Tag: Jobs Report

Monday Economic Report – January 13, 2014

Here is the summary for this week’s Monday Economic Report:

The labor market was disappointing in December, with just 74,000 nonfarm payroll workers added in the month. This was well below the consensus estimates of around 200,000 that was expected, and it somewhat undercuts the storyline that the U.S. economy was beginning to gain some momentum. However, it is important to not make too much of one month’s data, which might have been influenced by weather and other factors. Nonfarm payrolls growth averaged 214,000 in the prior four months (August to November), and there is some thinking that December’s hiring figures were a bit of an outlier. Indeed, the participation rate fell once again to 62.8 percent, matching what was seen in October, which was the lowest level since February 1978. As a result, the unemployment rate fell to a five-year low of 6.7 percent.

Meanwhile, manufacturers added 9,000 net new workers in December, its fifth month of positive gains. From August to December, the sector has averaged 16,000 additional hires each month. In contrast, the average from March to July was a net decline of 8,000 per month. This is generally consistent with the pickup in manufacturing activity that we have seen in other economic indicators, even if the net job growth in December was down from October and November. Indeed, new factory orders rose 1.8 percent in November, and even with quite a bit of volatility in the data (mainly due to choppiness in transportation orders), year-to-date sales growth increased modestly, up 2.6 percent in the first 11 months of 2013.

The other big news of last week was the narrowing of the U.S. trade deficit from $39.33 billion in October to $34.25 billion in November. On the surface, this is a positive development, with the decline in the deficit coming largely from reduced petroleum imports. This decrease corresponded to lower petroleum costs, as the cost of West Texas Intermediate crude fell sharply during that time frame. In addition, goods exports rose to an all-time high, up from $135.61 billion to $137.01 billion.

Nonetheless, one constant that we saw in much of the data last year was the frustratingly slow pace of growth for manufactured goods exports—a finding that was still true in the latest report. The value of U.S.-manufactured goods exports for the first 11 months of 2013 increased just 2.0 percent over the same time period in 2012. As such, despite stabilization in many of our key markets, including China and Europe, slower growth in foreign demand has been a challenge for growing sales all of last year. We hope to see continued progress on the international front that will yield stronger export growth in 2014. (For more worldwide economic trends, see the most recent monthly issue of the Global Manufacturing Economic Update, which was released on Friday.)

This week will be a busier one for economic data. A number of reports will provide new insights on the current health of the manufacturing sector, with the biggest highlight being Friday’s industrial production data. It is expected that manufacturing output will continue to show signs of acceleration, extending the gains in October and November. In addition, we will get survey data from the New York and Philadelphia Federal Reserve Banks and the Manufacturers Alliance for Productivity and Innovation (MAPI). Beyond those releases, other statistics of note to look for include the latest data on consumer and producer prices, consumer confidence, housing starts and permits, job openings, retail sales and small business optimism.

Chad Moutray is the chief economist, National Association of Manufacturers.

manufacturing employment - jan2014

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Monday Economic Report – October 28, 2013

Here is the summary for this week’s Monday Economic Report:

Manufacturers added only 2,000 net new workers in September, continuing the trend of weak hiring growth since mid-2012. Durable goods industries hired an additional 9,000 workers in the month—mainly from fabricated metal products and machinery—but this was offset mostly by the loss of 7,000 employees from nondurable goods firms. Many business leaders remain hesitant to increase their workforce, with roughly 60 percent of manufacturers not planning to make any hiring changes over the next 12 months, according to the latest NAM/IndustryWeek Survey of Manufacturers. Even though net hiring remains frustratingly low, manufacturing job postings picked up in August, particularly for durable goods entities, recovering from a slowdown in job openings from April to July.

Hiring in the larger economy was also disappointing, with just 148,000 additional nonfarm payroll workers. Employment growth has decelerated as the year has progressed, with the monthly nonfarm payroll average falling from 205,250 in the first four months of 2013 to 155,600 in the five months since.

