(What’s Left of) Our Economy: How Labor Shortages Can Help U.S. Manfacturing – & the Entire Economy

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aerospace, aircraft parts, labor shortages, manufacturing, productivity, Reuters, {What's Left of) Our Economy

Here’s some advice for Reuters reporters Allison Lampert and Rajesh Kumar Singh, and their editors Kevin Krolicki and Bill Berkrot: If you’re going to produce a story showing that labor shortages are decimating output in a certain part of the economy, make sure they really are decimating output in a certain part of the economy. Because in the case of the U.S. aircraft parts sector on which their piece this morning focuses, it ain’t.

How do we know this? First of all, it’s true that “In the United States, aerospace employment” is below its “pre-pandemic level” (though by my calculations, the Labor Department data show the fall-off has been 7.66 percent from immediately pre-pandemic-y February, 2020 through last July) and not 8.4 percent, as the article contends). And that’s indeed much worse than the record compiled in manufacturing overall – which is up 0.52 percent during that period.

Further, the workforces in aircraft engines and engine parts are down even more sharply – by 8.94 percent and 14.88 percent, respectively.

But output “grounded,” as the headline claims? Not exactly. In fact, according to the Federal Reserve’s manufacturing production figures, output in the broad aerospace products and parts category has surged by 28.44 percent between February, 2020 and last month. In the narrower aircraft and parts grouping, the growth has been 30.60 percent.

And these numbers are inflation adjusted, meaning that they’re not being artificially boosted by price increases. They represent the volume of stuff being turned out. And they leave in the dust the results for manufacturing overall (up 3.69 percent in real terms since just before the CCP Virus arrived in force).

Even more striking, the output rebound in aerospace has remained strong recently. In that broad category, it’s jumped 10.38 percent year-on-year in August. For aircraft and parts, the surge has been an even faster 30.60 percent.

How can this be? The answer should be obvious to anyone who knows even a smidgeon of economics. These industries have become much more efficient. And indeed, official figures show that labor productivity in aerospace products and parts soared by 15.50 percent between 2020 and 2021 (the latest figures available). The comparable figure for all manufacturing? Just 3.30 percent. (As known by RealityChek regulars, the government also tracks a broader measure of productivity, called total factor productivity, but the detailed industry figures aren’t out yet.)

And here’s what’s totally weird: Steps taken by companies in aircraft parts to compensate for scarce workers, and plans to take more, were reported in the Reuters piece.

There’s no doubt that businesses in manufacturing overall and in aerospace in particular would love to have more workers – largely because demand for their products is exceptionally strong. But as the output and productivity data reveal, they’re figuring out how to solve this problem – and impressively.

That’s not only not a bad news story – it’s a great news story. And if other industries (including in the service sector) could remotely duplicate this performance, responding to labor shortages by making technological and other forms of progress, rather than by pleading for more mass immigration and other productivity-killing crutches, the entire economy and its prospects would be in much better shape than at present.

(What’s Left of) Our Economy: Slower Growth and More Hiring in U.S. Manufacturing, Too

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aerospace, aircraft, aircraft engines, aircraft parts, CCP Virus, chemicals, coronavirus, COVID 19, electronics products, Employment, fabricated metal products, furniture, Jobs, machinery, manufacturing, medicines, miscellaneous durable goods, non-farm jobs, non-farm payrolls, paper, paper and paper products, pharmaceuticals, recession, semiconductors, surgical equipment, textiles, vaccines, {What's Left of) Our Economy

When it comes both to the U.S. economy in general and domestic manufacturing in particular, this morning’s official jobs report (for July) strongly supported a widely held supposition of economists – that employment is a lagging indicator of trouble.

That’s because laying off workers supposedly is seen as a last resort by businesses facing bad times, and the new results for non-farm payrolls (the U.S. government’s definition of the national jobs universe) seems to have validated this view in spades. Even though the economic growth has been slowing dramatically from last year’s rapid pace, employers boosted their headcounts by a stunning 528,000 last month (including 471,000 in the private sector). And even though inflation-adjusted American manufacturing production has fallen for the last two data months (May and June – the July results will come out August 16), U.S.-based industry added workers for the fifteenth straight month.

Indeed, July’s 30,000 increase in manufacturing jobs was the biggest monthly gain since April’s 61,000. And the numbers included the best hiring month of all time (or at least since that data series began in 1990) for the big pharmaceuticals and medicines industry. Moreover, revisions left the solid results of June and May virtually unchanged.

As a result, domestic manufacturing employment is 0.32 percent higher than its level in February, 2020 – just before the CCP Virus struck the U.S. economy in force and sent economic activity spiraling downward. Last month, when it finally regained its pre-pandemic jobs levels, the net gain was 0.09 percent.

Since July’s overall jobs improvement was so great, manufacturing is no longer the economy’s post-pandemic employment champion. That title has passed again to the total private sector, where payrolls are now 0.49 percent higher than in February, 2020. But manufacturing’s net job creation pace continues to exceed that of the non-farm economy (which includes the public sector). Its workforce is just 0.02 percent larger than just before the pandemic’s arrival.

The huge July surge in non-farm and private sector net hiring did depress manufacturing’s share of those workforces – from 9.86 percent of private sector jobs to 9.85 percent, and from 8.42 percent of non-farm jobs to 8.41 percent. But manufacturing employment is still up in relative terms since February, 2020 – climbing from 9.83 percent of private sector employment and 8.38 percent of non-farm employment.

Job-creation winners abounded throughout manufacturing’s major sectors in July, with the standouts being:

>fabricated metals products, where payrolls grew by 4,200. Revisions, however, continued to be weak, with June’s sequential loss remaining at 600; May’s originally reported 7,100 surge revised lower first to 6,900 and now to 6,600 (still the best since February’s 9,300 pop); and April’s results staying at a twice downgraded 1,400. Employment in this big sector is now 2.04 percent below its immediate pre-pandemic levels, versus the 2.31 percent shortfall calculable last month;

>miscellaneous durable goods (the major category containing many of the key medical devices used to combat the virus), which added 3,700 workers in its strongest monthly performance since last November’s 10,400. But revisions were on balance negative here, too, with June’s initially reported 2,400 job growth now judged to have been 1,700, May’s initially upgraded 1,300 advance downgraded to 1,000, and only April’s results breaking the pattern, with its upgraded 600 job loss staying unchanged.

Miscellaneous goods’ workforce is now 2.79 percent higher than in February, 2020, versus the 2.36 percent calculable last month;

>chemicals, which remained on a hot streak last month. Its companies added 3,700 employees on month in July, its June performance was revised way up from a 1,200 improvement to 4,500, its initially downgraded May rise upgraded to 5,100 (the greatest improvement since January’s 5,500), and April’s increase settling at 1,700 after being first reported as 1,000. As of July, 5.84 percent more workers were employed in the chemicals industry than in February, 2020, versus the 4.83 percent calculable last month; 

>machinery, which RealityChek regulars know is a bellwether for the rest of manufacturing and the whole economy because of how widely its products are used. Its employment increased by 3,400 on month in July; June’s initially reported 1,000 rise is now pegged as 1,600; May’s initially reported 3,200 job decrease has now ben revised all the way up to a jobs gain of 200; and April’s final total stayed at a twice downgraded 5,800. Consequently, machinery employment has rebounded to within 1.47 percent of its immediate pre-pandemic level, versus the 2.05 percent shortfall calculable last month; and 

>computer and electronics products, which contains shortage-plagued semiconductor sector, also boosted its employment by 3,400 sequentially in July. June’s initially reported 2,300 net new job creation is now judged to have been 2,000, but May’s totals were revised up a second time, to 5,300 (its best monthly performance since the 6,300 recorded in May, 2020, during the economy’s strong bounceback from the first CCP virus wave), and April’s thrice upgraded figure remained the same at 4,900. This progress pushed headcounts in this sector 0.41 percent above their February, 2020 levels, versus the 0.11 percent calculable last month.

The worst performers among July’s few maufacturing losers:

>paper and paper products, where employment fell month-to-month by 1,200. At the same time, June’s initially reported 1,200 job increase was upgraded to 1,500; May’s advance was revised down but still remained at an increase of 700; and April’s initially downwardly revised 1,300 employment rise stayed at an upwardly revised 2,100 increase. Nonetheless, there are now 0.86 percent fewer jobs in paper and paper products compared with February, 2020, versus the 0.22 percent dip calculable last month;

>textile mills, whose July employment was off by 600. Revisions were mixed, with June’s initially reported jobs bump of 700 now judged to have been 300, but May’s initially reported payroll decrease of 700 now upgraded to a loss of 400, and April’s upgraded 800-job increase remaining the same. Since just before the pandemic arrived,, however, textile mill jobs have shrunk by 6.18 percent, versus the 5.15 percent calculable last month; and

>furniture and related products, where headcounts sank by 600 on month. Worse, revisions on balance were decidedly negative. June’s initially reported employment improvement of 100 is now considered to be a drop of 1,100; May’s results, first reported as a 1,000 jump, were downgraded a second time to a mere 100 advance; and April’s initially reported 1,100 drop have been revised up only to 900 job loss. Whereas as of last month, the furniture complex’s workforce had risen to 0.60 higher than its February, 2020 level, it’s now sunk back to 0.03 percent lower.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and most turned in performances even better than manufacturing as a whole.

