Although travel kept me from reporting promptly on Friday’s monthly U.S. jobs report (for October), this indicator of the American economy’s health is so closely watched that it’s essential to point out what it said about the manufacturing sector and in particular the impact of President Trump’s tariff-centric trade policies. And that’s true even though the six-week strike at General Motors, which began in mid-September and lasted through nearly the end of last month, surely threw the October figures for industry even further off than what the actual findings revealed.
But before delving into the manufacturing-specific data, it’s important to review the overall totals. Non-farm payrolls (the Bureau of Labor Statistics’ definition of the United States’ job universe), grew by 128,000 on net in October. That’s not a great number by recent standards, but given that the GM work stoppage reduced vehicles and parts employment by 41,600, it’s eminently respectable – especially given how long the current economic recovery has lasted, and how low overall unemployment has fallen.
Just as important, the October jobs report revealed upward revisions for August and September that were absolutely jaw-dropping. The former’s jobs growth was upgraded from 168,000 to 219,000, and the latter’s from 136,000 to 180,000. In fact, the August employment increase was the economy’s best since January’s 312,000. And the upgrade of 95,000 for the two months combined was bigger than job growth for the individual months of February (56,000) and May (62,000). In fact, the collective revisions weren’t much smaller than the combined total for those two weak months.
American domestic manufacturing, however, didn’t share in this good news. In fact, even had GM not experienced labor problems, its payrolls would have climbed by only 5,600, and September’s previously reported 2,000 job loss was actually downgraded to a 5,000 decrease.
The question remains, however, about the impact of Mr. Trump’s trade wars, and unfortunately, the answer remains muddled not only by GM’s production halt – which of course rippled throughout its vast U.S. supply chain in ways that the BLS figures don’t enable analysts to quantify – but by the safety woes at Boeing and the similarly unidentifiable effects on its own widespread supplier network.
All the same, here are the latest figures for employment changes at major metals-using industries, which have been widely described as prime and continuing victims of the Trump tariffs on the imports of aluminum and steel. They start with April, 2018 – the first full month in which these levies were in effect, and run through October. For comparison’s sake, the results for manufacturing overall are also included, along with those of the durable goods super-sector in which most of the big metals-users are grouped:
Old thru Sept New thru Sept Thru Oct
entire private sector: +2.40 percent +2.48 percent +2.58 percent
overall manufacturing: +1.71 percent +1.69 percent +1.40 percent
durable goods: +2.05 percent +2.00 percent +1.48 percent
fabricated metals products: +1.36 percent +1.47 percent +1.57 percent
non-electrical machinery: +1.95 percent +1.79 percent +1.74 percent
automotive vehicles & parts: -0.69 percent -0.71 percent -4.89 percent
household appliances*: not available -6.47 percent not available
aerospace products & parts*: not available +8.62 percent not available
*data are one month behind
There’s no doubt from these results that payrolls in the metals-using industries, have continued their recent trend of losing job growth momentum versus the rest of manufacturing. Until the start of this year, as shown below, most of these sectors were out-performing industry as a whole. Now the only metals-users that aren’t laggards are fabricated metals companies and – oddly – aerospace firms:
Old thru Dec New thru Dec Thru Jan.
entire private sector: +1.37 percent +1.36 percent +1.60 percent
overall manufacturing: +1.45 percent +1.39 percent +1.49 percent
durable goods: +1.67 percent +1.72 percent +1.97 percent
fabricated metals products: +1.75 percent +1.57 percent +1.78 percent
non-electrical machinery: +2.20 percent +2.33 percent +2.57 percent
automotive vehicles & pts: +0.77 percent +1.07 percent +1.15 percent
household appliances:* not available -2.21 percent not available
aerospace products & pts:* not available +5.51 percent not available
* data are one month behind
Curious about the GM strike’s effect? Take out the 41,600 net employment nosedive in the automotive sector, and its jobs decrease since the metals’ tariffs advent is -0.71 percent, not 4.89 percent. For durable goods, the increase would be 2.01 percent, not 1.48 percent, and for manufacturing overall, the increase would be 1.73 percent, not 1.40 percent. In other words, but for the GM strike, which began months earlier), both durable goods, the metals users, and manufacturing as a whole would look considerably better compared with the entire private sector – though they’d still be lagging. Add in Boeing’s woes, which however unquantifiable can’t be trivial in effect and which started months ago, and the manufacturing employment picture would look better still.
But don’t forget a final tariff-related influence on the performance of all these sectors – the Trump China policies. As known by RealityChek regulars, even if the President’s duties had been imposed in a more orderly way, their impact would be impossible even to estimate roughly given how widely but unevenly U.S.-base manufacturers use inputs from China.
Moreover, although a wide variety of American domestic manufacturers have faced foreign retaliatory tariffs prompted by the Trump levies (on top of formidable trade barriers that had been in place for decades before), growth has slowed materially in the countries and regions (especially China and the European Union) that have tried going toe-to-toe trade war-wise. The resulting decline in overseas demand for U.S.-made manufactured products and therefore exports hasn’t been major, but it however also difficult to specify, is surely weighing on American industry’s employment for reasons having nothing to do with the Trump trade wars.
The good news for anyone trying to follow the U.S. economy and the impact of trade policy is that the GM strike effect proposition can start to be tested with next month’s employment and other manufacturing-related statistics. The bad news is that all the other complications will remain firmly in place.