The government shutdown slowed the growth of manufacturing activity, according to Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) data. The composite index fell from 52.8 in September to 51.1 in October, its slowest pace this year, with output contracting slightly (down from 55.3 to 49.5). Other data for the U.S. manufacturing sector were mostly mixed. Durable goods orders in September jumped 3.7 percent, but this was due mainly to sharp increases in aircraft sales. The broader data indicated quite a bit of softness in overall new orders, even as shipments continued to reflect modest gains.

Meanwhile, two Federal Reserve Bank surveys observed differing trends. The Kansas City Federal Reserve continued to see progress in terms of production and shipments, whereas manufacturer confidence and activity in the Richmond Federal Reserve region were essentially stalled. Employment grew only slightly at best in both district surveys. Manufacturers remain upbeat about the next six months, but less enthusiastically than in previous surveys. The decrease in sentiment somewhat mirrored the drop in consumer confidence from the University of Michigan, with Americans frustrated by the political maneuverings during the government shutdown and debt ceiling debate. Now that the budget impasse has ended—at least temporarily—confidence should rise moving forward.

On the international front, manufacturing activity in China and Europe continues to stabilize, which should bode well for improvements in exports. The HSBC Flash China Manufacturing PMI rose to its highest level since March, expanding for the third straight month. New orders, output and exports picked up their pace from the previous month, albeit with modest growth rates and hiring still a challenge. Elsewhere, the HSBC Flash Eurozone Manufacturing PMI rose marginally from 51.1 in September to 51.3 in October. This was the fourth consecutive monthly expansion and a sign that the continent has begun to recover from two years of recession. On a country-by-country basis, however, growth rates differ sharply. For instance, production has been rising in Germany, while French manufacturing activity continues to contract.

Even with better economic figures in many of our largest trading partners, manufactured goods exports remain below their ideal levels so far in 2013. Using non-seasonally adjusted data, these exports have increased just 1.8 percent through the first eight months of the year relative to the same time period in 2012. While this represents some improvement from the previous month, it remains lower than we would prefer. The overall trade deficit data were not much different in August than in July.

This week, we will get two major reports on the health of the U.S. manufacturing sector. This morning, the Federal Reserve will release September industrial production data, with manufacturers extending the gains from August. The consensus estimate is for an increase of around 0.5 percent. At the end of the week, we will get the latest Institute for Supply Management (ISM) PMI data for October. Similar to the Markit readings discussed above, there could be some easing in activity, likely due to the government shutdown, but with continued modest growth nonetheless. Recent ISM surveys have been very upbeat, especially for new orders, so it will be interesting to see how sentiment changes this time around.

In addition to these reports, ADP will unveil its October employment analysis, with the government shutdown expected to diminish job growth in the month. The Bureau of Labor Statistics has postponed the official government jobs report back one week to November 8. The Federal Open Market Committee (FOMC) is also widely expected to make no changes to its monetary policy this week, following the non-taper decision at its September meeting. Other highlights this week include the Dallas Federal Reserve Bank’s manufacturing survey, the Conference Board’s consumer confidence index and new data from the Bureau of Labor Statistics on consumer and producer prices.

Chad Moutray is the chief economist, National Association of Manufacturers.

durable goods orders - oct2013

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Monday Economic Report – August 5, 2013

Here are the files for this week’s Monday Economic Report:

Data reports on the manufacturing economy were mixed last week, with some releases providing hints of optimism, while others continued to note challenges. Output soared in the latest Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) report. The PMI rose from 50.9 in June to 55.4 in July, far exceeding expectations and lifted by jumps in production (up from 53.4 to 65.0) and new orders (up from 51.9 to 58.3). Hiring also shifted from contraction to modest growth (up from 48.7 to 54.4). The ISM report was overwhelmingly positive and more evidence that the sector has improved this summer after weaknesses in the spring, with cautious optimism for the second half of the year. Sentiment surveys from the Chicago and Dallas Federal Reserve Banks noted similar progress, mirroring findings from most other regions.