The semiconductor industry is still struggling with the aforementioned shortages that are hampering so many other parts of the economy. But the 1,700 jobs it added on month in June were the most since the 1,800 in January, 2019, and revisions were positive. May’s initially reported 800 jobs gain is now pegged as having been 1,000 and April’s first reported 100 increase has been upgraded more than ten-fold – to 1,100.

The upshot seems to be that the recent high profile announcements of new domestic microchip fab construction are showing up in the employment data. As of last month, the sector’s payrolls were only 2.20 percent higher than just before the pandemic’s large-scale onset (though in fairness, semiconductor employment actually rose during the steep 2020 downturn). As of today, however, employment is up 3.22 percent during that period. (Note: The 1,400 semiconductor job growth I said last month took place in December, 2021 in fact came in the previous December. Apologies for the error.)

In surgical appliances and supplies (which includes so many of the personal protective equipment and other medical goods so widely used to fight the CCP Virus), June employment dropped by 800 – these companies’ worst monthly performance since last July’s 1,100 decline. At least revisions were positive. May’s initially reported gain of 400 is now estimated at 500, and April’s figure stayed at an upgraded loss of 100. The surgical appliances and supplies sector now employs 3.69 percent more workers than in February, 2020; last month, this increase had been 4.36 percent.

The pharmaceuticals and medicines industry, by contrast, generated record-smashing net job creation in June. The 4,300 rise was the biggest monthly total ever in a data series that goes back to 1990, and greatly eclipsed the old mark of 3,200 recorded in September, 2019. Revisions, moreover, were excellent, with May’s initially reported 100 payroll decline now raised all the way up to a 1,200 gain, and April’s increase remaining at an upgraded 1,500. Headcounts in these businesses are now 11.58 percent higher than just before the pandemic, versus the 10.10 percent calculable last month.

The much smaller medicines subsector containing vaccines performed well on the jobs front, too, hiring 1,100 net new workers in June. In addition, May’s initially reported 600 increase is now judged to have been 700, and April’s monthly improvement stayed at 1,100. This subsector’s workforce has now expanded by 26.29 percent since just before the pandemic arrived in force, as opposed to the 24.47 percent calculable last month.

An aerospace cluster hit especially hard by CCP Virus-related travel restrictions experienced another robust employment month in June.

Aircraft companies hired 1,500 net new workers on month, and revisions were excellent as well. May’s initially reported net new hires figure was upgraded from 1,300 to 1,600 – their best such performance since last June’s increase of 4,400 (mis-reported last month as a rise of 4,000). And April’s advance remained at an upgraded 500. As a result, the aircraft workforce is only 9.64 percent smaller than just before the pandemic arrived, versus the 10.30 percent calculable last month.

Aircraft engines and engine parts jobs were up by 800 sequentially in June, May’s initially reported increase of 700 was revised up to 900, but April’s results stayed at a downwardly revised 800. This improvement enabled employment at these firms to come within 9.81 percent of their February, 2020 levels, versus the 10.91 percent calculable last month.

These increases were mirrored in the non-engine aircraft parts and equipment industry, which added 600 workers on month. May’s initially reported 300 jobs increase remained unrevised as did April’s upgraded 400 increase. The non-engine aircraft parts and equipment sectors, as a result, crept to within 14.62 percent of their employment levels of February, 2020, versus the 15.14 percent calculable last month.

The big questions for American workers, and domestic industry as a whole including manufacturing, are whether economic growth will really continue to deteriorate further (here’s a recent forecast that it won’t, at least in the third quarter); and if it does, will businesses continue to “hoard” labor. Let me know if there’s anyone you trust to provide accurate answers.

(What’s Left of) Our Economy: U.S.-Based Manufacturing Returns to Pre-Pandemic Job Levels

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aerospace, aircraft, aircraft engines, aircraft parts, Bureau of Labor Statistics, CCP Virus, coronavirus, COVID 19, Employment, fabricated metal products, Federal Reserve, food products, inflation, Jobs, Labor Department, machinery, manufacturing, miscellaneous non-durable goods, monetary policy, non-farm jobs, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, printing, private sector, recession, semiconductors, supply chain, surgical equipment, textiles, transportation equipment, vaccines, {What's Left of) Our Economy

A power outage in my Maryland suburb of Washington, D.C. prevented me from filing my usual same-day post on the manufacturing highlights of the latest official U.S. jobs release, but the big news is still eminently worth reporting:

Specifically, “It’s back.” According to yesterday’s employment report from the Labor Department (for June), as was the case with the private sector overall, U.S.-based manufacturing last month finally regained all the jobs it lost – and then some – during the deep but short CCP Virus- and lockdowns-induced recession of spring, 2020.

The new figures show that by adding 29,000 workers on net sequentially during June, and having added slightly more to their headcounts in April than previously reported, domestic industry’s employment last month stood at 12.797 million. That’s 0.09 percent more than the 12.785 million on their payrolls in February, 2020, the last full data month before the pandemic’s arrival in force began decimating and distorting the economy.

As of June, American private sector workers now number 129.765 million – 0.11 percent above its immediate pre-pandemic level of 129.625 million.

Yet the entire non-farm economy (the employment universe of the Labor Department’s Bureau of Labor Statistics, which tracks employment trends for the federal government) still hasn’t recovered all the jobs it lost during March and April, 2020. Because public sector employment is still off some, June’s 151.980 million non-farm payroll count remains 2.38 percent below the February, 2020 total of 152.504 million.

The June jobs report left manufacturing employment at the same level of total non-farm employment (8.42 percent) as in May, and a slightly smaller (9.86 percent versus 9.87 percent) share of total pivate sector employment that month.

But since the CCP Virus’ large-scale arrival, domestic industry has boosted these percentages from 8.38 percent and 9.83 percent, respectively.

Another reason for optimism about the manufacturing results of the June jobs report: The 29,000 payrolls boost was a nice increase from May’s unrevised 18,000 increase – the worst monthly performance since April, 2021’s 28,000. And as noted above, this past April’s excellent results saw their second upward revision – from 58,000 to 61,000 (the highest month-to-month gain since last July’s 62,000).

May’s biggest manufacturing jobs winners among the broadest Individual industry categories monitored by the Labor Department were:

>transportation equipment, which has been on a genuine rollercoaster. June’s hiring increase of 7,200 followed a May loss revised down from 7,900 to 9,800 – the worst such monthly drop since February’s 19,900. Yet the April figure for the sector was upgraded from an unrevised 19,500 to 20,100 – and followed a March advance of 25,000. That was the best such performance since October’s 28,200.

Yet all this tumult – due largely to an ongoing semiconductor shortage still plaguing the automotive sector in particular – still left transportation equipment employment 2.23 percent lower than in immediately pre-pandemic-y February, 2020 – as opposed to the 2.57 percent figure calculable last month;

>miscellaneous non-durable goods, where headcounts improved by 5,400 – the biggest monthly increase since February, 2021’s 5,500. But volatility is evident here, too, as May’s previously reported 2,900 jobs decrease was revised downgraded 3,400 – the biggest decline since December, 2020’s -9,400. Yet payrolls in this catch-all sector are now 9.68 percent higher than in February, 2020 – up from the 8.12 percent calculable from last month’s figures;

>plastics and rubber products, whose 5,300 hiring advance was its best since April’s now twice upgraded 8,000 rise. Moreover, May’s initially reported jobs decrease of 400 is now judged to have been a gain of 2,600. These companies now employ 4.33 percent more workers than just before the pandemic’s large-scale arrival in February, 2020, versus the 2.88 percent calculable last month; and

>food manufacturing, which added 4,800 employees on month in June. In addition, May’s initially reported 6,100 increase was revised up to 7,600, more than offsetting a second downgrade of the April advance from 7,700 0 7,100. This huge industry’s workforce is now 2.87 percent greater than in February, 2020, as opposed to the 2.53 percent figure calculable last month.

The biggest jobs losers in June among the broadest manufacturing sectors were:

>printing and related support activities, where 900 jobs were cut in the biggest monthly decrease since January’s 1,800. Worse, May’s initially reported employment retreat of 400 is now estimated at 700, and April’s upgraded increase (of 3,100) was revised down to 3,900. Employment by these companies is now down by 10.63 percent since just before the CCP Virus’ arrival in force in February, 2020, versus the 10.23 percent calculable last month;

>textile product mills, whose sequential June jobs loss of 700 was its worst since last September’s 900. May’s initially reported 100 employment dip stayed unrevised, but April’s initially upgraded results (from a headcount loss of 400 to one of 300) is now judged to be a decline of 400 once again. Consequently, payrolls in this sector are now off by 5.32 percent since February, 2020, as opposed t the 4.60 percent calculable last month; and

>fabricated metal products, whose 600 job loss in June was its worst such retreat since April, 2021’s 1,600, and the first fall-off since then. Revisions were mixed, with May’s initially reported increase of 7,100 downgraded to 6,900 (still its best sequential performance since February’s 9,300 surge) but April’s losses were revised down again, from 1,600 to 1,400. Despite its recent hiring hot streak, however, payrolls in this large sector are still 2.31 percent below pre-pandemic-y February, 2020’s level, versus the 2.24 percent calculable last month.

