(What’s Left of) Our Economy: Springtime Blahs for U.S. Manufacturing Jobs

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aerospace, aircraft, appliances, automation, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Employment, fabricated metal products, Jobs, Labor Departent, machinery, manufacturing, masks, metals tariffs, non-farm business, non-farm payrolls, pharmaceuticals, PPE, productivity, protective gear, regulatory policy, tariffs, tax policy, vaccines, Wuhan virus, {What's Left of) Our Economy

In contrast to the mixed set of signals I saw being given off by last month’s official monthly U.S. jobs report (for April), today’s May figures are pretty clearly indicating that manufacturing hiring is in a weak patch. In fact, the patch has been weak enough to turn the sector from a national employment creation leader to a laggard. Just as important, the short-term outlook at least seems somewhat dimmer than it had been.

The main reason for confusion over the previous data had to do with the disconnect between the automotive-heavy losses of April (which accounted for more than all of that month’s initially reported 18,000 net job decrease) and the positive revisions for the preceding months. Another very encouraging sign – the second straight month of strong jobs gains for the machinery sector, whose products are used widely not only in the rest of manufacturing, but in other major parts of the economy like agriculture and construction.

May’s results were almost a mirror image – and not in a good way.

For example, whereas in April, the 27,000 sequential automotive job losses exceeded total manufacturing job loss of 18,000 (leaving the rest of industry’s hiring performance pretty subdued, to be sure), in May, automotive payrolls rose by 24,800. But overall manufacturing job gains totaled only 23,000 – so the rest of the sector shed workers on net.

In addition, revisions are now negative. April’s manufacturing employment is now judged to have fallen by 32,000 month-to-month, not 18,000. That’s largely because that month’s automotive layoffs were much bigger than first reported – 37,700 rather than 27,000. Even March’s very good upwardly revised monthly hiring surge of 54,000 has now been revised down again to 51,000.

As for machinery, that crucial industry lost 4,700 jobs on net in May – its worst results by far since April, 2020 – at the depths of the CCP Virus-induced downturn and the first negative number since January. Moreover, this April’s 3,700 monthly jobs increase has now been revised down to 1,900, and March’s last upgraded 5,400 figure is now pegged at only 3,500.

In all, manufacturing has now regained 876,000 (64.27 percent) of the 1.363 million jobs it lost at the pandemic’s height in the spring of 2020. That’s now well behind the 69.74 percent employment recovery of the private sector and even the 65.88 percent rebound of the total economy (defined as the non-farm sector by the U.S. Labor Department, which compiles and categorizes the data).

The manufacturing sectors with the biggest sequential May jobs gains were the overall transportation equipment sector (where a 9,000 hiring improvement was propped up by the automotive increases), miscellaneous non-durbable good makers (up 4,100), fabricated metals products (up 3,500) miscellaneous durable goods manufacturing (a catch-all category including everything from surgical equipment – like facemasks and other personal protection equipment to gaskets to jewelry – where payrolls were up 3,400), and computer and electronics products and electrical equipment and appliances (up 2,800 each).

The hiring in fabricated metals and appliances was noteworthy given that companies in both industries have been complaining loudly about the pain they’ve been suffering from higher metals prices stemming in part from ongoing U.S. tariffs on these materials. (See, e.g., here and here.)

May’s big manufacturing jobs losers aside from machinery were non-metallic mineral products (down 2,200), paper and paper products (down 2,100), and the big chemicals sector, which is another big supplier of a wide variety of products to the entire economy (down 1,100).

More encouragingly, when it comes to industries closely related to the fight against the pandemic, job creation seems picking up, although the relevant data are one month behind the rest of the jobs figures. Specifically, in the surgical appliances and supplies sector that includes the protective gear, March’s employment increase was unrevised at 900, and hiring accelerated to 1,200 in April – the best monthly performance since September’s 1,600. This sector’s payrolls are now 10,400 (9.89 percnt) higher than in February, 2020 – the last pre-pandemic month.

For pharmaceuticals and medicines overall, March’s 1,500 sequential jobs increase was revised up to 1,600, and April hiring surged to 2,700 – its best performance by far of the CCP Virus period. Its payrolls are up by 12,500 (4.01 percent) since pre-pandemicky February, 2020.

For the pharmaceuticals subsector containing vaccines, March’s initially reported employment increas of 500 is now judged to be 800, and net hiring grew by 1,300 in April – a solid improvement by this industry’s recent standards. As a result, its workforce has now increased by 9,200 (9.30 percent) since February, 2020.

The same unfortunately can’t be said for the aerospace industry, and continuing and even mounting troubles for Boeing presage ongoing woes for the foreseeable future. March’s initially reported 1,800 monthly job loss for aircraft has now been revised for the worse to 1,900, and the sectors workforce fell by another 200 in April. Meanwhile, following sequential March losses in aircraft engines and parts, and in non-engine aircraft parts, employment flatlined in these two sectors combined in April.

Continued strength in the overall recovery of the U.S. economy should provide strong tailwinds for domestic manufacturers and for industry’s jobs figures, and continuing tariffs should help by keep much foreign competition (especially from China) out of the market.

Vaccine production will likely keep expanding – and requiring more workers – as well, mainly to supply immense foreign demand. But the sector is so small that its employment performance can’t move the manufacturing jobs needle much.

Boeing’s problems, however, can be expected to cast a big shadow not only over the big aerospace industry, but over its big domestic supply chain as well. And although the global semiconductor shortage that has hit the automotive sector especially hard may be starting to ease, the damage appears likely to take considerably longer to overcome. Manufacturers face big questions about the future of U.S. tax and regulatory policy, too.

Recently, moreover, some data’s come out pointing to a development that might wind up strengthening domestic industry in toto, but weakening its employment potential, at least in the short run. Labor Department figures show that, from the depths of the pandemic through the first quarter of this year, U.S.-based manufacturing has boosted its labor productivity much faster than the non-farm economy generally — and much faster than it has since its recovery from the last recession.  In other words, manufacturers lately been improving their ability to turn out product more than they’ve increased hiring. 