Despite encouraging recent developments regarding output and sales, overall hiring has yet to pick up beyond small gains. The Bureau of Labor Statistics reported that manufacturers added 6,000 net new workers in July, ending four straight months of declines. Yet, the auto sector alone contributed 9,100 to this figure, suggesting that without gains in motor vehicle employment, the broader sector would have had losses again. Moreover, in the past 12 months, manufacturers added just 40,000 additional workers, or 1.8 percent of all net new nonfarm payroll jobs. This is a far cry from the outsized role that the sector played during the two months following the recession. Manufacturers continue to be hesitant to add new workers, a trend that will probably continue until they perceive the economic marketplace to be on a firmer footing.

The Federal Reserve Board’s policy statement—which kept “highly accommodative” monetary policies in place without any changes (perhaps until this fall)—said that economic activity expanded modestly during the first half of the year. Yet, while there was progress by midyear, growth has not been fast enough. The Bureau of Economic Analysis did a major revision on its GDP and income data going back to 1929, adding in new measures of intellectual property and research and development. Using the new data, we now know that real GDP increased by 1.1 percent and 1.7 percent in the first and second quarters of 2013, respectively. While the second-quarter figure exceeded expectations, the U.S. economy has been operating below its potential, with manufacturers keenly aware of and challenged by this softness. Still, real GDP should increase by roughly 2 percent for 2013 as a whole.

This forecast, however, relies on a better second half of the year. For that to happen, we will need to see continued strength in consumer and business spending, which alone added 2.56 percentage points to real GDP in the second quarter. Consumer confidence remains strong overall, with measures from the Conference Board and the University of Michigan at or near pre-recessionary highs. Personal spending data have also been mostly positive, with increases in durable and nondurable goods spending in June. This is true despite the fact that personal income grew less strongly, lowering the savings rate from 4.6 percent in May to 4.4 percent in June. Meanwhile, construction activity has been less robust of late, with reduced housing starts and declines in nonresidential spending. Manufacturing construction was off 1.9 percent year-over-year in June, highlighting its weaknesses; however, a pickup in production or sentiment could rejuvenate construction investments for the sector.

One of the larger drags to real GDP in the second quarter was net exports, with growth in imports outstripping exports. Tomorrow, we will get new international trade data, which will hopefully show some improvements. Through the first five months of 2013, manufactured goods exports grew a paltry 1 percent. Recent reports show that Europe’s problems might be stabilizing, even as China’s seems to be slowing. The trade figures will be watched closely for signs of progress regarding international demand for our goods. Other economic highlights for the week include the latest credit availability and demand, job openings and wholesale trade reports. In addition, the new Global Manufacturing Economic Update will be released on Friday.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturing Employment Was Unchanged in April

The U.S. economy added 165,000 nonfarm payroll jobs in April, and there were upward revisions of 114,000 additional nonfarm workers in the months of February and March. The higher February number suggests that job growth in that month was now the highest in almost 3 years. Indeed, for the larger economy, the employment data including the revisions could be perceived as somewhat positive. Yes, we would like to see even greater job gains on a month-by-month basis, but the economy added almost 196,000 workers on average in the first four months of 2013. This is higher than the nearly 183,000 average of 2012.

The unemployment rate fell to 7.5 percent. This is the lowest level since December 2008. At that time, the rate was on its way up, topping off at 10 percent in October 2009. The unemployment rate was 9 percent in April 2011, illustrating its descent in the past two years. Its decline can be explained by two factors: an improving jobs picture and a falling participation rate. In April, the participation rate was unchanged at 63.3 percent. As noted last month, this rate is the lowest since May 1979.

For manufacturers, the news has been less positive. Manufacturing employment was unchanged in April, only slightly lower than the gain of 2,000 workers experienced in March. The revisions to February and March data added 9,000 workers to those two months. Still, over the past 12 months, the sector has actually shed 10,000 workers, illustrating significant weaknesses for manufacturers, especially after July 2012. As we have noted since then, some of the challenges have been slowing domestic and global sales and fiscal and regulatory uncertainties. Recent surveys indicate that this softness persists in March and April data of manufacturing activity on weaker new orders, with hiring continuing to be skittish as long as policies out of Washington continue to provide uncertainty and undue burdens.

