U.S. employment numbers jumped significantly higher in January, according to the Bureau of Labor Statistics, with the unemployment rate dropping to 8.3 percent.  Moreover, nonfarm payrolls grew by 243,000, and manufacturers added 50,000 net new workers. These gains were greater than expected, and certainly, much higher than the estimates from ADP released two days ago. Consensus estimates had been for around 150,000 net new jobs with the unemployment rate remaining around 8.5 percent.

These numbers continue to affirm the rebound and importance of manufacturing to our economic recovery. There were 82,000 net new jobs created in the sector in the past two months. This is definitely a sign that manufacturers have picked up their activity of late. Moreover, manufacturers have added 287,000 of the 2,063,000 net new nonfarm payroll jobs generated in the last 13 months (since December 2010); this suggests that nearly 14 percent of all of the jobs generated in that time frame stemmed from manufacturing.

As I noted last month, though, we would be remiss without mentioning the fact that employment remains a significant challenge, even with today’s good news. The “real” unemployment rate – which includes discouraged and underemployed workers – is now 15.1 percent, down from 15.2 percent in December and 16.1 percent last year at this time.

There are currently 2.81 million Americans who are classified as “marginally attached to the labor force,” with 1.06 million being discouraged workers. This is up slightly from last month. (The civilian labor force also grew last month, from 240.58 million to 242.27 million.)

Looking specifically at the January 2012 figures, the bulk of the new jobs in manufacturing came from the durable goods sector, which was up 44,000 for the month. The largest gains came in fabricated metal products (up 10,900), machinery (up 10,500) and transportation equipment (up 10,300). Nondurable goods sector employment rose by 6,000 in January. In that sector, the strongest growth came in the chemicals (up 2,200), printing and related support services (up 1,700) and beverages and tobacco products (up 1,300) sectors.

The average workweek for manufacturers rose from 40.6 hours in December to 40.0 hours in January. The average amount of overtime edged slightly higher from 3.3 to 3.4 hours. Therefore, the average weekly earnings for manufacturing workers rose from $969.93 to $977.51.

Overall, these numbers show renewed strength in the domestic economy, with employment growth in almost every major industrial sector except information, financial services and government. It mirrors other recent economic indicators showing an uptick in activity since October. Moreover, several sentiment surveys suggest that manufacturers are optimistic about future production and employment in 2012, which should bode well for this year’s numbers.

Yet, it is important to remember that significant headwinds exist both in Europe and in the U.S. The labor and housing markets – while improving – still have a long way to go before they are healthy, and consumer and business optimism is mixed with persistent anxieties. Still, we will take good news when we can get it.

Chad Moutray is chief economist, National Association of Manufacturers.

Today Vice President Joe Biden was in Grand Rapids, MI talking about manufacturing and following up on the proposals laid out last week by President Obama in the State of the Union.

We are happy to see the President and Vice President are continuing to talk about manufacturing and realize how important it is to the economy and job creation. However, manufacturers need the right policies to grow and create jobs.

Manufacturers are looking for the “All-of-the-Above” energy policy that includes the Keystone XL pipeline. If they Administration wants to create manufacturing jobs, the perfect project was right before them. Keystone XL will create 20,000 construction and manufacturing jobs and more than 118,000 spin-off jobs.

As the discussion continues about manufacturing and how to create jobs we hope that both Congress and the Administration will move forward with policies to let manufacturers lead the economic recovery and create quality, high-paying jobs.

The Institute for Supply Management (ISM) released it purchasing managers index (PMI) this morning, showing a modest uptick in the pace of overall manufacturing activity in January. Note that much of the data for 2011 were revised due to new seasonal adjustment factors. With that revision, the PMI rose from 53.1 in December to 54.1 in January. The index has been above 50 – its threshold for expansion in the sector – for 30 months, or since August 2009.

Looking at the various components the news is more mixed. While all of the key areas are over 50 except for inventories, a couple did reflect some easing in their pace of growth. On the positive side, the new orders variable grew stronger, up from 54.8 to 57.6. Supplier deliveries and new export orders also improved in the month.