Whether this is a secular change or whether industry will revert to its recent mean is anyone’s guess. Also highly uncertain is whether better productivity growth (including of course more use of labor-saving technologies) will wind up destroying jobs on net, or increasing them by supercharging production. So far history seems to teach that such advances are net employment creators, but is that inevitable going forward? And is it inevitable for manufacturing specifically? All I can say is “Stay tuned” and “Be patient.”          

(What’s Left of) Our Economy: Normalizing Signals from the New U.S. Manufacturing Growth Data?

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aerospace, aircraft, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Covid relief, Federal Reserve, inflation-adjusted growth, infrastructure, machinery, manufacturing, pharmaceuticals, real growth, semiconductor shortage, stimulus package, tariffs, vaccines, Wuhan virus, {What's Left of) Our Economy

Do the April data just released by the Federal Reserve show that U.S. manufacturing output is settling into a post-CCP Virus normal? Despite achieving solid (0.42 percent) month-to-month growth in real terms, I’m not so sure. That’s mainly because although one of the big drags on domestic industry’s recent performance that resulted from weather rather than economic fundamentals is clearly past us, the impact continues of similar, likely temporary, developments that economists call “exogenous shocks.” And although plainly temporary, they may turn out to be pretty long-lasting.

The drag that’s out of the way is the amazingly harsh winter weather that crippled state economies in the south central states. Even so, the Fed now estimates the damage produced on a nation-wide basis as having been even worse than initially judged. The monthly plunge in February after-inflation manufacturing production keyed by the blizzards and power outages is now pegged at 4.12 percent – down from the original -3.12 percent and last month’s -3.72 percent. That’s still the wors monthly performance since April’s 15.83 percent nosedive, during the height of the pandemic and the depths of the recession.

The silver lining is that the March rebound first judged to be 2.79 percent is now believed to have been 3.22 percent.

So that 0.42 percent sequential increase in price-adjusted manufacturing production for April could be interpreted as an end to the winter aftershocks period. Except the Fed is now telling us that a new problem – the recent global semiconductor shortage – depressed U.S. automotive output so greatly last month (by 4.28 percent), that without such disruption, total constant dollar factory production would have been nearly twice as strong (0.75 percent). Moreover, the microchip shortage shows no sign of ending any time soon. And don’t forget about those still congested West Coast ports! 

According to the Fed, moreover, U.S.-based industry seems to be dealing with another distinctly non-normal situation – those “supply chain difficulties” generated by the same dramatic reopening of the economy that are distorting the inflation figures. Much more government money is bound to be injected into the economy on top of the already enormous virus relief and stimulus funds that have already been provided (and are still working their way through the system), So manufacturers and other businesses will surely continue facing various bottlenecks as they all try to keep up with the new customer demand all at once. Of course, complicating matters still further – and prolonging the return to normality – is that very massive government spending, which all else equal will keep propping up that demand and manufacturing and other output.

Thanks to the April advance and the cumulative impact of the revisions, domestic manufacturing production is now up 23.27 percent after inflation from its low last April, and is now back to within 1.42 percent of its last pre-pandemic reading in February, 2020.

One sign for manufacturing and the rest of the economy that remained genuinely bullish in April was the 0.65 percent sequential output growth of the big machinery sector – whose products are used extensively not only throughout the rest of manufacturing, but in big non-manufacturing sectors like construction and agriculture. That April increase was much smaller than March’s 3.55 percent surge – the best such performance since July’s 5.56 percent jump. But the March result was upgraded from an initially eported 2.87 percent. And in inflation-adjusted terms, the machinery sector is now 3.72 percent bigger than in February, 2020, just before the pandemic arrived.

Other significant April manufacturing production winners were the big chemical industry (up 3.17 percent on month, but still recovering from the huge 8.64 percent sequential output drop resulting mainly from those winter storms), primary metals (whose 1.68 percent monthly improvement followed a 2.20 percent rise that’s still left the sector 3.11 percent smaller in real terms than just before the pandemic), and petroleum and coal products (1.57 percent – but in a chemicals-like recovery situation).

The biggest losers were miscellaneous non-durable goods (off 1.08 percent) and plastics and rubber products (down 0.83 percent).

Although reopening measures in the United States and around the world are reviving air travel, the April Fed report shows that Boeing’s continuing production troubles may have again undercut growth in the big American aerospace industry. Price-adjusted output in aircraft and parts dipped by 0.23 sequentially last month – the first such decrease since December’s 1.43 percent. And March’s initially reported 4.09 percent increase has been downwardly revised all the way to 1.92 percent. Nonetheless, after inflation, aircraft and parts production is still up 4.98 percent from its final pre-CCP Virus levels.

Another big industry that should be benefitting from reopening-related headwinds – pharmaceuticals and medicines – also delivered a disappointing performance in April, especially since it includes vaccines. Real output rose by just 0.33 percent on month, and March’s initially reported 2.90 percent rise was trimmed back to 2.87 percent. In addition, previous and dramatic downward revisions for January and February were downgraded on net yet again – though modestly. Consequently, inflation-adjusted production in the sector has grown by 5.95 percent during the pandemic.

Growth in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators – remained nothing to write about either. April’s real growth was a so-so (0.42 percent). And although March’s initially estimated 0.61 percent constant dollar output increase got a nice upgrade to 1.11 percent, February’s results – which had been revised up from a 0.56 percent decline to a 0.44 percent drop – was revised back down to a 0.64 percent decrease. Consequently, real output here is just 0.56 percent higher than in that final pre-CCP Virus month of February, 2020, despite all the national talk of the need to improve America’s health security.

An optimistic outlook for domestic manufacturing still seems justified for me, if only because government-fueled growth and reopening still seem to be the most powerful influences on the entire economy, and President Biden has still kept in place the sweeping Trump tariffs are still pricing hundreds of billions of dollars of manufactured goods from China out of the U.S. market. That latest Boeing glitch seems to have been resolved. The need for more protective medical equipment and more vaccines (especially abroad) certainly haven’t gone away for good . And maybe a serious infrastructure rebuild and expansion is on the way. 

But just as a big enough number of anecdotes can deserve being seen as a trend, a big enough number of temporary disruptions can deserve being seen as a new, and more difficult, normal.