As known by RealityChek regulars, the big machinery industry is a bellwether for all of domestic manufacturing and indeed the entire U.S. economy, since so many industries use its products. So it was definitely good news that employment in this sector rose on month in June by 1,000 after having dropped by a downwardly adjusted 3,200 in May. That’s the sector’s worst such performance since it shed 7,000 workers last November. (Note: Last month, I mistakenly reported the May, 2021 decrease at 7,900.)

Yet April’s hiring gains were revised down again – from 5,900 to 5,800 – and machinery employment is still off since just before the pandemic’s arrival by 2.05 percent, versus the 2.12 percent calculable last month.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and interestingly, their May performance was generally better than that for domestic industry as a whole.

The semiconductor industry still struggling with the aforementioned shortages boosted employment on month in May by 800, and April’s initially reported 900 increase was revised up to 1,100 – the best since December’s 1,400. Even though March’s jobs improvement remained at a downgraded 400, payrolls in the sector moved up to 2.20 percent higher than just before the pandemic arrived in February, 2020 from the 1.66 percent calculable last month. And although progress seems modest, it must be remembered that even during the early spring, 2020 downturn, these companies added to their headcounts.

In surgical appliances and supplies (which includes all the personal protective equipment and other medical goods so widely used to fight the CCP Virus), employment in May climbed by 400 on month, April’s initially reported 200 loss is now estimated at just 100, and March’s unrevised 1,100 increase stayed unrevised. These results mean that these sectors have increased their workforces by 4.36 percent since February, 2020, versus the 3.88 percent calculable last month.

The large pharmaceuticals and medicines industry was a partial exception to this pattern, losing 100 jobs sequentially in May. But April’s initially reported 1,400 rise (the best monthly performance since last June’s 2,600) is now judged to have been 1,500. And March’s advance stayed at an upwardly revised 1,200. As a result, these industries now employ 10.10 percent more workers than in immediately pre-pandemic-y February, 2020, versus the 9.78 percent calculable last month.

The medicines subsector containing vaccines hired 600 net new employees on month in May, April’s 1,100 payrolls increase (the best such performance since December’s 2,000), stayed unrevised, as was March’s previously upgraded 600 increase. Consequently, these companies’ headcounts are now 25.08 percent above their February, 2020 levels, versus the 24.47 percent improvement calculable last month.

Good job creation also continued throughout an aerospace cluster hit especially hard by CCP Virus-related travel restrictions. Aircraft manufacturers added 1,300 workers in May, their most robust monthly hiring since last June’s 4,000 jump. April’s initially reported climb of 200 was upgraded to 500, and March’s results stayed at an upwardly revised 1,200. These companies’ workforces have now crept to within 10.30 percent of their pre-pandemic total, versus the 10.96 percent shortfall calculable last month.\

In aircraft engines and engine parts, jobs rose by 700 sequentially in May, and though April’s initially reported increase of 900 is now judged to be 800, it was still the best such performance since February’s increase of 900. March’s new hires stayed at an upwardly revised 600, leaving employment in this sector 10.91 percent below February, 2020 levels, versus the 11.56 percent calculable last month.\

Non-engine aircraft parts and equipment makers kept making steady employment progress as well. They added 300 workers on month in May, and their initially reported new April hiring of 300 is now estimated at 400. March’s employment increase stayed unrevised at 700, but this sector still employs 15.14 percent fewer workers than in February, 2020, versus the 15.48 percent calculable last month.

With the Federal Reserve still on record as seeing the need for slowing the economy’s growth (at best) in order to fight inflation, signs of recession multiplying (e.g., here), domestic industry’s major export markets looking increasingly weak as well, the Ukraine War dragging on, and supply chain problems ongoing (see, e.g., here and here) it’s difficult to expect U.S.-based manufacturers to escape these powerful downdrafts. But these companies have kept turning in remarkably strong results in production as well as hiring, so who’s to say they can’t keep bucking the odds?

(What’s Left of) Our Economy: Revisions Take U.S. Manufacturing’s Solid Pandemic-Era Performance Down a Notch

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aerospace, aircraft, aircraft parts, apparel, appliances, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, durable goods, electrical components, electrical equipment, fabricated metal products, Federal Reserve, furniture, inflation-adjusted output, machinery, manufacturing, medical devices, miscellaneous durable goods, miscellaneous nondurable goods, nondurable goods, nonmetallic mineral products, paper, petroleum and coal products, pharmaceuticals, plastics and rubber products, printing, real growth, recession, semiconductors, textiles, wood products, Wuhan virus, {What's Left of) Our Economy

Sharp-eyed RealityChek readers have no doubt noticed my habit of noting that “final” versions of official U.S. economic data are typically final only “for now.” That’s because Washington’s statistics gathering agencies, to their credit, look back regularly on several years’ worth of figures to see where updates are needed because new information has come in, and this morning, the Federal Reserve released its own such “benchmark” revision of its manufacturing production data.

The results don’t contain any earthshaking changes, but they do alter the picture of domestic industry’s inflation-adjusted growth during the pandemic period, as well as of the performance of specific sectors, in non-trivial ways.

The main bottom lines: First, the Fed previously estimated that U.S.-based manufacturers had increased their constant dollar production from February, 2020 (the month before the CCP Virus’ arrival in force began roiling the entire American economy) through last month, by 4.94 percent. Today, the Fed told us that the advance was just 4.12 percent.

Second, as a result, domestic industry has further to go in real terms to recover its all-time high than the central bank had judged. As of the last regular monthly industrial production increase, U.S.-based manufacturing was 2.41 percent smaller after inflation than in December, 2007 – still its peak. But the new figures show that these manufacturers are still three percent behind the after-inflation output eight-ball.

Third, and especially interesting given the recent, significant U.S. growth slowdown and distinct possibility of a recession before too long, the revisions add (though just slightly) to the evidence that the overall economy’s woes this year are indeed beginning to affect manufacturing. Before the revision, the Fed judged that real manufacturing output had expanded by 2.68 percent between last December and this May, and slipped by 0.07 percent between April and May. The new figures: 2.46 percent and -0.22 percent, respectively.

The virus-era downward revisions affected durable goods and nondurable goods industries alike. The previous price-adjusted growth figure for the former during the pandemic period was 6.31 percent. Now it’s pegged at 5.18 percent. For the latter, the downgrade was from 3.42 percent to 2.99 percent.

Before the revisions, of the twenty broadest sub-sectors of manufacturing tracked by the Fed, only five suffered inflation-adjusted production declines from immediate pre-pandemic-y February, 2020 through this May, and all were found in the nondurables super-category. They were miscellaneous non-durable goods (down 11.43 percent), textiles (down 3.80 percent), paper (2.33 percent), printing and related activities (1.89 percent), and petroleum and coal products (1.21 percent).

The new data show that the number of growth losers has expanded to eight;. Four sectors were added: fabricated metals products (down 1.30 percent), nonmetallic mineral products (1.06 percent), apparel and leather goods (off by 0.59 percent), and furniture and related products (0.17 percent). And petroleum and coal products’ contant dollar production was upgraded from a 1.21 percent decrease during the pandemic period to a 2.96 percent gain.

The names on the list of top five pandemic period growers remained the same, with after-inflation production actually improving in aerospace and miscellaneous transportation (from 18.99 percent to 19.69 percent), miscellaneous durable goods (from 11.41 percent to 12.43 percent), and machinery (from 6.29 percent to 6.52 percent). But real production gains were revised down in computer and electronics products (from 10.42 percent to 7.38 percent), and chemicals (from 8.48 percent to 7.55 percent).

In absolute tems, the biggest price-adjusted output upgrades were registered in miscellaneous nondurable goods (from an 11.43 pecent nosedive to a smaller drop of 7.56 percent), electrical equipment, appliances and components (from a 2.19 percent rise to one of 4.95 percent), the aforementioned petroleum and coal products sector, wood products (from a 5.24 percent increase to 6.45 percent), and plastics and rubber products (from 1.78 percent growth to 2.76 percent).

The biggest real production downgrades came in the printing sector (all the way from a 1.89 percent inflation-adjusted output shrinkage to one of 9.52 percent), apparel and leather goods (from a 4.59 percent real production rise to a 0.59 percent dip), nonmetallic mineral products (from 2.58 percent price-adjusted growth to a 1.06 percent decline), and the aforementioned computer and electronics product sector.

RealityChek has been following with special interest narrower sectors that have attracted unusual attention since the CCP Virus arrived, and the new industrial production revision shows that constant dollar output climbed by more than previously estimated in aircraft and parts (24.89 percent versus 19.08 percent) and medical equipment and supplies (14.48 percent versus 11.51 percent), and by less in semiconductors and other electronic components (22.48 percent versus 23.82 percent) and in pharmaceuticals and medicine (12.79 percent versus 14.78 percent).

These Fed revisions are hardly a reason to push the panic button about U.S. manufacturing. But because domestic industry’s fortunes during the pandemic era have been so closely tied to blazing hot demand for its products, it’s hardly great news to learn that with signs abounding of a slumping American economy, manufacturing is approaching this apparent downturn in less robust shape than thought as late as yesterday.   