However, production, employment and imports rose at a slower rate. Inventories continued to contract, but neared the neutral point.  The pace of price increases for raw materials also gained some steam after contracting in the previous three months.

Most of the sample comments provided by ISM echoed these sentiments. A machinery respondent, for instance, said, “Year starting a little slow, but customers are positive about increased business in 2012.” This sums up the bulk of the comments, with optimism for a stronger year.

Interestingly, one individual in the computer and electronics manufacturing sector added, “Business lost to offshore is coming back.” We continue to hear such anecdotal pieces of evidence about reshoring, and if nothing else, it provides another hint of American competitiveness in light of recent labor productivity gains. The Bureau of Economic Analysis is releasing new productivity data for the fourth quarter tomorrow.

Overall, the ISM data shows the manufacturing sector continues to recover. But, like other data released this week it is clear that growth has been modest at best. January appears to be growing less strongly than in November or December. While the new orders figures in this report bode well for future activity, it would be nice to see that translate into higher production and employment growth in the months ahead.

Chad Moutray is chief economist, National Association of Manufacturers.

Consumers were slightly less optimistic this month, according to the Conference Board’s Consumer Confidence Index. The overall index fell from 64.8 in December to 61.1 in January. The leading driver of this decline was a diminishment in people’s perception of the current economic environment, with the index for present conditions down from 46.5 to 38.4. This is essentially where the index stood in November, essentially erasing the improvements observed in December. Nonetheless, individual assessments of future conditions remained about the same, down to 76.2 from 77.0.

This index rises and falls with pocketbook issues, and in this survey, Americans felt that jobs were harder to get. Also, fewer of them anticipated increases in their incomes. The result was a decrease in the percent planning to purchase a home, automobile or major appliance.

Lynn Franco, the Director of The Conference Board Consumer Research Center, cites one other factor which might be providing a drag to these numbers. In the press release she says, “Recent increases in gasoline prices may have consumers feeling a little less confident this month.” Indeed, there is a long history of consumer confidence being shifted by the price that Americans pay at the gas pump.

For manufacturers, this is obviously not a positive way to enter the new year. We need the consumer to pick up their spending, helping to drive more demand for our goods. While over sentiment is much-improved from the lows seen in late summer and early fall, there is still much work to do to get the public less anxious about the economy.

Chad Moutray is chief economist, National Association of Manufacturers

The Chicago Business Barometer from ISM-Chicago declined from 62.2 in December to 60.2 in January. While this still represents strong growth, it also reflects a modest easing in manufacturing activity from the November and December readings.  

Production and new orders continue to be healthy, with a slightly lower value this month. Nonetheless, with values of 63.8 and 63.6, respectively, activity remains highly elevated. Capital equipment purchases and supplier deliveries picked up their pace.

Employment also eased a little, with its index declining from 59.2 to 54.7. Job growth is positive, but this represents the slowest pace of hiring since August. The only component of the index that contracted was the measure for order backlogs, which shrunk from 57.3 to 48.3 for the month.

The prices paid for raw materials decreased from 63.8 in December to 62.4 in January. This more-or-less continues some pricing relief seen since November. The larger trend has reflected a downward shift (but still elevated levels) in prices since mid-2011. The index in July, for instance, was 73.4.

Despite some easing in these numbers, manufacturing activity in the Chicago region remains strong, supported by healthy production and new orders overall. It would definitely be nice to regain the momentum seen in early 2011, though, when the Chicago Business Barometer was hovering around 70.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Association of Manufacturers (NAM) was pleased to learn yesterday that the World Trade Organization (WTO) agreed with U.S. complaints and found China’s export restraints on several industrial raw materials used as key components in the steel, aluminum, and chemicals industries to be inconsistent with China’s WTO obligations. 

We applaud U.S. Trade Representative Ambassador Kirk and his team for bringing the case before the WTO as companies need these materials to compete at home and abroad. When China withholds from the market these key materials in contravention of its WTO obligations, it artificially increases world prices while effectively subsidizing Chinese producers, while hiding behind specious claims of environmental protection and conservation.

