The stunningly poor February overall and manufacturing jobs figures released by the Labor Department today surely caused rejoicing in the ranks of America’s trade alarmists. Here, finally, was evidence that President Trump’s tariff-centric policies are backfiring on the U.S. economy and especially its manufacturing sector.
Actually, however, the new employment data show that the alarmists will need to wait at least another month for the statistics even remotely to justify their claims and warnings. For however disappointing the 20,000 net monthly increase in total American job creation and the 4,000 improvement in manufacturing payrolls, the internals provide no reason to assign significant – or any – blame to trade.
The first clue of course was the steep sequential drop in non-farm employment (the Labor Department’s U.S. jobs universe) generally speaking recorded in this first survey of February trends. After all, if the trade wars were mainly behind February’s results, why was the monthly drop-off in job creation nearly three times steeper in the overall economy (most of which has little global trade exposure) than in manufacturing (which has lots of it)?
At least as important, although the President began imposing tariffs on imports of steel and aluminum eleven months ago, manufacturing sectors heavily reliant on these metals keep outperforming the rest of manufacturing in employment terms. And similar trends are becoming apparent for the enormous number of industries that use various inputs from China that have been tariff-ed starting in July.
Below are the net hiring increases since April (the first full month of the new metals trade regime) for the American private sector as a whole, for all of manufacturing, and for the main heavy metal-using industries.
Old thru Jan. New thru Jan. Thru Feb.
entire private sector: +1.36 percent +1.62 percent +1.64 percent
overall manufacturing: +1.39 percent +1.55 percent +1.58 percent
durable goods: +1.72 percent +1.97 percent +2.04 percent
fabricated metals products: +1.57 percent +1.80 percent +1.60 percent
non-electrical machinery: +2.57 percent +2.54 percent +2.82 percent
automotive vehicles & parts: +1.15 percent +0.97 percent +1.11 percent
household appliances: not available -2.52 percent not available
aerospace products & parts: not available +5.93 percent not available
The only metals-using sector that seems to have encountered employment trouble in February was the fabricated metals industry. And even in this segment of manufacturing, hiring since April has been slightly stronger than in manufacturing overall.
Automotive job creation has been weak as well, but actually enjoyed a relatively good February, relatively speaking. And although the appliance employment picture remains very weak, it needs to be remembered that it’s been laboring under an additional set of product-specific tariffs since late January.
Yet the entire durable goods sector continued to punch above its job creation weight in February, including the crucial machinery and (at least through January), aerospace industries. Why haven’t higher metals prices darkened their employment picture.
As for the impact of the China tariffs, that’s harder to judge for four reasons. First, an enormous number of manufacturing industries use Chinese inputs – and to greatly varying extents. Second, these levies only began in July, and then on a relatively small scale. Third, the list of products tariff-ed beginning in July matches up imperfectly at best with the sectoral classification scheme used by the Labor Department to track manufacturing employment. And fourth, most of the affected products are found in relatively narrow categories of manufactures, where the jobs data is one month behind.
So the following table shows the post-July employment performance of some major manufacturing sectors that use the Chinese parts, components, and materials tariff-ed that month. But it should be viewed with caution. Nonetheless, they show a heavy burden of proof on the tariff alarmists to identify any damage resulting from the China levies – especially since most of the July-January gains have been so strong.
Old July-Jan. New July-Jan. July-Feb.
overall manufacturing +0.91 percent +0.98 percent +1.00 percent
aircraft engines/engine parts: not available +0.70 percent not available
industrial heating equipment: not available +3.02 percent not available
oil/gas drilling parts: not available +3.93 percent not available
farm machinery/equipment: not available +2.67 percent not available
ball bearings: not available +2.32 percent not available
“Even a stopped clock is right twice a day” is a popular expression explaining why individual accurate statements or correct predictions shouldn’t automatically signal an information source’s broader credibility. The February jobs figures indicate once again that the trade alarmists haven’t even met this rock-bottom bar.