(What’s Left of) Our Economy: Will Inflation and a Hawkish Fed Finally Undermine U.S. Manufacturing?

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aerospace, aircraft, aircraft parts, appliances, automotive, capital spending, CCP Virus, coronavirus, COVID 19, electrical components, electrical equipment, Federal Reserve, furniture, inflation, inflation-adjusted output, machinery, manufacturing, medical devices, medicines, non-metallic mineral products, petroleum and coal products, pharmaceuticals, real growth, semiconductor shortage, semiconductors, wood products, {What's Left of) Our Economy

The new (May) U.S. manufacturing production report from the Federal Reserve doesn’t mainly indicate that industry may be facing a crossroads because the sector’s inflation-adjusted output dropped on month for the first time since January.

Instead, it signals that a significant slowdown may lie ahead for U.S.-based manufacturers because its downbeat results dovetail with the latest humdrum manufacturing jobs report (also for May), with results of some of the latest sentiment surveys conducted by regional branches of the Fed (e.g., here), and with evidence of a rollover in spending on machinery and equipment by the entire economy (which fuels much manufacturing output and typically reflects optimism about future business prospects).

Domestic industry shrank slightly (by 0.07 percent) in real output terms month-to-month in May. On the bright side, the strong results of recent months stayed basically unrevised, and April’s very good advance was upgraded from 0.75 percent to 0.77 percent.

Still, the May results mean that real U.S. manufacturing production is now up 4.94 percent since just before the CCP Virus began roiling and distorting the American economy (February, 2020), rather than the 5.07 percent calculable from last month’s report.

May’s biggest manufacturing growth winners were:

>Petroleum and coal products, where after-inflation jumped by 2.53 percent sequentially in May. The improvement was the fourth straight, and the increase the best since February’s 2.68 percent. As a result, constant dollar production in these sectors is now 1.21 percent higher than in immediately pre-pandemic-y February, 2020;

>Non-metallic mineral products, whose 1.78 percent sequential growth in May followed an April fall-off that was revised way down from -0.67 percent to -1.72 percent. March’s 0.76 percent decrease was downgraded to a 1.29 percent retreat, but February’s sequential pop was revised down just slightly to a still outstanding 4.37 percent surge. All told, the sector has grown by 2.58 percent after inflation since February, 2020 – exactly the same result calculable from last month’s Fed release; and

>Furniture and related products, whose 1.23 percent May inflation-adjusted output rise was its first such increase since February’s, and its best since that month’s 4.96 percent surge. Moreover, the May advance comes off an April performance that was revised up from a -0.60 percent sequential dip to one of -0.12. In all, these results were enough to move real furniture production above its Februay, 2020 level – by 0.08 percent.

May’s biggest manufacturing production losers were:

>wood products, whose 2.56 percent real monthly output decline was its first decrease since January and its worst since February. 2021’s 3.65 percent. Moreover, April’s previously reported 1.13 percent advance is now estimated to have been just 0.97 percent – all of which means that constant dollar production by these companies is now 5.24 percent higher than just before the pandemic arrived, not the 7.85 percent calculable last month;

>machinery, whose May inflation-adjusted output sank by 2.14 percent – the biggest such setback since February, 2021’s 2.59 percent. As known by RealityChek readers, machinery production is one of those aforementioned indicators of capital spending because it’s sold to customers not just in manufacturing but throughout the economy.

It’s true that machinery’s revisions were mixed. April’s after-inflation production increase was upgraded all the way fom 0.85 percent to 1.69 percent – its best such performance since last July’s 2.85 percent. But March’s performance was revised down from 0.36 percent to one percent shrinkage, and February’s increase was revised up again, but only from 1.17 percent to 1.22 percent. Consequently, whereas as of last month, machinery production was 8.31 percent higher in real terms than in February, 2020, this growth is now down to 6.29 percent.

>electrical equipment, appliances and components, where real output sagged for the second consecutive month, and by a 1.83 percent that was its worst such monthly performance since February, 2021’s 2.34 percent decrease. Revisions were modest and mixed, with April’s previously reported 0.60 percent sequential drop upgraded to -0.42 percent, March’s downgraded 0.04 percent dip upgraded to a 0.19 percent gain, and February’s real output revised up again – from 2.03 percent to 2.08 percent. These moves put real growth in the sector post-February, 2020 at 2.19 percent, less than half the 5.55 percent calculable last month.

By contrast, industries that consistently have made headlines during the pandemic delivered solid May performances.

Aircraft- and aircraft parts-makers pushed their real production up 0.33 percent on month in May, achieving their fifth straight month of growth. Moreover, April’s excellent 1.67 percent sequential production increase was upgraded to 2.90 percent (the sector’s best such result since last July’s 3.44 percent), March’s estimate inched up from a hugely downgraded 0.47 percent to 0.50 percent, and the February results were upgraded again – from 1.34 percent to 1.49 percent. This good production news boosted these companies’ real output gain since immediately pre-pandemic-y 16.37 percent to 19.08 percent.

The big pharmaceuticals and medicines industry performed well in May, too, as after-inflation production increased by 0.42 percent. Revisions were overall negative but small. April’s initially reported 0.20 percent real output slip is now judged to be a0.15 percent gain, but March’s upwardly revised 1.23 percent increase is now pegged at only 0.32 percent, and February’s downwardly revised 0.96 percent constant dollar output drop revised up to -0.86 percent. All told, inflation-adjusted growth in the pharmaceuticals and medicines sector is now up 14.78 percent since February, 2020, as opposed to the 14.64 percent increase calculable last month.

Medical equipment and supplies firms fared even better, as their 1.44 percent monthly real output growth in May (their fifth straight advance) was their best such result since February, 2021’s 1.53 percent. Revisions were positive, too. April’s previously recorded 0.06 percent dip is now estimated as a 0.51 percent increase, March’s downgraded 1.28 percent figure was upgraded to 1.41 percent, and February’s 1.46 percent improvement now stands at 1.53 percent. These sectors are now 11.51 percent bigger in terms of constant dollar output than they were just before the CCP Virus arrived in force – a nice improvement from the 8.92 percent figure calculable last month.

May also saw a production bounceback in the shortage-plagued semiconductor industry. Its inflation-adjusted production climbed 0.52 percent on month, but April’s previously reported 1.85 percent drop – its worst such performance since last June’s 1.62 percent – is now judged to be a 2.25 percent decline. At least the March and February results received small upgrades – the former’s improving from a previously downgraded 1.83 percent rise to 1.92 percent, and February’s upgraded growth of 2.91 percent now estimated at 2.96 percent. The post-February, 2020 bottom line: After-inflation semiconductor production is now 23.82 percent higher, not the 23.38 pecent increase calculable last month.

And since the automotive industry’s ups and downs have been so crucial to domestic manufacturing’s ups and downs during the pandemic era, it’s worth noting its 0.70 percent monthly price-adjusted output growth in May.

Revisions overall were negative. April’s previously reported 3.92 percent constant dollar production growth was revised down to 3.34 percent, March’s 8.28 percent burst was upgraded to 8.99 percent (the best such result since last October’s 10.64 percent jump), and February’s previously upgraded 3.86 percent inflation-adjusted production decrease was downgraded to a 4.24 percent plunge.

But given that motor vehicle- and parts-makers are still dealing with the aforementioned semiconductor shortage, these numbers look impressive, and real automotive output is now 1.17 percent greater than in pre-pandemic-y February, 2020, as opposed to the 0.77 percent increase calculable last month.

Domestic manufacturing has overcome so many obstacles since the CCP Virus’ arrival that counting it out in growth terms could still be premature. But an obstacle that it hasn’t faced since the pandemic-induced downturn have s looming again — a major economy-wide slowdown and possible recession that could result from monetary tightening announced by the Federal Reserve to fight torrid inflation.  And with the world economy likely to stay sluggish as well and limit export opportunities (see, e.g., here), the possibility that industry’s winning streak finally ends can’t be dismissed out of hand.  

(What’s Left of) Our Economy: U.S. Manufacturing’s Hiring Takes a (Slight) Breather

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aerospace, aircraft, aircraft engines, aircraft parts, automotive, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, fabricated metals products, Federal Reserve, fiscal policy, food products, inflation, Jobs, Labor Department, machinery, manufacturing, medical devices, medicines, monetary policy, non-farm jobs, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, semiconductor shortages, semiconductors, stimulus, transportation equipment, Ukraine, Ukraine-Russia war, vaccines, wood products, {What's Left of) Our Economy

U.S.-based manufacturing’s employment performance has been so strong lately that the 18,000 net gain for May reported in today’s official U.S. jobs report was the worst such performance in more than a year – specifically, since April, 2021’s 28,000 employment loss. And even that dismal result stemmed mainly from automotive factories that were shut down due to semiconductor shortages – not from any underlying weakness in domestic industry.

Moreover, revisions of the last several months’ of sizable hiring increases were revised higher. April’s initially reported 55,000 increase is now pegged at 61,000, and March’s headcount boost was upgraded again, this time all the way from 43,000 to 58,000.