(What’s Left of) Our Economy: A Spring-y New U.S. Manufacturing Production Report

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aerospace, automotive, Biden, Boeing, CCP Virus, coronavirus, COVID 19, Donald Trump, Federal Reserve, health security, imports, industrial production, inflation-adjusted output, infrastructure, machinery, manufacturing, pharmaceuticals, PPE, real growth, semiconductor shortage, stimulus, supply chain, tariffs, Trade, trade war, vaccines, ventilators, West Coast ports, Wuhan virus, {What's Left of) Our Economy

You might call today’s March U.S. manufacturing production figures from the Federal Reserve a good news/bad news/good news story. Moreover, the new data on inflation-adjusted factory output contained a surprise worth noting.

First the good news/bad news/good news. The Fed report showed that real domestic manufacturing output rose by 2.79 percent on month in March. That was the best such result since July’s 4.25 percent – much earlier during the recovery from the deep CCP Virus- and lockdowns-induced recession. Rebounds from major downturns tend to be strongest earliest, especially for highly cyclical sectors of the economy like manufacturing, and that surely went double for a slump largely caused by an outside shock like a pandemic and dramatic government responses, rather than one caused by a market-based economy’s ordinary fluctuations.

The bad news was that this robust growth followed a February sequential drop of 3.72 percent that was the worst monthly performance since pandemicky April’s 15.83 percent plunge. Moreover, this revised February figure was a significant downgrade from the initially reported 3.12 percent decline. The other revisions, going back to October, were too small to affect the picture over the last few months.

But then there’s that second piece of good news: As the Fed’s release explained this morning, the lousy February numbers “largely resulted from widespread outages related to severe winter weather in the south central region of the country.” So they stemmed from a (temporary) outside shock, too.

The surprise? Although the U.S. automotive industry continues reducing production due to a global shortage of semiconductors, output in price-adjusted terms grew by 2.79 percent sequentially in March. At the same time, the February fall-off was revised down from 8.26 percent to ten percent even. And the shortage is expected to undercut vehicle production until the fall, so that’s a drag likely to weigh on the overall manufacturing figures for months.

The total March manufacturing figure means that domestic industry’s after-inflation production has grown by 22.88 percent since its recent low-point last April, and has climbed back to within 1.73 percent of its last pre-pandemic reading in February, 2020.

Manufacturing’s monthly current dollar output gains were broadbased in March, including in the crucial machinery sector. In this industry, whose products are widely used not only throughout manufacturing, but in many other important segments of the economy like construction and agriculture, price-adjusted production improved by 2.87 percent. And now it actually stands 2.16 percent higher than during that last pre-CCP Virus month of February, 2020.

Although the semiconductor shortage is bound to crimp production in many industries on top of automotive, domestic manufacturing still seems to be benefiting from two headwinds other than the economy’s generally improving strength that seem to have some staying power, too. The first is aerospace giant Boeing’s continuing, but sometimes uneven, progress exiting its protracted recent safety and manufacturing problems. The pandemic’s blow to air travel worldwide clearly didn’t help, either.

But in March, real output in aircraft and parts jumped by 4.09 percent sequentially, and is now fully 5.07 percent above its February, 2020 pre-CCP Virus level.

The picture was more mixed in the pharmaceutical and medicines category – which includes vaccines. Inflation-adjusted output advanced by 2.90 percent on month in March, but the previously reported January and February numbers were both downgraded dramatically – from an upwardly revised 2.57 percent to 0.85 percent, and from a 1.29 percent rise to a 0.05 percent dip. These moves left the sector’s output 5.83 percent higher than in pre-pandemic February, 2020 with the prospect of more impovement to come as vaccine production continues to boom.

Growth is still lagging, however, in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. February’s constant-dollar production was revised up from a 0.56 percent monthly decline to a 0.44 percent drop – but it was still a drop. Growth returned in March – but only by 0.61 percent in real terms. So price-adjusted output in this category – which includes many other products – is still slightly (0.39 percent) below pre-pandemic February, 2020’s levels, despite all the national talk of the need to improve America’s health security.

I’m still bullish on manufacturing’s outlook, though. No one should forget headwinds facing industry aside from the semiconductor shortage – chiefly, the fading of vaccine production at some point, the distinct possibility of many more regulations and higher taxes from a Democratic-conrolled federal government, and the supply chain disruptions resulting largely from clogged West Coast ports (which on top of the Trump tariffs are slowing the import of many foreign inputs still needed by Made in the USA companies).

But arguably more than offsetting these dangers is the so far better-than-expected resumption of total U.S. growth, the virtual certainty of even yet another gigantic dose of stimulus an infrastructure spending, along with President Biden’s decision to retain every dollar’s worth of those sweeping, often towering Trump trade curbs.

Yet much more important than my views is the continuing optimism registered by domestic manufacturers in all of the soft data surveys that come out each month from the private sector and from various branches of the Federal Reserve system. If they’re full of confidence, who am I to rain on their parade?

(What’s Left of) Our Economy: Winter Smacks February U.S. Manufacturing Output but Forecast Remains Bright

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aerospace, aircraft, American Rescue Plan, automotive, Biden, Boeing, CCP Virus, China, coronavirus, COVID 19, Covid relief, Donald Trump, facemasks, Federal Reserve, industrial production, inflation-adjusted output, machinery, manufacturing, masks, medical equipment, petroleum refining, pharmaceuticals, plastics, PPE, real growth, resins, semiconductor shortage, semiconductors, stimulus package, tariffs, Texas, Trade, vaccines, winter, Wuhan virus, {What's Left of) Our Economy

Count me as one awfully surprised blogger when I saw this morning’s Federal Reserve U.S. manufacturing production figures (for February), which reported a 3.12 percent sequential drop in industry’s inflation-adjusted output. That was by far the worst such monthly performance since pandemicky April’s 15.83 percent crashdive, and even though the Fed largely blamed harsh winter weather in much of the country, it still contended that manufacturing would have shrunk by about half a percent even in balmier conditions.