Looking specifically at manufacturing sectors, durable goods industries added a net 1,000 workers in April, which was counteracted by a net decline of 1,000 workers from nondurable goods businesses. Manufacturing sectors with employment gains for the month included machinery (up 3,600), transportation equipment (up 3,000, with 2,400 from motor vehicles), fabricated metal products (up 2,500), and food manufacturing (up 2,300). On the negative side, sectors with losses in April were printing and related support activities (down 3,100), apparel (down 2,900), computer and electronic products (down 2,000), wood products (down 1,700), and nonmetallic mineral products (down 1,300).

Reflecting the flat nature of the employment data, overall compensation in the manufacturing sector was also essentially stalled, declining marginally. Average weekly earnings in the sector decreased from $985.73 in March to $982.91 in April. In addition, there were slightly fewer hours worked on average. The average weekly hours in manufacturing in April were 40.7 hours, down from 40.8 hours the month before. Moreover, average overtime hours dropped from 3.4 hours to 3.3 hours.

In short, the manufacturing sector has not performed as well as the larger economy when it comes to jobs gains. This is not to suggest that nonfarm payroll growth is stellar – because it is not – but at least we have seen upward movement in overall hiring. Nonfarm payroll growth is approaching 200,000 on average each month, which is decent and higher than what was seen last year.

Yet, hiring in the manufacturing sector leaves a lot to be desired, going beyond the stalled growth of April. Over the course of the past 12 months, manufacturers have added just over 6,000 workers on net each month. That is well shy of what we like to see coming from the sector, and it is a sign of just how soft new orders and other activity have been for the industry of late. As noted in February in a speech by NAM President and CEO Jay Timmons, we would like to see average monthly job gains of around 20,000. To achieve this “20/20 Vision” – as it has been dubbed – manufacturers will need pro-growth policies stemming from Washington, and it will require stronger economic growth overseas, which will help to drive greater exports.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – November 5, 2012

Below is the summary of this week’s Monday Economic Report:

Manufacturers continue to experience significant headwinds in the U.S. and global economy. Global sales continue to struggle, and manufacturers are increasingly worried about the uncertain political and business environment. However, last week’s indicators provided a more positive view of recent improvements in the economic landscape, both here and abroad. (For more on the international perspective, see the most recent Global Manufacturing Economic Update, which was released on Friday, November 2.)

There were 13,000 net new workers hired in the manufacturing sector in October, helping to reverse the downwardly-revised 27,000 jobs lost in August and September, and overall non-farm payrolls rose higher than expected, up 171,000. Combined with revisions in the prior two month’s data, the last jobs report before the election provided some possibly encouraging signs. Yet, it also reflected an unemployment rate that continues to be highly elevated, at 7.9 percent, and total job growth that is well below its potential. Nonetheless, perceived improvements on the jobs front have led to higher consumer confidence, with the Conference Board’s measure up from 61.3 in August to 72.2 in October. Americans have also increased their overall spending, despite dipping into their savings to do so. The savings rate fell to 3.3 percent, its lowest level since November 2011.

Manufacturing activity was more mixed depending on the source. Factory orders rebounded in September after an extremely disappointing August. In addition, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) edged slightly higher from 51.5 in September to 51.7 in October, confirming that the sector continues to grow modestly, with new orders picking up. However, hiring continues to be weak, and export sales remain negative. The Markit U.S. Manufacturing PMI showed a similar finding, but with orders easing. Beyond these national surveys, the Chicago and Dallas regions showed signs of weakness. Slowing auto sales have been the culprit in the Midwest, while respondents to the Texas survey were worried about the current political and economic environment. Despite manufacturers’ uncertainty, there is cautious optimism about future orders and production.