Indeed, taken together, this payroll surge has enabled U.S.-based manufacturing to increase its share of American jobs again. As of May, industry’s employment as a share of the U.S. total (called “non-farm payrolls” by the Labor Department that releases the data) rose sequentially from the 8.41 percent calculable last month to 8.42 percent. And the manufacturing share of total private sector jobs climbed from the 9.86 percent calculable last month to 9.87 percent..

The improvement since February, 2020 – the last full data month before the CCP Virus’ arrival began roiling and distorting the entire U.S. economy – has been even greater. Then, manufacturing jobs represented just 8.38 percent of all non-farm jobs and 9.83 percent of all private sector employment.

Domestic industry still slightly lags the private sector in terms of regaining jobs lost during the worst of the pandemic-induced recession of March and April, 2020. The latter has recovered 99.01 percent of the 21.016 million jobs it shed, compared with manufacturing’s 98.75 percent of its 1.345 million lost jobs.

But the main reason is that industry’s jobs losses during those months were smaller proportionately than those of the private sector overall.

Viewed from another vantage point, the May figures mean that manufacturing employment is just 0.13 percent smaller than just before the pandemic struck.

May’s biggest manufacturing jobs winners among the broadest individual industry categories tracked by the Labor Department were:

>fabricated metals products, which boosted employment on month by 7,100 – the sector’s biggest rise since since February’s 9,300. Its recent hiring spree has brought fabricated metals products makers’ payrolls to within 2.24 percent of their immediate pre-CCP Virus (February, 2020) levels;

>food products,where payrolls grew by 6,100 sequentially in May. Employment in this enormous sector is now 2.53 percent higher than in February, 2020;

>the huge computer and electronics products sector, whose headcount improved by 4,400 over April’s levels. As a result, its workforce is now just 0.19 percent smaller than in immediate pre-pandemic-y February, 2020;

>wood products, which added 3,800 employees in May over its April levels. Along with April’s identical gain, these results were these businesses’ best since May, 2020’s 13,800 jump, during the strong initial recovery from the virus-induced downturn. Wood products now employs 6.85 percent more workers than in February, 2020; and

>chemicals, a very big industry whose workforce was up in May by 3,700 over the April total. The result was the best since January’s 5,500 sequential jobs growth, and pushed employment in this industry 4.76 percent higher than in February. 2020.

The biggest May job losers among those broad manufacturing groupings were:

>transportation equipment, another enormous category where employment fell by 7,900 month-to-month in May. That drop was the biggest since February’s 19,900 nosedive. But it followed an April monthly increase that was revised up from 13,700 to 19.500. All this volatility – heavily influenced by the aforementioned semiconductor shortage that has plagued the automotive industry – has left transportation equipment payrolls 2.57 percent smaller than just before the pandemic’s arrival in February, 2020;

>machinery, whose 7,900 sequential job decline in May was its worst such result and first monthly decrease since November’s 7,000. Moreover, April’s initially reported 7,400 payroll increase in machinery is now judged to be only 5,900. These developments are discouraging because machinery’s products are used so widely throughout the entire economy, and prolonged hiring doldrums could reflect a slowdown in demand that could presage weakness in other sectors. Machinery payrolls are now down 2.12 percent since February, 2020; andent since February 2020; and

>miscellaneous nondurable goods, where employment shrank in May by 2,900 on month. But here again, a very good April increase first reported at 3,300 is now judged to have been 4,400, and thanks to recent robust hiring in this catch-all category, too, its employment levels are 8.12 percent higher than in February. 2020.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and their April job creation overall looked somewhat better than that for domestic manufacturing as a whole.

Semiconductors are still too scarce nationally and globally, but the semiconductor and related devices sector grew employment by 900 on month in April – its biggest addition since last October’s 1,000. March’s initially reported 700 jobs gain was revised down to 400, and February’s upgraded hiring increase of 100 stayed unrevised. Consequently, payrolls in this industry are up 1.66 percent since just before the pandemic arrived in full force, and it must be kept in mind that even during the deep spring, 2020 economy-wide downturn, it actually boosted employment.

The news was worse in surgical appliances and supplies – a category containing personal protective equipment (think “facemasks”) and similar medical goods. April’s sequential jobs dip of 200 was the worst such performance since October’s 300 fall-off, but at least March’s initially reported 1,100 increase remained intact (as did February’s downwardly revised – frm 800 – “no change.” Employment in surgical appliances and supplies, however, is still 3.88 percent greater than in immediate pre-pandemic-y February, 2020.

In the very big pharmaceuticals and medicines industry, this year’s recent strong hiring continued in April, as the sector added 1,400 new workers sequentially – its biggest gains since last June’s 2,600. In addition, March’s initially reported increase of 900 was revised up to 1,200, and February’s slightly downgraded 1,000 rise remained unchanged. Not surprisingly, therefore, this sector’s workforce is up by 9.78 percent during the CCP Virus era.

Job creation was excellent as well in the medicines subsector containing vaccines. April’s 1,100 monthly headcount growth was the greatest since last December’s 2,000. March’s initially reported payroll rise of 400 was upgraded to 600, and February’s results stayed at a slightly downgraded 500. In all, vaccine manufacturing-related jobs has now increased by fully 24.47 percent since February, 2020.

Aircraft manufacturers added just only 200 employees on month in April, but March’s jobs gain was revised up from 1,100 to 1,200 (the best such result since last June’s 4,000), and February’s upwardly revised 600 advance remained unchanged. Aircraft employment is still off by 10.96 percent since the pandemic’s arrival in force.

Aircraft engines and engine parts makers were in a hiring mood in April, too. Their employment grew by 900 sequentially, March’s 500 increase was revised up to 600, and February’s unrevised monthly increase of 900 stayed unrevised. Payrolls in this sector have now climbed to within 11.56 percent of their level just before the CCP Virus hit.

As for the non-engine aircraft parts and equipment sector, it made continued modest employment progress in April, with the monthly headcount addition of 300 following unrevised gains of 700 in March and 200 in February. But these companies’ workforces are still 15.48 percent smaller than their immediate pre-pandemic totals.

The U.S. economy is clearly in a period of growth much slower than last year’s, and since there’s no shortage of actual and potential headwinds (e.g., the course of the Ukraine War, the Fed’s monetary tightening campaign, persistent lofty inflation, the likely absence of further fiscal stimulus), no one can reasonably rule out a recession that drags down manufacturing’s hiring with it. But until domestic industry’s job creation and production growth starts deteriorating dramatically and remains weak, today’s so-so employment figures look like a breather at worst – and not much of one at that.

(What’s Left of) Our Economy: The New Official U.S. Manufacturing Data Look Anything but Recession-y

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aerospace, aircaft, aircraft parts, appliances, automotive, electrical equipment, electronic components, Federal Reserve, furniture, industrial production, inflation, machinery, manufacturing, medical devices, medicines, metals, non-metallic mineral products, pharmaceuticals, plastics and rubber products, semiconductor shortage, semiconductors, supply chains, transportation equipment, Ukraine, wood products, {What's Left of) Our Economy

Today’s Federal Reserve industrial production report (for April) is making clearer than ever that if the U.S. economy is headed for a recession or a major growth slowdown, domestic manufacturing won’t deserve significant blame unless it takes a major nosedive before too long.

The report showed that despite the Ukraine war, despite ongoing supply chain snags, despite torrid inflation, and despite Federal Reserve plans to cool these price rises with interest rate hikes that will almost have to moderate growth if they work, U.S.-based industry increased output for the seventh straight month – and by a thoroughly respectable 0.75 percent.

Moreover, modest and mixed revisions left those strong recently results entirely intact. As a result, since February, 2020 – the last full data month before the CCP Virus’ arrival in force began upending the economy – domestic manufacturing has grown in real terms by 5.07 percent, up from the 4.42 percent calculable from last month’s release. In addition, in constant dollars, these sectors’ production is now within 2.29 percent of its all-time high – reached in December, 2007, just as the Great Recession triggered by the global financial crisis was beginning.

The list of April’s main manufacturing growth leaders was headed by the volatile automotive sector, but many of the biggest industry sub-sectors tracked by the Fed enjoyed healthy expansions last month.

Especially encouraging about the combined performance of vehicle and parts makers – which continue to be plagued by the global semiconductor shortage – was the follow-through. Their vigorous April sequential 3.92 percent after-inflation output increase followed a March gain upgraded from 7.80 percent to 8.28 percent, and that represented the biggest monthly advance since last October’s 10.64 percent. And that result followed a September tumble of 6.32 percent. Moreover, February’s big monthly dropoff was upgraded again, to a 3.86 percent loss.

All told, price-adjusted automotive output in April moved above its February, 2020 immediate pre-pandemic level (by 0.77 percent) for the first time since July, 2020.

A banner April also was registered by aerospace and miscellaneous transportation equipment companies. They boosted inflation-adjusted production by a sequential 2.15 percent. But March’s initially reported 1.90 percent after-inflation increase – previously the best monthly performance since last July’s 4.21 percent jump – is now judged to be a negligible 0.08 percent rise, February’s downgraded 1.64 percent real production improvement, however, was revised up to 1.82 percent, leaving these businesses 17.28 percent larger than in February, 2020 – as opposed to the 16.43 percent growth calculable from last month’s Fed report.