A big reason for my surprise was the apparent contrast between these results and the findings of the monthly manufacturing surveys conducted by various of the Fed’s regional branches. They’re soft data, presenting manufacturers’ perceptions rather than actual changes in output (or jobs, or capital spending, or any other indicator), and I’ve written before that soft data are anything but perfect. But not only were the production reads in these surveys strong. They were strong even in Texas, where the storms were so severe. (And the Dallas Fed’s survey was conducted as they were raging.) Moreover, the same held for the February results from the neighboring Kansas City Fed bank.

Further, other hard data – specifically, on jobs – pointed to a good February for manufacturing, too, as industry expanded its payrolls by 21,000.

But the new Fed production numbers shouldn’t be dismissed entirely, so let’s look at the…lowlights, starting with the revisions, which were moderately negative. January’s previously reported 1.04 percent monthly advance is now pegged at 1.29 percent. December’s already once-downgraded inflation-adjusted output growth was lowered again, from 0.94 percent to 0.84 percent. November’s result, which had been upgraded twice (most recently to 1.10 percent) is now judged to have been 1.05 percent. October’s string of upward revisions was stopped, too, as the new report reveals a downgrade from 1.51 percent to 1.39 percent.

Overall, these readings mean that domestic manufacturing’s after-inflation production has grown by 20.26 percent since its April nadir, and stands 3.83 percent below its last pre-pandemic reading, from February.

As not the case with recent Fed industrial production reports, the output changes were highly concentrated in a few industries. Bearing out the central bank’s observation that “some petroleum refineries, petrochemical facilities, and plastic resin plants suffered damage from the deep freeze and were offline for the rest of the month,” most of these sectors saw outsized price-adjusted month-to-month drops in February. For petroleum and coal products, the fall-off was 4.43 percent, and for the huge chemicals sector, 7.11 percent Interestingly, the chemicals decline was even bigger than that it suffered last April, at the depths of the pandemic and related economic activity curbs (6.08 percent).

And as for those resin plants? Their February real output plummeted by fully 28.12 percent – much more than at any time last spring, during the pandemic’s height, and the worst such performance since the 30.64 percent cratering during Great Recessionary September, 2008. In fact, constant dollar output in the industry sank to its lowest level since equally Great Recessionary March, 2009.

Another February real production decrease that looks temporary (but perhaps longer-lasting): the 8.26 percent plunge in constant dollar automotive production. The main culprit is no doubt a global shortage of semiconductors that could well weigh on the entire domestic manufacturing sector going forward.

As known by RealityChek regulars, the machinery sector is a major barometer of manufacturing’s overall health, because its products are used throughout industry. So given February’s poor results for the entire sector, it’s no surprise that real machinery output was off by 2.33 percent on month. But January’s results were upgraded tremendously – from 0.52 percent after-inflation growth to 2.59 percent. So price-adjusted machinery output is still within 1.17 percent of its final pre-pandemic levels.

Because Boeing’s protracted safety-related problems continue to clear up, aircraft and parts production notched another month of growth in real terms in February – an increase of 1.04 percent. Revisions, however, were negative, especially December’s – its previously upgraded production increase (to a strong 3.03 percent) is now judged to be a 0.61 percent decline. Largely as a result, inflation-adjusted output is now just fractionally above its February pre-pandemic level.

The picture was brighter in pharmaceuticals and medicines. This industry, which includes vaccines, saw its after-inflation production climbed by anorther 1.29 percent in February. Moreover, January’s initially reported robust 2.42 percent increase was revised to an even better 2.57 percent. As a result, pharmaceutical and medicines real output is now 5.62 percent higher than just before the pandemic, and should generate even better results in the coming months, as vaccine production will be surging even more strongly.

Unfortunately, the also vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators – is still behind the curve. Constant dollar production actually dipped by 0.56 percent on month in February, although in another major revision, January’s performance is now judged to be a 1.08 percent gain rather than a 0.54 percent loss. All the same, real production in this sector (which encompasses many other products as well) is still 1.37 percent less than just before the CCP Virus and the lockdowns arrived in force.

All told, I’m still full of confidence about domestic manufacturing production, due to the Boeing, vaccines, and now the Biden stimulus effects. And don’t forget the administration’s continued reluctance to lift its predecessor’s towering and sweeping tariffs on China, and on metals imports from many countries. Lastly: The weather’s bound to keep getting better!

(What’s Left of) Our Economy: U.S. Manufacturing Hiring Climbs Back on Track

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aerospace, automotive, Biden, Boeing, CCP Virus, China, coronavirus, COVID 19, Donald Trump, gloves, healthcare goods, Jobs, macinery, manufacturing, masks, non-farm jobs, pharmaceuticals, PPE, private sector, semiconductor shortage, semiconductors, tariffs, transportation equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

As this morning’s February official U.S. jobs report was dominated by a reopening-fueled surge in leiure and hospitality payrolls (which accounted for 355,000 of the month’s total 379,000 sequential improvement), American domestic manufacturing’s employment performance resumed chugging along.

U.S.-based industry gained 21,000 jobs on net last month, recovering from its drop off in January (which was revised down from a decline of 10,000 to one of 14,000). December’s initially reported advance, though, was upgraded from 31,000 to 34,000.

The February results mean that manufacturing has now regained 60.45 percent (824,000) of the 1.363 million jobs lost during the peak CCP Virus lockdowns period of last March and April. Consequently, they show that industry’s reemployment pace has continued to reverse its previous performance as the economy’s pandemic recovery leader.

That status now belongs to the overall private sector, which since last April has regenerated 62.61 percent (13.267 million) of the 21.191 million jobs it shed last spring.

Nonetheless, since public sector net hiring remains very weak, manufacturing’s job-creation performance remains well ahead of that of the economy as a whole – which is viewed by the Labor Department, which compiles and releases these statistics, as the “non-farm sector.” Since April, employment in this combined public and private sector is back up by 12.887 million – representing just 57.63 percent of the 22.362 million jobs they lost together in March and April.

Manufacturing’s biggest February jobs winner by far was transportation equipment (up 9,700 – more than 46 percent of industry’s total employment advance). Since payrolls in the very big automotive sector inched up by just 1,000, it’s likely that much of the rest of the increase came in an aerospace sector whose employment troubles are being healed by Boeing’s comeback from safety woes. But because the aerospace (and other non-automotive transportation) jobs figures are reported one month late, we’ll need to wait until the March report to know for sure.