This week, all eyes will be on tomorrow’s election, particularly with so many manufacturers concerned about its potential impact. The most recent NAM/IndustryWeek Survey of Manufacturers shows that nearly 79 percent of respondents cited political uncertainties as their top challenge. Beyond the election, the main economic indicator will come on Thursday with the release of new trade numbers. There has been some progress on the economic front in many countries outside of Europe, but persistent weaknesses remain. That should dampen export growth, as we have seen in recent months. Other highlights include the latest on consumer credit, job openings and wholesale trade.

Chad Moutray is the chief economist at the National Association of Manufacturers.

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Continued Slow Jobs Growth in July, with Manufacturers Adding 25,000 Workers

The U.S. economy added 163,000 net new jobs in July, its fastest pace since February, according to the Bureau of Labor Statistics. Even with slightly stronger nonfarm payroll growth than expected, job growth remains weak overall, with the unemployment rate edging higher from 8.2 percent in June to 8.3 percent in July.

Manufacturers continue to play an outsized role in employment and output growth, adding 25,000 net new workers in July.  Over the course of the last eight months (since November), the sector has contributed 210,000 net new jobs, or 16.4 percent of the total. The stronger growth in jobs in July stands in contrast to weaker data for the industry elsewhere. Some of this could be the result of seasonal adjustments, as the data that were not adjusted reflected a smaller increase of just 10,000 workers.

The gain of 25,000 for July was primarily the result of higher employment in the durable goods sector, which added 24,000 new workers. Over half of that stemmed from the automotive sector, which was up by 12,800 employees. Other sectors that did well included transportation equipment (up 7,700 without motor vehicles), fabricated metal products (up 5,200), plastics and rubber products (up 1,600), primary metals (up 1,400), chemicals (up 1,100), and food manufacturing (up 1,100). Lower employment was observed in the machinery (down 2,200), paper and paper products (down 1,800), and printing (down 1,400) sectors.

The average workweek for manufacturers was unchanged at 40.7 hours, with the average amount of overtime steady at 3.2 hours. Nondurable good overtime was slightly less, down from 3.3 hours on average to 3.2 hours. This was reflected in earnings, as well. The average weekly earnings for manufacturing workers rose from $975.58 to $976.39.

In short, these numbers show that manufacturing continues to help drive economic growth, with strong production in durable goods industries lifting employment. Yet, it is also clear that more needs to be done for stronger growth moving forward. Manufacturers continue to worry about the future direction of the economy, and other data points to a sector which is stuck in neutral. The larger economy is also weak, with the unemployment rate too high and growth not strong enough to bring it down in any substantive way. (continue reading…)

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A Disappointing May Jobs Report

The Bureau of Labor Statistics reported that the economy added 69,000 net new jobs in May, with manufacturing up just 12,000. This is another disappointing labor report which is consistent with recent weaknesses we’ve seen in the global and domestic marketplace. Several other recent economic indicators have shown growth easing in the spring months. Both manufacturers and consumers are anxious about Europe and uncertain about long-term tax policies. 

The unemployment rate edged slightly higher to 8.2 percent, up from 8.1 percent in April. Looking at the so-called real unemployment rate, which includes discouraged and underemployed workers, that figure rose from 14.5 percent to 14.8 percent.

Manufacturers have increased employment over the past six months by 173,000 net workers, or 16.5 percent of all of the nonfarm payroll jobs added during that time. Since the end of 2009 manufacturing has added 487,000 workers.

The sector remains a bright spot, with outsized contributions to both employment and output but we have to do much better in order to continue to drive economic growth. Manufacturers need policies from Washington which will enable them to invest, create jobs and remain competitive against global competition. Currently they are facing many difficult challenges and headwinds which are negatively impacting job growth.

Durable goods industries added 13,000 jobs in May, with nondurable companies shedding 1,000. The fastest growth was seen in motor vehicles (up 5,800), fabricated metals (up 5,700), primary metals (up 3,800), beverage and tobacco products (up 2,700) and machinery (up 2,500).

Chad Moutray is chief economist, National Association of Manufacturers.

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