Domestic U.S. manufacturing regained some of its lost job creation prowess in June, according to this morning’s monthly employment report from the Bureau of Labor Statistics (BLS). The takeaway for trade mavens? Oddly mixed. Problems remained in numerous industries especially affected by President Trump’s metals tariffs. But the effects of the levies on imports from China (which are much harder to gauge) revealed no consistent pattern.
The June figures, which are preliminary, showed that manufacturers’ payrolls increased by a net 17,000 jobs – the best such performance since January (when the same gain was reported). Revisions were mixed, with May’s 3,000 increase (also still preliminary) revised up to 4,000, but April’s previously estimated 5,000 improvement (which had been upgraded from 4,000) now downgraded to 3,000.
But the overall manufacturing results say little about how domestic manufacturing is faring in the Trump trade wars. To answer that question, it’s necessary to zero in on metals-using industries (where higher costs for the steel and aluminum they use are supposed to be crippling) and on sectors reliant on products from China.
The main metals-users are easy to identify, and for the most part, the June figures signal a continuation of recent trends: Particularly strong hiring during the early months following the steel and aluminum has lost considerable momentum.
The metals tariffs might not be the only reason. For example, U.S. housing, a big consumer of metal products that are used in construction and for appliances, has actually shrunk on net since the end of 2016. American motor vehicle sales have basically flatlined since the fall of 2015 after a strong rebound from a scary recessionary nosedive. And the aerospace industry has been troubled since safety issues began prompting countries to ground Boeing’s popular 737 jets – and resulted in dramatic company-wide orders cuts.
Nonetheless, as indicated above, some of these problems have been dogging manufacturing for years, yet the metals-using sectors held up exceptionally well – until the last few months. The table below shows the hiring performance of these industries since April, 2018 (the first full month that the duties were in effect). And for perspective, figures are also included for the American private sector in general, for manufacturing overall, and for the durable goods super-sector (where the main metals users are found).
Old thru May New thru May Thru June
entire private sector: +1.79 percent +1.99 percent +2.14 percent
overall manufacturing: +1.60 percent +1.61 percent +1.74 percent
durable goods: +1.94 percent +1.96 percent +2.11 percent
fabricated metals products: +1.71 percent +1.59 percent +1.49 percent
non-electrical machinery: +2.52 percent +2.53 percent +2.92 percent
automotive vehicles & parts: +0.20 percent +0.29 percent +0.27 percent
household appliances: not available -4.73 percent not available
aerospace products & parts: not available +7.46 percent not available
Weakened momentum compared with the entire private sector and all of industry is clear from the the fabricated metals and automotive data, and for durables in general. Machinery and aerospace, however seem to be holding up well, and appliances of course have faced their own separate tariffs on large household laundry machines since February, 2018 .
As usual, the China effect is much harder to determine, both because the tariffs have been imposed in several phases, because the first have been in place only since July, 2018, because the list of tariff-ed imports employs a manufacturing classification system different from that used by the BLS to track jobs, because Chinese inputs are found so widely throughout manufacturing, and because their importance to individual industries varies just as widely. So keep taking the figures below – which present the post-July, 2018 results for some of the few BLS sectors that match up reasonably well with the tariff list – with considerable skepticism.
July-April Old July-May New July-May July-June
private sector: 1.38 percent +1.46 percent +1.45 percent +1.60 percent
overall mfg: +1.00 percent +1.04 percent +1.02 percent +1.16 percent
aircraft engines & +1.51 percent not available +1.39 percent not available
industrial heating: +1.12 percent not available +1.23 percent not available
oil & gas drilling +5.29 percent not available +5.02 percent not available
farm machinery & -0.10 percent not available -0.05 percent not available
ball bearings: +1.68 percent not available +2.18 percent not available
Weaker momentum is detectable in aerospace, energy-related equipment, and farm machinery (where sales are clearly being affected by flooding, by retaliatory tariffs imposed by China and other foreign economies, and by the slump in farm prices that began five years ago). But whereas the pace of hiring slowed in those industries, in contrast to quickening in the private sector and in manufacturing overall, in ball bearings and industrial heating equipment, job creation is accelerating, too.
In sum, if the various Trump tariffs led much of U.S. manufacturing into the woods starting early this year, the new jobs report indicates that some sectors remain mired, and some might be coming out. Still far from clear – how deep have the woods been to begin with?
Benjamin Cole said:
The weakness in housing construction can be laid at the doorstep of property zoning. Simply put, it is a criminal act to construct dense housing along most of the West Coast. By law, new construction is outlawed exactly where people need it.
The negative effects of property zoning vastly outweigh any negative effects of a trade dispute with a single nation, as in China.
If property zoning could be ruled unconstitutional, there would be a property development boom along the West Coast that would employ millions and would last for decades.
The financial media obsession with trade issues reflects the overwhelming influence of multinationals in media, academia, think tanks, lobby groups, trade associations, and even directly in political campaigns.