Other major February manufacturing jobs gainers were miscellaneous non-durable goods (up 4,100), machinery (3,800), plastics and rubber products (3,000) and miscellaneous durable goods (2,800). The increases in miscellaneous non-durables and machinery were especially encouraging, as the former category (as detailed below) includes many of the medical goods vital to the anti-virus fight, and the latter’s products are used throughout not only the manufacturing sector, but other big parts of the economy like construction and agriculture.

The biggest February manufacturing jobs losers were food manufacturing (where payrolls fell by a net 3,100), non-metallic mineral products (2,400), and printing and related support activities (1,700).

Given the continuing struggle against the pandemic, the continuing shortages of many vital products like protective gear, and the surge in vaccine production, the jobs performance of healthcare goods once again underwhelmed – though keep in mind that, as with the non-automotive transportation goods categories, the data here are one month behind, too.

In the broad pharmaceuticals sector, employment actually fell by 700 in January. December’s initially reported 2,200 jobs rise has now been upgraded to 2,300, but this big industry’s payrolls are up just 1.89 percent since last Febuary – the last full pre-pandemic data month.

Hiring was stronger in the pharmaceuticals subsector containing vaccines. January employment rose by just 100 sequentially, but the initially reported December 1,100 payrolls increase was revised up to 1,600. As a result, the subsector’s workforce is now 4.55 percent bigger than last February.

The manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns has grown employment most impressively of all these healthcare sectors. But it lost 800 net new jobs in February, a drop that failed to offset the upward revisions of 600 for December. These shifts left employment in this sector 7.98 percent higher than the final pre-pandemic monthly figure.

Notwithstanding January’s workmanlike result, all the pieces still seem to be in place for an accelerating manufacturing jobs rebound: the return of normal economic conditions generally (however choppily), Boeing’s brightening prospects, the continuing need for much more in the way of vaccines and other medical goods, the Biden administration’s stated determination to boost domestic output of CCP Virus-related products, and last – but surely not least – the sweeping tariffs placed by the Trump administration on imports from China that for the near future President Biden apparently will keep.

No one should forget, though, that one strong new headwind has appeared – a global shortage of semiconductors that is already depressing production across manufacturing. Yet even this disruptive event at bottom seems largely due to the unexpected speed of the U.S. economic bounceback, especially in sectors shut down almost entirely, like automotive manufacturing. So whatever the short-term difficulties it causes, the microchip shortage looks like it stems from the kinds of problems, to borrow from an old sports adage, that manufacturing and its workers ultimately would like to have.        

(What’s Left of) Our Economy: As Trump’s Tariffs Stay in Place, U.S. Manufacturing Output Keeps Surging

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aerospace, aircraft, aircraft parts, Boeing, CCP Virus, China, coronavirus, COVID 19, Federal Reserve, gloves, imports, industrial production, inflation-adjusted output, manufacturing, masks, pharmaceuticals, PPE, real growth, recession, tariffs, Trump, Wuhan virus, {What's Left of) Our Economy

It’s tough to describe this morning’s manufacturing production figures from the Federal Reserve (for January) as anything but excellent, and anything but another strong endorsement of the stiff, sweeping tariffs former President Trump imposed on goods, especially from China. By shielding industry from a flood of imports from the People’s Republic, these trade curbs have undoubtedly contributed to a manufacturing recovery that entered its ninth straight month in January, and brought its production to within a whisker of pre-CCP Virus levels.

Moreover, as noted last month, the sector’s prospects seem bright, since not only has the entire economy kept recovering as CCP Virus vaccination proceeds and accelerates, but the aerospace industry revives both from its Boeing safety-related woes and the pandemic-related travel slump, and vaccine production surges.

Domestic manufacturers’ real output rose by 1.04 percent sequentially, increases were broad-based, and revisions were strongly positive. Although December’s previously reported 0.95 percent growth was downgraded to 0.94 percent, November’s was revised up for the second straight time (from 0.83 percent to 1.10 percent), and October’s for a third straight time (from 1.34 percent to 1.51 percent).

Due to these revisions, despite the severely recessionary impact of the CCP Virus both at home and abroad, domestic manufacturing’s inflation-adjusted 2020 production decline now comes in at just 2.01 percent, rather than the 2.63 percent reported last month. In addition, price-adjusted manufacturing output has advanced by 24.11 percent since its April nadir, and is now a mere 0.75 percent below its last pre-pandemic level last February.

As encouraging as the January figures and revisions were was their breadth. In fact, for the second straight month, the constant dollar output improvement came despite a small (0.72 percent) sequential dip in the automotive sector, whose major ups and downs have heavily influenced overall manufacturing production results for much of the pandemic period.

One cautionary note: January monthly after-inflation output growth for the big machinery category – which turns out production equipment for the rest of manufacturing, and devices crucial for other major industries like construction and agriculture – was only 0.52 percent, just half that for the entire manufacturing sector. And revisions were mixed.

More encouraging: Machinery’s growth has been strong enough that its real output is now back to within 1.12 percent of its February pre-pandemic levels.

January also saw accelerating growth in aircraft and parts production. Monthly output in expanded by 2.89 percent in January, December’s strong initially reported 2.78 percent increase is now judged to have been 3.03 percent, and November’s has been upgraded from 2.39 percent to 2.50 percent.

In fact, recovery in these aerospace sectors has been so vigorous that their output is now 6.77 percent greater than their February pre-pandemic levels.

Probably reflecting the vaccine effect, price-adjusted production of pharmaceuticals and medicines increased by 2.42 percent on month in January – the best showing since July’s 2.57 percent. But revisions were mixed, and this vital sector’s real output is only 4.11 higher than in February, just before the pandemic struck the U.S. economy in full force. On the brighter side, immense vaccine demand makes clear that the industry’s upside is enormous for the time being.

As for medical equipment and supplies – including virus-fighting items like face masks,face masks, protective gowns, and ventilators – their production performance keeps lagging badly. Inflation-adjusted output for this category (which encompasses many other products as well) actually fell in January for the second straight month – and by 0.54 percent. In fact, constant dollar output in this sector is 2.18 percent lower than during the last pre-pandemic month of February, 2020.