This beggar thy neighbor trade policy is what China must reverse and it is time it complies with the spirit as well as the letter of the international trading system rule book that has benefited from much since 2001. Other countries that have similar protectionist policies, like Argentina, should take note.

Stephen Jacobs is senior director of international business policy, National Association of Manufacturers.

President Obama meets with Georgian President Mikheil Saakashvili today. Later, he hosts a chat on Google +. Wednesday, he crosses the Potomac and delivers remarks on the economy in northern Virginia. On Thursday, he attends the National Prayer Breakfast.

The Senate convenes this afternoon and will hold a procedural vote on the congressional insider trading bill (S. 2038).

The House returns on Tuesday and will vote on a motion to go to a House-Senate conference on the Federal Aviation Authority reauthorization bill (H.R. 658). The House will also take steps toward repealing a program established by President Obama’s health-care law. Later in the week, the House will consider legislation that would reform the budget process.

See the Majority Leader’s calendar here.

Senate Hearings: TUESDAY—The Energy and Natural Resources Committee holds a hearing on the energy outlook for 2012. The Finance Committee looks at tax extenders and tax reform. The Banking Committee conducts an oversight hearing on the Consumer Financial Protection Bureau. WEDNESDAY—The Small Business Committee holds a hearing on entrepreneurship. The Budget Committee ponders the “Outlook for the Eurozone.” THURSDAY—The Energy and Natural Resources Committee examines “America’s Nuclear Future.” The Health, Education, Labor and Pensions Committee considers college affordability. The Budget Committee holds a hearing on the “Budget and Economic Outlook: FY2012-2022.”

House Hearings: MONDAY—A Transportation and Infrastructure subcommittee holds a field hearing on the Coast Guard’s readiness to respond to oil spills. WEDNESDAY—An Energy and Commerce subcommittee holds a hearing on “America’s Nuclear Future.” The Oversight and Government Reform Committee looks at President Obama’s recent recess appointments. An Energy and Commerce subcommittee holds a hearing on reauthorization of the Prescription Drug User Fee Act. A Science, Space and Technology subcommittee looks at the Environmental Protection Agency’s (EPA) research on fracking. The Education and Workforce Committee holds a hearing on “Expanding Opportunities for Job Creation.” A Financial Services subcommittee considers the Manufactured Housing Improvement Act of 2000. The Budget Committee receives testimony from Congressional Budget Office Director Doug Elmendorf on the budget and economic outlook. A Judiciary subcommittee holds a hearing on “Prior User Rights: Strengthening U.S. Manufacturing and Innovation.” The Small Business Committee considers “The Path to Job Creation: The State of American Small Businesses.” THURSDAY—An Education and Workforce subcommittee looks at challenges facing the Pension Benefit Guaranty Corporation. The Budget Committee hears about the state of the economy from Federal Reserve Chairman Ben Bernanke. FRIDAY—A Science, Space and Technology subcommittee examines “Fostering Quality Science at EPA.”

Executive Branch: Vice President Joe Biden speaks to the Conference of Chief Justices today. On Wednesday, Commerce Secretary John Bryson will be in Pittsburgh, Pa., to deliver remarks on manufacturing. On Friday, Secretary of State Hillary Clinton leaves for Germany and Bulgaria.

Economic Reports: From the New York Times: “Data will include personal income and spending for December (Monday); the S.& P./Case-Shiller home price index for November, the Chicago purchasing managers index for January, and consumer confidence for January (Tuesday); ADP employment for January, the I.S.M. manufacturing index for January and construction spending for December (Wednesday); weekly jobless claims and productivity for the fourth quarter (Thursday); and unemployment for January, the I.S.M. nonmanufacturing index for January and factory orders for December (Friday).”

As the Environmental Protection Agency (EPA) continues to move forward with its overreaching agenda the impact is beginning to be felt across the country. This week we’ve seen new reports in the news of jobs that will be lost as the result of facilities that will be forced to close because of new EPA regulations. These closing’s just don’t impact those who work at the plant, they impact the entire town.

A report from Williamsport, Maryland Herald-Mail yesterday tells the story of the impact the closing of the R. Paul Smith Power station will have on the entire community.