Inflation-adjusted primary metals production rose on month by 1.36 percent in April, and March’s initially reported 1.69 percent sequential drop – the biggest since January’s 2.53 percent plunge – is now judged to be just 0.75 percent. And February’s already upwardly revised constant dollar production surge was upgraded again – to a 2.94 percent figure that’s still the best since last April’s 3.48 percent. After-inflation production of these metals is now 4.01 percent greater than in February, 2020, compared with the 1.16 percent calculable last month;

Wood products output expanded nicely in real terms, too – by 1.13 percent sequentially in April. This improvement pushed this industry’s price-adjusted production to 7.85 percent above its immediate pre-pandemic level.

And consistent with manufacturing’s overall output winning streak, machinery production continued in April continued to excel as well – although more unevenly. Real output in this bellwether sector – whose products are used so widely throughout the economy – climbed by 0.85 percent sequentially in April. And although March’s results were revised way down from 0.78 percent growth to 0.36 percent contraction, February’s previously reported and downgraded 0.54 percent improvement was revised way up to 1.17 percent. As a result, the sector is now 8.31 percent bigger after inflation than in immediately pre-pandemic February, 2020.

The biggest April manufacturing growth losers were:

>plastics and rubber products, where a March real output increase of a sharply downgraded 0.58 percent was followed by a 0.79 percent decrease that was the biggest monthly decline since December’s 0.94 percent. February, moreover, saw another discouraging revision – from a 3.14 percent constant dollar monthly advance to 2.80 percent. At least that result still was the best since August, 2020’s 3.85 percent. Consequently, this sector is now just 1.05 percent bigger in real output terms than in February, 2020 – as opposed to the 3.56 percent calculable last month;

>non-metallic mineral products, where inflation-adjusted production dipped for a second straight month – this time by 0.67 percent. March’s drop, however, is now pegged at only 0.76 percent instead of 1.15 percent, and February’s upgraded real output burst of 3.94 percent is now estimated at 4.42 percent, its best such performance since the 9.19 percent increase in May, 2020, early during the rapid recovery from the steep recession caused by the CCP Virus’ first wave and associated economic and behavioral curbs. But whereas as of last month’s industrial production report, these sectors had grown by an inflation-adjusted 3.28 percent since February, 2020, this figure is now down to 2.58 percent.

>electrical equipment, appliances, and components, where real output fell for a second straight month. The April sequential decrease was 0.60 percent and followed a 0.04 percent March drop that was first reported as a 1.03 percent increase. Fortunately, February’s results were upgraded a second time, to a 2.03 percent advance that’s still the sector’s best since last July’s 3.24 percent. But the net result is a group of industries that’s now only 3.55 percent larger in real output terms than in February, 2020, as opposed to the 5.55 percent calculable last month; and

>furniture and related products, whose price-adjusted output decreased in April for the second straight month. The 0.60 percent monthly retreat means that these sectors have shrunk by an inflation-adjusted 1.56 percent since February, 2020.

Growth, however, generally tailed off in April in industries that consistently have made headlines during the pandemic.

The aircraft and aircraft parts sectors were the out-performers. Their real output rose on month in April by a strong 1.67 percent. But even here, March’s initially reported even better 2.31 percent increase is now pegged at just 0.47 percent. The February estimate, however, bounced back from a downgraded 1.13 percent gain to an improvement of 1.34 percent, helping the sector to register 16.37 percent real production growth since February, 2020, compared with the 15.86 percent calculable last month.

Inflation-adjusted output in the big pharmaceuticals and medicines industry dropped sequentially in April for the third time in the last four months. More encouragingly, that 0.20 percent decline followed March growth that was revised up from 1.17 percent to 1.23 percent. But February’s 1.15 percent decrease is now estimated at a still dreary 0.96 percent retreat, and January’s previously upgraded 0.45 percent increase is now thought to be a contraction of 0.26 percent. So where as of last month, real pharmaceuticals and medicines output was reported as 14.75 percent higher than in immediately pre-pandemic-y February, 2020, that growth is now down to 14.64 percent.

As for medical equipment and supplies, these sectors suffered their first monthly production decline (0.06 percent) since December’s 0.68 percent. In addition, March’s previously reported 1.81 percent rise was revised down to 1.28 percent, February’s previously upgraded 1.73 percent increase was cut back to 1.46 percent, and January’s upwardly revised gains were trimmed from 3.28 percent to 2.94 percent. As a result, these industries’ post-February, 2020 real production increase is now estimated at 8.92 percent, down from the 10.28 percent improvement calculable last month.

Even semiconductor output took a hit in April. The shortage-plagued sector saw real production sink by 1.85 percent sequentially last month – its worst such performance since last June’s 1.62 percent. Revisions were mixed, with March’s initially reported 1.99 percent constant dollar advance reduced to 1.83 percent; February’s big jump upgraded again to 2.91 percent; and January’s fractional 0.05 percent increase revised up to 0.06 percent. These results still left price-adjusted semiconductor production up 23.38 percent since February, 2020, but that figure is down from the 25.99 percent calculable last month.

An entirely new hurdle to domestic manufacturing output could appear in late June. That’s when the Fed’s data gatherers tell us they’ll issue their next annual benchmark revision – which could reveal that U.S.-based industry’s performance has been weaker in recent years than they’d thought. At the same time, it could turn out to be stronger.  Given how domestic manufacturing has overcome so many other headwinds recently, that would be an upside surprise that I at least wouldn’t find completely surprising.   

(What’s Left of) Our Economy: U.S. Manufacturing Growth is Overcoming the Ukraine War, Too

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aerospace, aircraft, aircraft parts, appliances, automotive, electrical components, electrical equipment, Federal Reserve, furniture, inflation, logistics, machinery, manufacturing, medical devices, medical equipment, metals, monetary policy, non-metallic mineral products, pharmaceuticals, printing, semiconductors, supply chains, textiles, transportation, {What's Left of) Our Economy

My day got away from me yesterday, so I couldn’t finish up my report on that morning’s Federal Reserve’s newest U.S. manufacturing production figures (for March) till now. But they’re worth examining in detail because although they’re the first such data to be released since the Ukraine war broke out and began disrupting global supply chains for important goods, they strongly resembled last month’s statistics – which were the final pre-war figures.

And just as interesting: Many of the results for individual industries illustrated strikingly the roller coaster ride on which much of domestic industry remains, with multi-month bests in particular coming right on the heels of multi-month worsts. Moreover, underscoring much of the uncertainty created by Ukraine-related tumult coming on top of (and in China’s case, alongside) CCP Virus-related tumult, some revisions of previous months’ readings were unusually large.

In inflation-adjusted terms, American manufacturing output grew 0.87 percent sequentially in March. The increase was powered largely by a 7.80 percent monthly jump in real output in the exceptionally volatile automotive sector. But even stripping out vehicles and parts production, price-adjusted manufacturing production improved by 0.40 percent in March.

In addition, revisions were mildly positive. February’s initially reported 1.20 percent constant dollar month-on-month production increase – the best such performance since last October’s 1.71 percent – was upgraded to 1.22 percent. January’s downwardly revised 0.03 percent improvement is now estimated at 0.11 percent. And December’s small dip was revised up again – from -0.06 percent to -005 percent.

Consequently, since the last full data month before the CCP Virus began roiling the U.S. economy (February, 2020), domestic manufacturing has expanded by 4.42 percent – up from the 3.37 percent calculable last month.

At the same time, U.S.-based industry is still 2.91 percent smaller than at its all-time peak – reached just before the Great Recession in December, 2007 – although that’s up from the 3.88 percent deficit calculable last month.

March’s biggest manufacturing production winners were:

>automotive, as mentioned above. That was the biggest sequential gain since last October’s 10.64 percent, but it follows a February drop that’s been downgraded from 3.55 percent to 4.64 percent. And that was the worst monthly figure since last September’s 6.32 percent. All these (and previous) ups and downs left after-inflation vehicle and parts production 3.50 percent below their immediate pre-pandemic (February, 2020) levels;

>aerospace and miscellaneous transportation, where after-inflation production rose by 1.90 percent on month. The February advance, was downgraded substantially, from 3.22 percent to 1.64 percent, leaving the March increase the biggest since last July’s 4.21 percent. These industries are now 16.43 percent larger in real terms than in February, 2020;

>electrical equipment, appliances and components’ price-adjusted production climbed 1.03 percent sequentially and February’s increase was revised all the way up from 0.48 pecent to 1.95 percent– best since last July’s 3.24 percent. Inflation-adjusted output in these sectors is now 5.55 percent above thei February, 2020 levels; and

>plastics and rubber products, which displayed a similar pattern. Real output was up 1.14 percent sequentially in March, and February’s results were more than doubled – from +1.46 percent to +3.14 percent. That burst – the best since August, 2020’s 3.85 percent – left constant dollar production for these industries 3.56 percent greater than in immediate pre-pandemic-y February. 2020

In addition machinery, which is such a bellwether for both the rest of industry and the entire economy because of the widespread use of its products, price-adjusted output in March improved by 0.78 percent over February’s results. And although the February improvement was downgraded from 0.78 percent to 0.54 percent, after-inflation machinery production is still up 8.29 percent since February, 2020.