(What’s Left of) Our Economy: U.S. Manufacturing’s Biggest 2020 Winners & Losers

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aerospace, automotive, Boeing, CCP Virus, computer and electronics products, consumer goods, coronavirus, COVID 19, energy, Federal Reserve, food products, fossil fuels, furniture, housing, industrial production, inflation-adjusted output, lockdowns, machinery, manufacturing, on-line shopping, stay-at-home, travel, wood products, Wuhan virus, {What's Left of) Our Economy

Thanks to last Friday’s release of the Federal Reserve’s report on December U.S. manufacturing production, it’s possible to identify the sector’s biggest winners and losers for inflation-adjusted growth. And their ranks include some notable surprises. (As with all U.S. government economic data, though, there’ll be plenty of revisions over the next few years.)

First, let’s keep in mind that the following categories are pretty broad, including a wide range of products whose performances have varied just as widely. For example, as noted previously (e.g., here), “machinery” contains everything from machine tools to heating and cooling equipment to semiconductor production gear to turbines to construction equipment to farm machinery.

Still, these groupings are specific enough to show how much care is needed when generalizing about the performance of a piece of the economy as big as manufacturing. Moreover, they’re the categories that come early on in the incredibly detailed presentation each month of manufacturing output results deep in the weeds of the Fed’s own website.

With these observations in mind, the five strongest growers (or most modest shrinkers) in manufacturing during 2020 were automotive (vehicles and parts combined) at plus-3.64 percent; food, beverage, and tobacco products (up 0.40 percent), wood products (0.38 percent), computer and electronics products (up 0.14 percent), and non-metallic mineral products (down just 0.52 percent).

The biggest losers? Petroleum and coal products (down 13.34 percent); printing and related activities (off by 10.41 percent); furniture and related products (down 9.86 percent); non-durable miscellaneous manufactures (down 8.57 percent); and aerospace and other non-automotive transportation equipment (an 8.27 percent contraction).

Some of these results were entirely predictable. For example, petroleum and coal products essentially entails the fossil fuels industries, which have been decimated by the overall U.S. and global economic slumps triggered by the CCP Virus, and by the particular hit taken by business and leisure travel. And don’t forget the lingering effects of Boeing’s safety troubles. Moreover, of course those Boeing woes in turn have taken their toll on the aerospace sector.

On the flip side, despite major concern about the strength of America’s food supply chain, it proved impressively resilient. And since Americans didn’t stop eating, real food production expanded – although as the table below shows, its this expansion was much slower than in 2019.

I’m not sure what’s been up with furniture, though, especially considering that the good performance of wood products surely reflects the strength of a domestic housing industry that should have spurred production of furniture. Moreover, so far, the 2020 trade statistics reveal no significant increase in imports.

Non-durable miscellaneous manufactures are something of a puzzle, too. This category includes items like jewelry, silverware, sporting goods, toys, and musical instruments. Since on-line shopping has propped up consumption during the pandemic period, purchases and domestic production of these goods should have remained strong, too – even though many of these sub-sectors have long dominated by imports.

And speaking of imports, a clear sign of their importance is the negligible growth of the domestic computer and electronics industries. It’s clear that the virus and related lockdowns and stay-at-home orders has greatly increased demand for information technology products. But it’s evident that the biggest winners weren’t U.S.-based suppliers. In fact, 2020 growth was way below 2019’s, as the table below shows.

Meanwhile, the solid growth of the automotive sector is pretty remarkable, since the sector literally shut down almost completely in March and April. That looks like awfully strong evidence that much of the economic damage of the pandemic period has stemmed from government restrictions, and not from any inherent weakness in the economy.

In any event, below are the results for all of manufacturing’s main big industry groups, along with the data for the durable goods and non-durable goods super-sectors, and industry overall. For comparison’s sake with the pre-CCP Virus period, I’ve also presented their after-inflation growth for 2019. And a year from now, the final Fed 2021 statistics will permit judging just how complete a retun to normalcy has been achieved.

                                                                              2018-19              2019-20

manufacturing                                                        -1.06                   -2.63

durable goods                                                         -1.70                   -2.97

wood products                                                       +3.58                  +0.38

non-metallic mineral products                               -1.17                   -0.52

primary metals                                                       -2.69                   -7.66

fabricated metals products                                     -1.72                   -5.38

machinery                                                              -2.39                   -3.80

computer & electronics products                          +6.19                  +0.14

electrical equipmt, appliances & components       -1.71                   -1.68

motor vehicles and parts                                        -9.05                  +3.64

aerospace and misc transporation equipment       +0.29                   -8.27

furniture and related product                                +0.34                   -9.86

miscellaneous manufactures                                +0.30                    -3.67

non-durable goods                                                -0.72                    -2.24

food, beverage and tobacco products                  +2.67                   +0.40

textiles and products                                            -2.24                    -5.04

apparel and leather goods                                    -7.50                    -3.64

paper                                                                    -2.37                    -1.91

printing and related activities                              -3.20                  -10.41

petroleum and coal products                               -1.32                  -13.34

chemicals                                                            -2.07                     -1.31

plastics and rubber products                               -3.24                     -0.78

other manufacturing                                           -8.59                      -8.51

(What’s Left of) Our Economy: Why Today’s Fed U.S. Manufacturing Report is So Bullish

Tags

737 Max, aircraft, aluminum, automotive, Boeing, China, Federal Reserve, inflation-adjusted growth, Joe Biden, machinery, manufacturing, medical supplies, metals, pharmaceuticals, PPE, real output, steel, tariffs, Trade, vaccines, {What's Left of) Our Economy

Think for a moment about this morning’s very good manufacturing production figures from the Federal Reserve (for December) and a case for major optimism about U.S. industry’s foreseeable future is easy to make. Not only has the advent of highly effective vaccines greatly boosted hopes for a return to normality sooner rather than later. But much of the underlying data was collected before the vaccine production surge began.

Moreover, although Boeing aircraft is still dealing with manufacturing problems, its popular 737 Max model is being recertified or nearly recertified for flight by numerous countries (including the United States) and any continued significant rebound in air travel levels is sure to help the company’s order book for all of its jets.