Williamsport resident Johnna Artz didn’t mince words Thursday about her opposition to the closing of the R. Paul Smith Power Station in town.

“This affects everybody,” she said. “It hurts the whole community with the number of jobs and revenue lost.” The plant, which went on line in 1927 and employs around 40 people, is being closed as a result of tougher emission regulations imposed by theU.S. Environmental Protection Agency.

Artz, 71, who has lived in Williamsport for 48 years, said that the plant closing will impact her family. She said the federal government could focus on other environmental issues instead of those that take away jobs.

And on the banks of Lake Erie FirstEnergy Corp facing the same regulations will be shuttering plants which will impact hundreds of employees and have a domino effect through the local communities. (continue reading…)

One of the big success stories in the trade world for 2011, other than passage of the FTAs, was success of the Export-Import Bank’s Global Access for Small Business program. Last year the Ex-Im Bank approved $6 billion in small business financing through this helpful new program which is supported by the National Association of Manufacturers.

It’s a little known fact that more than 85 percent of all the Bank’s transactions directly benefit small business exporters.

As you can see export financing is paramount to the ability of manufacturers to export and in turn grow jobs and invest. We have to remember that 95 percent of the world’s consumers are outside of the U.S. and our manufacturers need the tools to reach them, if not we will be eclipsed by our overseas competition.

The NAM is urging Congress to act as soon as possible to reauthorize the Ex-Im Bank and to increase the Bank’s lending capacity. If we are going to meet the goal of doubling exports by 2014 an improved Ex-Im Bank is going to play an important role and we can’t afford to wait to act until the temporary authorization expires.

Manufacturers are constantly planning for the future several months and years in advance which is why a multi-year extension is needed. 

Ex-Im Bank Chairman Fred Hochberg is also pushing for Congress to move quickly as CQ reported earlier this week.

In an interview, Ex-Im Bank Chairman Fred Hochberg said Congress needs to quickly assure businesses and foreign customers that it will have more financing authority. Hochberg called legislation to raise the bank’s lending limit a “jobs bill.”

Reauthorizing Ex-Im means more exports which translates to more jobs for American workers. We are hopeful Congress can come together to move forward soon before we lose out to the competition.

The Conference Board announced that its Leading Economic Index rose 0.4 percent in December, the third consecutive month of gains. Manufacturing played an important role in this month’s increases, with increased new orders and a longer average workweek. Improvements in the employment situation, equity markets and the interest rate spread also made positive contributions to this figure, with lower consumer confidence dragging it lower.

The index has changed, effective with this month’s release, by replacing a measure of the money supply (M2) with a newly-created Leading Credit Index. The switch was made so that the indicator would do a better job of predicting the impact of credit crunches on the business cycle, with this new measure an improved predictor of the recent downturn. In this month’s analysis, the index was lower, providing a slight drag to the composite figure.

The Coincident Economic Index, which measures the current environment, increased by 0.3 percent. All of the subcomponents of this index rose. This includes higher levels of industrial production, manufacturing and trade sales, nonfarm employment and personal income.

This positive report mirrors another national index on the economy from the Chicago Federal Reserve Bank. Its National Activity Index rose from -0.46 in November to +0.17 in December. This measure looks to see if the U.S. is expanding at its historical growth rate; therefore, positive numbers reflect above-average growth. This month’s data suggest a significant improvement, with manufacturing output the leading contributor. The production-related variables shifted from -0.28 to +0.24 for the month, led by stronger manufacturing production and capacity utilization.

Other positive contributors included higher employment and sales. Housing, on the other hand, remains a weak spot. Overall, 85 indicators provided a positive contribution, offset by 32 others.

The three-month moving average for the composite index improved from -0.19 to -0.08 in December. This suggests that, while the overall economy remains below its long-term trend, it is moving in the right direction. Moreover, the risk of recession is reduced, as the index has moved further away from the -0.70 threshold which suggests an increased likelihood of recession.

These two measures – one from the Conference Board and the other from the Chicago Fed – are good news as we enter 2012. The economy is improving, with manufacturers playing an important role in its recent rebound.

Chad Moutray is chief economist, National Association of Manufacturers.