For the second straight month, manufacturing employment fell, which was disappointing. Given the rebound in sentiment and activity seen in other measures, there was some hope that job growth might stabilize in this report. Instead, manufacturers lost 13,000 workers on net in September, extending the loss of 16,000 employees in August. More importantly, manufacturing employment has decreased by 58,000 year-to-date, suggesting continuing cautiousness among manufacturing business leaders to add workers in light of lingering weaknesses in the global economy.
On this Manufacturing Day, that message is a bittersweet one. We were encouraged by the rebound in demand and production seen in Monday’s ISM figures, and there is some expectation that activity will pick up in the coming months. Yet, these figures suggest a degree of nervousness in the economic outlook, with job growth in manufacturing continuing to lag behind.
With that in mind – and especially with the election just weeks away – manufacturers will continue to stress pro-growth policies that will enable faster economic growth and enhance the sector’s overall global competitiveness.
Looking more closely at the data, durable and nondurable goods firms shed 11,000 and 2,000 workers in September, respectively. The largest declines were seen in the food manufacturing (down 4,300), transportation equipment (down 4,200, including a 3,100 decline for motor vehicles and parts), furniture and related products (down 1,700), wood products (down 1,600), computer and electronic products (down 1,500) and fabricated metal products (down 1,500) sectors. In contrast, there were employment gains in September for miscellaneous nondurable goods (up 1,300), nonmetallic mineral products (up 1,300) and textile product mills (up 1,200), among others.
Despite the drop in hiring for the month, average weekly earnings in the manufacturing sector moved higher, up from $1,058.85 in August to $1,064.71 in September. On a year-over-year basis, average weekly earnings have increased from $1,031.65 in September 2015, up 3.2 percent for the 12-month period. Average weekly hours were also up slightly, rising from 40.6 hours to 40.7 hours, with average overtime hours unchanged at 3.3 hours.
Meanwhile, the U.S. economy added 156,000 employees in September, easing marginally from an increase of 167,000 observed in August. This was off somewhat from the consensus increase of around 170,000. So far in 2016, nonfarm payrolls have grown by 178,000 per month on average, slowing from the average gain of 229,000 per month seen in 2015 as a whole. At the same time, the unemployment rate edged up from 4.9 percent in August to 5.0 percent in September, its highest level since April. This was likely the result of an increased participation rate, up from 62.8 percent to 62.9 percent, a six-month high.
Overall, the U.S. economy continues to add jobs at a very modest pace, but perhaps at a rate that remains less-than-desired and certainly slower than seen last year. This is especially the case for manufacturing, which continues to struggle on the hiring front.