And again, the data themselves were strong. According to this first Fed read for the month, American inflation-adjusted manufacturing output rose by 0.95 percent sequentially. Moreover, November’s initially reported 0.79 percent improvement was upgraded to 0.83 percent, and October’s results were revised upward for a second time – to 1.34 percent.

These noteworthy advances – which add up to eight straight months of increases – brought price-adjusted U.S. manufacturing production to 22.05 percent above the levels it hit during its CCP Virus-induced nadir in April, and to within 2.40 percent of its last monthly pre-pandemic numbers (for February).

Especially interesting, and another cause for optimism: The December manufacturing growth was so broad-based that it was achieved despite a 1.60 percent monthly drop in constant dollar automotive production. Combined vehicle and parts output has rebounded so vigorously since its near-evaporation last spring (by just under six-fold) that on a year-on-year basis, it’s actually grown by 3.64 percent. But today’s Fed report represents evidence that many other sectors are now catching up.

The crucial (because its products are used so widely throughout the entire economy) machinery sector enjoyed a good December, too, with after-inflation production increasing by 2.07 percent sequentially. That welcome news more than offset a downward revision in the November results, from a 0.51 percent to 0.99 percent shrinkage. Due to this growth, this real domestic machinery output is now just 1.53 percent off its pre-pandemic level.

As for the pharmaceutical industry, its price-adjusted output expanded by a solid 2.12 percent sequentially in December, but November’s disappointing initially reported 0.76 percent fall-off was downgraded to a 0.84 percent decrease, and October’s results stayed at minus 1.01 percent.

Moreover, year-on-year constant dollar pharmaceutical production is up only 0.18 percent – anything but what you’d expect for a country suffering through an historic pandemic.

But the first batch of Pfizer anti-CCP Virus vaccines didn’t leave the factory until December 13, and key data behind this first read on the month’s performance were gathered beforehand. So it’s likely that the huge ramp in vaccine out could start showing up in the revised December results in next month’s Fed manufacturing report (for January), which will reflect more relevant statistics.

Similar optimism seems warranted for the U.S. civilian aerospace industry and especially its beleaguered collosus, Boeing. Despite the safety woes of the popular 737 Max model and its consequent production suspension, the domestic aircraft and parts sectors have actually staged a powerful real output recovery since a 32.85 percent nosedive in February and March. Since then, inflation-adjusted production has boomed by 52.30 percent, fueled in part by December’s 2.78 percent sequential jump and November’s upwardly revised 2.39 percent growth.

In fact, constant dollar output in civilian aerospace is now actually 2.27 percent higher than its last pre-CCP Virus level. The 737 effect isn’t over yet, as made clear by the 11.49 percent real production decline since last December. But it seems evident that the industry is and will remain on the upswing barring any new seriously bad news.

Unfortunately, little such optimism appears justified in the case of medical equipment and supplies – including face masks, protective gowns, ventilators, and the like. Inflation-adjusted production in their larger subsector sank in December by 0.36 percent on month, and although the November increase has been revised up from 1.56 percent to 1.60 percent, October’s growth has been downgraded again – from an initially judged 3.54 percent all the way down to a decidedly non-pandemic-y 1.75 percent.

And since April, the after-inflation production recovery has been only 21.02 percent – still less than that for all of manufacturing. The year-on-year December result is no better, as it’s down 5.44 percent. And of course, those 2019 levels were revealed by the pandemic to have been dangerously inadequate.

But before ending, I couldn’t forgive myself if I didn’t say something about tariffs, and as with last month’s Fed manufacturing figures, the performance of the primary metals sectors for December is sending this loud and clear message to President-Elect Joe Biden: Keep them on.

For in constant dollar terms, these protected industries have recorded strong monthly growth since June, and November’s upwardly revised sequential 3.98 percent pop has now been followed by a 2.51 percent increase in December.

All told, since the April bottom, price-adjusted production has risen by 29.01 percent – expansion that looks inconceivable without the trade curbs preventing the U.S. market from being flooded with Chinese steel and aluminum along with product transshipped through the ports of those U.S. allies with whom Biden is so keen on repairing tattered Trump era ties, and greater metals shipments they often send America’s way to offset their own China-related losses.

(What’s Left of) Our Economy: More Manufacturing Jobs Strength – & Vindication of Trump Tariffs

Tags

737 Max, aerospace, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Employment, Jobs, machinery, manufacturing, manufacturing jobs, non-farm payrolls, pharmaceuticals, PPE, private sector, tariffs, Trade, trade war, Trump, vaccines, Wuhan virus, {What's Left of) Our Economy

This morning’s official U.S. jobs report, for December, shows that, to paraphrase that unforgettable battery ad slogan, domestic manufacturing just keeps hiring and hiring and….

As a result, the December data also add to the already compelling case that domestic industry’s continued resilience – including an ongoing hiring out-performance – owes significantly to the Trump tariffs that have prevented imports from China from flooding U.S. markets and massively depriving Made in America products of customers as they had before his presidency.

The nation’s manufacturers boosted their payrolls by 38,000 on month in December, even as the private sector shed 95,000 jobs and government at all levels lost 45,000.

Moreover, in line with the strong overall employment revisions for October and November, industry’s previously reported 33,000 hiring improvement for the former (which had already been downgraded from 38,000) is now judged to be 43,000. And November’s figure has been upgraded from 27,000 to 35,000.

Although this performance pales compared with the 333,000 jobs added in manufacturing in June, the sector continues to punch above its employment weight, and in fact has now won back a status it apparently had lost in the fall.

As of December, U.S.-based industry had regained 60.16 percent (820,000) of the 1.363 million jobs it had lost during the worst (so far) of the pandemic-induced downturn in March and April.

That’s slightly ahead of the total private sector, which has recovered 59.91 percent (12.696 million) of its 21.191 million drop last spring.

And its considerably ahead of the overall economy’s record. Non-farm payrolls (the definition of the American employment universe used by the Labor Department, which issues these jobs reports) have risen by 12.321 million since April, a bounceback reprsenting only 55.60 percent of their 22.160 million plunge that month and in March.