The biggest March manufacturing growth losers were:

>non-metallic mineral products, whose 1.15 percent March monthly decline was the worst such figure since last May’s 2.29 percent decrease. But this drop-off followed a February monthly surge that was upgraded from 3.46 percent to 3.94 percent – the .best such showing the 4.34 percent of June, 2020 – early in the recovery from the deep economic downturn triggered by the first wave of the CCP Virus and related lockdowns and behavioral curbs. Real output in this sector has now risen by 3.28 percent since February. 2020;

>primary metals, where similarly. March’s 1.69 percent fall was the biggest since January’s 2.46 percent drop – and followed a February 2.26 percent increase that was upgraded from the previously reported 2.10 percent and represented the best monthly performance last April’s 3.48 percent. Primary metals inflation-adjusted output is now 1.16 greater than in Februrary, 2020;

>furniture and related products’ after-inflation production sank by 1.51 percent from February to March – the worst such figure since February, 2021’s 3.21 drop. But March’s lousy results followed a February increase that was also more than doubled – from 2.52 percent to a 5.63 jump that was this sector’s best since June 2020’s 5.66 percent. These results brought real output in furniture and related products to within 0.80 percent of its immediate, February, 2020 pre-pndemic level;

>textiles’ 1.46 percent monthly March real output decrease was its worst monthly result since January’s 2.30 percent drop. But it, too, followed a strong February. That month’s improvement was upgraded from 0.03 percent to 0.97 percent – the biggest monthl increase since September’s 1.36 percent. Yet in real terms, the industry is still 5.84 percent smaller than in February. 2020;

>and printing and related support activities. It’s 1.10 percent March sequential after-inflation output retreat was also its worst since January’s 2.16 percent decrease. But it, too, followed a strong February. Indeed, that months’ inflation-adjusted production increase was revised up from 1.66 percent to 2.66 percent – its best such performance since last May’s 2.75 percent rise. This cluster, though, has still shrunk by 4.69 percent in constant dollar terms since February. 2020.

Growth was solid, too, in industries that consistently have made headlines during the pandemic.

In the aircraft and aircraft parts sector, real production increased in March by 2.31 percent. Because February’s initially reported 2.52 percent monthly rise was marked all the way down to 1.13 percent, the March figure became these industries’ best since last July’s 3.44 percent (which I mistakenly reported last month was an August total). January’s results were downgraded, too – and for a second time, to 0.91 percent. But the sector is still 15.86 percent bigger than it was after inflation than in February, 2020.

The big pharmaceuticals and medicines sector turned in a more mixed performance. March’s 1.17 percent price-adjusted monthly production increase was the best such total since last August’s 2.39 percent. But February’s initially reported 1.08 percent gain is now reported as a 1.15 percent loss. January’s constant dollar production change, however, was revised up from a 0.14 percent drop to a 0.45 percent increase. All told, pharamaceuticals and medicines production is 14.75 percent higher afte inflation than in February, 2020.

But the news was unambiguously good in the medical equipment and supplies sector that contains so many of the products needed to fight the pandemic. The March inflation-adjusted output improvement was 1.81 percent and February’s production growth was upgraded from 1.39 pecent to 1.73 percent. Further, the January after-inflation growth figures – which had already been revised up from 2.50 percent to 3.26 percent – was upgraded further to 3.28 percent. And a December result that was first reported as a decline of 2.75 percent is now estimated to be a dip of just 0.37 percent. All told, output in these sectors has increased by 10.80 percent since immediately pre-pandemic-y February, 2020.

And although the national and global semiconductor shortage persists, U.S. domestic production kept rising healthily. Output in March improved month-to-month by 1.99 percent adjusted for inflation, February’s initially reported rise of 1.96 percent was upgraded to 2.87 percent (the best such growth since April, 2017’s 3.78 percent), and January’s downwardly revised 0.37 percent sequential output decline was revised up to a 0.05 percent gain. As a result, semiconductor production is upfully 25.99 percent over its immediate pre-pandemic levels.

The March manufacturing production figures portray a domestic industry resilient enough to withstand not only pestilence but (so far) war and the beginnings of tighter Federal Reserve monetary policy aimed at slowing U.S. growth in the name of reducing  inflation. No one knows what catastrophes the future may hold, or how much more the aforementioned problems could worsen. But it’s looking like any force powerful enough to derail American manufacturing for long may need to be truly Biblical in its proportions.

(What’s Left of) Our Economy: U.S. Manufacturing Employment Powers Through Ukraine Jitters, Too

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aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, CCP Virus, chemicals, China, coronavirus, COVID 19, electrical equipment, Employment, Federal Reserve, inflation, interest rates, Jobs, lockdowns, machinery, medicines, metals, monetary policy, non-farm employment, non-farm jobs, personal protective equipment, pharmaceuticals, PPE, recession, Russia, semiconductor shortage, semiconductors, supply chains, surgical equipment, tariffs, transportation equipment, Ukraine-Russia war, vaccines, Wuhan virus, {What's Left of) Our Economy

The Ukraine war looks like the latest disastrous development that’s failed to stop the impressive growth in U.S. domestic manufacturing employment – just as has been the case recently with the Omicron variant of the CCP Virus and surging inflation. And let’s not forget that the Federal Reserve has begun raising interest rates and signaled that steeper hikes are on the way – steps of course designed to cool off the economy, including the demand for manufactured goods.

U.S.-based industry added a strong 38,000 net new jobs on month in March, according to this morning’s monthly employment report from the Labor Department, and revisions were positive. February’s initially reported 36,000 sequential improvement was upgraded to 38,000, and January’s already upwardly revised 16,000 advance is now judged to have been 26,000.

In fact, domestic industry slightly outperformed the rest of the non-farm economy (the Labor Department’s definition of the U.S. jobs universe) job-wise in March, with its share of non-farm employment inching up from 8.38 percent to 8.39 percent. These results, moreover, show that manufacturing jobs have grown a bit faster than the overall economy’s throughout the pandemic period. In February, 2020, the last data month before the virus and related lockdowns and behavioral curbs began roiling and distorting the economy, manufacturing accounted for 8.38 percent of total non-farm jobs.

The comparison with the private sector isn’t quite as impressive, but satisfactory all the same. Manufacturing’s share of those jobs as of March was 9.83 percent – exactly the same as it was in February, 2020. And some context is essential here: U.S. manufacturing payrolls have held their own and then some even though the massive, sweeping Trump tariffs on imports from China – which were supposed to cripple domestic industry – are still almost entirely in place, as are many of the former president’s tariffs and other trade curbs on metals.

From another vantage point, manufacturing has now replaced 1.244 million (90.60 percent) of the 1.362 million jobs it shed in March and April, 2020 – the peak of the CCP Virus’ first wave.

That trails the 92.82 percent of non-farm workers and 95.46 percent of private sector workers hired back during this period. But the gap isn’t big at all, and manufacturers shrunk their headcounts proportionately less than the rest of the economy during that horrendous spring of 2020. So they didn’t have as much ground to make up.

February’s biggest manufacturing jobs winners among the major sectors tracked by the Labor Department were:

>transport equipment, where payrolls in March advances by 10,800 – their best such performance since last August’s 19,000. At the same time, this increase followed a 19,800 February jobs plunge that was the sector’s worst such performance since the automotive sub-sector’s semiconductor shortage woes led to a nosedive of 48,100 in April, 2021. All this volatility left this sector’s employment levels 4.05 percent below those in that final pre-pandemic data month of Februay, 2020 – versus the one percent decrease since then by manufacturing overall;

>chemicals, whose 7,200 monthly jobs jump was its best ever (or at least since figures began being tracked in 1990). The previous all-time high was the 6,600 gain of January, 2021. This huge industry’s headcount is now up 4.49 percent since February, 2020;

>electrical equipment and appliances, where employment rose sequentially by 3,800 for its strongest increase since March, 2021’s 4,200. Jobs-wise, these industries are now 2.82 percent larger than in Febuary, 2020;

>and automotive. This industry, a sub-sector of transportation equipment, boosted employment by 6,400 in March, the most in a month since last October’s 34,200 burst. But underscoring the volatility among vehicle and parts makers, This March increase followed a 16,000 drop-off in February that was the biggest decrease since the 49,100 jobs lost in April, 2021. These ups and downs still have left automotive employment 1.32 percent their February, 2020 levels.

Machinery’s 1,700 monthly jobs gain in March wasn’t exceptional by the above standards. But RealityChek regulars know it’s of special importance because its products are so widely used throughout manufacturing and the rest of the economy. And in a somewhat discouraging development, this sector’s initially reported 8,300 jobs growth was revised down to 6,600. And its payrolls are still 2.89 percent smaller than in February, 2020.

The only significant jobs loser in March was non-metallic mineral products, where employment sank by 4,500 on month. That was the sector’s worst such perforance since last May’s 5,300 decline, but the March downturn snapped a string of good gains for these companies, and their workforces are 2.81 percent above their February, 2020 levels.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and as with the rest of domestic industry for February, their employment picture showed improvement overall.

In that shortages-plagued semiconductor and related devices sector, employment dipped by 100 on month, but January’s initially reported 200 increase was revised up to 300– its best such performance since October’s 1,000 advance. Since February, 2020, its headcount has climbed by only 0.86 percent, but these companies actually added jobs during the very steep CCP Virus-induced recession of spring, 2020.

Surgical appliances and supplies makers – whose products include personal protective equipment and similar medical goods – boosted employment by 800 in February. January’s initially reported 1,700 jobs increase was downgraded to 1,300, and December’s results were unrevised at 1,100. These health security-related companies have expanded their workforces by 3.79 percent since February, 2020.

The employment news was particularly good in the very big pharmaceuticals and medicines industry. Its February monthly employment increase of 1,300 was the best since September’s 1,600, and January’s initially reported dip of 100 now stands as an increase of 1,100. December’s downwardly revised 900 jobs gain remained the same, and these companies have now increased their employee numbers by 9.04 percent since February, 2020.

The medicines subsector containing vaccines didn’t perform nearly as robustly in February, but still grew jobs by 800. January’s initially reported 500 employment increase and December’s downwardly revised 2,000 expansion remained the same. The vaccine industry workforce is now 23.05 percent larger than in February, 2020.

The aviation cluster enjoyed a good hiring month in February, too. Jobs in the aircaft industry, dominated by Boeing and companies in its supply chain, rose by 500 – the best since the identical total in November. January’s initially reported downturn of 800 and December’s decrease of 400 remained unrevised. Aircraft employment is still off by 11.57 percent since February, 2020.

Makers of aircraft engines and engine parts expanded their workforces by 900 during February, and although January’s initially reported hiring figures were downgraded, the estimate went only from 1,000 to 900. December’s upwardly revised employment increase of 700 was unrevised, all of which helped these companies bring their payrolls to within 13.20 percent of their February, 2020 levels.

Jobs prospects in the deeply depressed non-engine aircraft parts and equipment sector keep looking up, too. Employment improved by 200 in February, and January’s initially reported job growth of 500 was revised all the way up to 1,500. December’s jobs losses stayed at 900, and although these industries’ headcounts are still 16.35 percent below February, 2020’s, that’s better than the 17.30 percent shortfall calculable last month.

Continuing headwinds are still imaginable for domestic manufacturing – like a dramatic escalation of the fighting in Ukraine (which could greatly heat up inflationary pressures and foster even greater Federal Reserve efforts to slow economic growth); a new CCP Virus variant that’s not only more infectious but more deadly; and more big China lockdowns that could further screw up global supply chains. But given the recent actual record, it’s even easier to imagine manufacturing employment continuing to improve.

(What’s Left of) Our Economy: At Least Pre-Ukraine, U.S. Manufacturing’s Solid Growth Continued

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aerospace, aircraft, aircraft parts, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Federal Reserve, interest rates, lockdowns, mandates, manufacturing, manufacturing production, medical devices, monetary policy, pharmaceuticals, real output, semiconductor shortage, semiconductors, Ukraine, Ukraine invasion, Ukraine-Russia war, {What's Left of) Our Economy

This morning’s Federal Reserve report on U.S. domestic manufacturing production (for February) was especially interesting for three reasons. First, it showed that the output of America-based factories rose month-on-month in inflation-adjusted terms by 1.20 percent. That was the best such performance since October’s 1.71 percent, and although it covers the period just before whatever Ukraine war-related disruption is going to hit the U.S. economy, it also contrasts with most (sluggish) estimates of overall American growth for the first quarter of this year. Manufacturing production revisions, moreover, were only slightly negative.

Second, since February, 2020 was the final data month before the CCP Virus and related lockdowns and voluntary behavioral changes started roiling and distorting the economy, it’s noteworthy that exactly two data years later, manufacturing output has grown by a real 3.37 percent. (As of last month’s Fed release, this figure was 2.49 percent.)

Third, these results hardly mean that domestic industry is in top shape, at least not historically speaking. For in inflation-adjusted production terms, it’s still 3.88 percent smaller than at its all-time peak – reached in December, 2007, just before the economy plunged into the Great Recession prompted by the global financial crisis.

February’s biggest monthly manufacturing production winners were:

>non-metallic mineral products, whose 3.46 percent monthly real expansion was its best since the 4.34 percent achieved in June, 2020 – during the rapid economy-wide recovery from the first wave of the virus and resulting activity curbs and dropoffs. This latest sequential increase brought output in the sector to 4.36 above its February, 2020 levels;

>the broad aerospace and miscellaneous transportation equipment industry, which increased after-inflation output in February by 3.22 percent. That rise was its best since July, 2021’s 4.21 percent, and the sector is now fully 16.90 percent bigger production-wise than in February. 2020;

>the small apparel and leather goods industries, which improved its constant dollar output on month by 2.96 percent, for its best sequential gain since January, 2021’s 3.31 percent. This industry’s production – which shrank greatly for decades due to low-cost foreign competition – is now up by just 1.85 percent since February. 2020; and

>wood products, where price-adjusted output expanded sequentially by 2.58 percent – the most since March, 2021’s 4.05 percent. In real terms, wood products production is now 6.28 percent greater than in February, 2020.

RealityChek regulars know that the broad machinery sector is a key barometer of national economic health generally speaking, since its products are used by so many manufacturing and non-manufacturing industries. So it’s good news that its sequential inflation-adjusted output advanced by a solid 0.78 percent in February, and even better news that January’s results were revised up from 1.08 percent to 1.83 percent – its best such perfomance since July. The machinery industry’s real output is now a strong 7.62 percent greater than in Febuary, 2020.

Of all the biggest manufacturing sub-sectors tracked by the Fed, only two suffered after-inflation monthly downturns in February:

>The automotive industry continued suffering from the global semiconductor shortage, with its constant dollar output sinking by 3.55 percent sequentially in February – its worst monthly performance since September, 2021’s 6.32 percent plunge. Price-adjusted production of vehicles and parts is now fully 10.68 below Febuary, 2020’s levels; and

>miscellaneous non-durable goods. Its real month-on-month output dipped by 0.36 percent in February, but since February, 2020, it’s off by 16.00 percent.

Industries that consistently have made headlines during the pandemic generally enjoyed February’s at least as strong as manufacturing overall.

Likely stemming from the widening flow of long overdue news from industry giant Boeing (see, e.g., here), aircraft- and parts-makers grew their after-inflation output in Febuary by 2.52 percent over Jauuary’s figure – their strongest such showing since August’s 3.44 percent. That January figure was revised down from 1.37 percent sequential growth to a still impressive 1.21 percent, and December’s upgraded 0.38 percent monthly dip is now judged to be a 0.62 percent decline. But after-inflation output for these companies is now up 16.35 percent since February, 2020 – up from the 13.14 percent calculable from last month’s Fed report.

The combination of a solid February and negative revisions also marked the big pharmaceuticals and medicines sector. February’s 1.08 percent price-adjusted monthly output gain was the industry’s best since August’s 2.39 percent. But January’s initially reported 0.27 percent sequential uptick is now pegged as a 0.14 percent decrease, and December’s upwardly revised 0.81 percent rise is now judged to be a 0.10 percent drop. Even so, total real pharmaceutical and medicines production is 14.91 percent higher than in February, 2020 – up from the 13.42 percent calculable last month.

Much better February results were turned in by the medical equipment and supplies sector. Monthly production improved by 1.39 percent – the best such result since the 10.78 percent reported in July, 2020, early during the recovery from the first pandemic wave.

And revisions were positively eye-popping. January’s initially reported 2.50 percent monthly real output rise is now judged to have been 3.26 percent, and December’s first estimate of a 2.75 percent after-inflation fall-off is now estimated at just a 0.37 percent decline. All told, this grouping is now 8.44 percent bigger real growth-wise than in February, 2020 – as opposed to the 4.43 percent increase calculable last month.

Those semiconductors in such short supply were more abundant after February’s price-adjusted sequential production increase of 1.96 percent that was the best such performance since May’s 2.61 percent growth. January’s previously reported fractional decline is now pegged at a 0.37 percent decrease, but December’s 0.52 percent rise is now estimated at 0.88 percent. Consequently, these industries’ real output is now up 21.97 percent since February, 2020, as opposed to the 20.66 percent calculable last month.

The economic fall-out of the Ukraine war won’t start being reflected in the Fed manufacturing production reports until next month, but it looks virtually certain that it will either keep inflation (and therefore manufacturers’ input costs) high or push it higher. A bigger wild card could be the Fed itself. The central bank yesterday did keep its quasi-promise to start increasing the federal funds rate, but the hike was only 0.25 percent. And though more increases supposedly are scheduled, they’re far from certain if overall growth weakens markedly (as the Fed itself has forecast). New, more dangerous CCP Virus variants can always emerge. But national rates of vaccination and natural immunity seem high enough – and the public fed up enough with restrictive mandates – to keep supporting growth all else equal for the foreseeable future.

So unless the fortunes of manufacturing and the broader economy diverge sharply, it looks like domestic industry’s steady-for-the-most-part expansion since the depths of spring, 2020 will remain on course.