The big reason is the slump in government jobs at all levels, and especially in states and localities. Public sector employment sank by 45,000 sequentially in December and by 81,000 the month before. And the outlook for public sector employment remains clouded by the brightening (due to the nearly final 2020 election results) but still uncertain prospects for a federal bailout of state and local governments, whose December monthly job losses totaled 49,000. (The federal government actually added positions.)

Manufacturing’s biggest monthly employment winners in December were plastics and rubber products (up 6,900), the automotive sector (6,700), non-metallic mineral products (6,100), food manufacturing (5,500), and apparel (4,000).

Especially encouraging were the 2,800 jobs created by domestic machinery makers, since the equipment they make is so widely used throughout the rest of manufacturing and elsewhere in the economy. November’s on-month machinery jobs gains were revised up from 1,900 to 2,500, but October’s totals were revised down for a second time, from 3,000 to 2,700.

December’s biggest manufacturing job losers were miscellaneous non-durable goods (down 11,200 sequentially) and primary metals (down 2,100).

Also on the encouraging side: Better progress has been made in job-creation for the CCP Virus-related medical manufacturing categories. These only go through November, but they show that the the broad pharmaceuticals and medicines sector added 1,000 new jobs that month, and its October figure was upgraded all the way from 100 to 1,100.

In addition, the sub-sector containing vaccines increased payrolls in December by 1,100, and its October performance was revised up from 600 to 1,100.

But in the manufacturing category containing PPE goods like face masks, gloves, and medical gowns, along with cotton swabs, the previously reported October employment increase stayed unreivsed at 400, and the November growth was only 500.

These results, however, still mean that the PPE category’s job gains since February have been much stronger (7.85 percent) than those of the vaccines category (a disappointing 2.82 percent) and of the broader pharmaceuticals industry (an even weaker 1.40 percent).

Finally, other than the prospect of a vaccine-related return to normal in the U.S. and global economies (for domestic manufacturing is a big exporters), the biggest reason for further manufacturing employment optimism concerns the aerospace sector. It’s been pummeled by both the pandemic-induced nosedive in air travel around the world, and by Boeing’s safety woes.

The U.S. aerospace giant isn’t out of the woods yet. Its troubled 737 Max model has now been recertified by the federal government as safe to return to flight, but new production-related problems have cropped up, too. Moreover, who can say with any confidence when “normal,” or enough of it to help, Boeing, returns?

Yet assuming some substantial Boeing recovery in the foreseeable future, a major restart of its own manufacturing could give a big boost to domestic industry as a whole, given its many and long domestic supply chains.

(What’s Left of) Our Economy: A Strange U.S. Monthly Trade Report Even by 2020 Standards

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Agence France-Presse, Boeing, China, goods trade, goods trade deficit, manufacturing, manufacturing trade deficit, merchandise trade, services trade, Trade, trade deficit, {What's Left of) Our Economy

Because the economy, its strengths and weaknesses, and the policy issues they raise haven’t disappeared despite, yesterday’s outrageous attack on the U.S. Capitol Building, I’m reporting as usual in detail on this morning’s monthly international trade figures (for November).

But a first read of the data, anyway, reveals something pretty unusual (aside from the now-standard CCP Virus- and lockdowns-related distortions) – the 7.97 sequential increase in the combined goods and services deficit, to the second biggest monthly level ever, came from a very large number of sources. And some of the biggest standard culprits (including recent problem sectors like services) played a very minor role.  

At the same time, it’s important to remember that the makeup of that all-time worst overall monthly trade gap ($68.28 billion, in August, 2006), was completely different from the latest $68.14 billion total in that 38.31 percent consisted of oil. The latest trade data show a small oil surplus. That change has major policy implications, since (as known by RealityChek regulars), it means that now the entire trade shortfall in goods (the bulk of the overall deficit) comes in those flows heavily influenced by trade policy. And we’ll get back to that “Made in Washington” portion of the trade gap below.

The November figure brought the year-to-date total trade deficit figure to $604.82 billion – 4.85 percent bigger than last year’s counterpart of $576.85 billion. As a result, the December results are certain to produce a new annual record (currently held by 2018’s $579.94 billion).

Nevertheless, this projected figure as a share of the total U.S. economy (measured as pre-inflation gross domestic product or GDP) would be well below 2006’s record of 5.58 percent, and could trail some levels hit in the 2010s.

Meanwhile, the goods, or merchandise, trade deficit hit its own all-time high in absolute terms (not the relative terms described immediately above), with the $86.36 billion level topping August’s $83.90 billion. And the November surplus of $18.21 billion represented the worst monthly services trade performance since August, 2012’s $17.08 billion.

The rise in the November overall trade deficit stemmed entirely – and then some – from the 2.94 percent increase in total imports from $245.11 billion to $252.32 billion. And worsening goods imports were just about the whole story, growing 3.04 percent sequentially from $207.76 billion to $214.08 billion. Total exports improved by 1.19 percent, from $182.00 billion to $184.17 billion.

As suggested above, the “Made in Washington” trade deficit (which strips out not only oil, but services, since the former is almost never the focus of trade policy, and liberalization in the latter remains embryonic globally) hit a new monthly record, too. The $85.70 billion November figure was 5.54 percent higher than October’s $81.20 billion total, and slightly exceeded August’s previous $84.65 billion all-time high.

Standing at $830.21 billion to date this year, this trade gap, too, will certainly top the annual record of $840 billion set in 2019.

Strangely, though, two of the biggest historical pieces of the trade deficit – the China goods and manufacturing gaps – were little changed on-month in November.

The former increased by 1.90 percent month-to-month, to $30.68 billion, as U.S. exports fell slightly and the much greater amount of imports increased fractionally. Moreover, year-to-date, this deficit is down 11.51 percent year-to-date, making clear that the Trump tariffs have diverted trade to countries that much friendlier politically, and much less predatory economically.

More evidence for this proposition – and for the overall economic success of the Trump levies: As recent news accounts of China’s official trade figures continually emphasize, the People’s Republic’s global goods exports have been booming lately. This Agence France-Presse article reported that China’s November goods exports represented a 21.1 percent jump on a year-to-date basis, and its merchandise trade surplus surged 29.06 percent on-month.

But if the U.S. November data are to be believed, almost none of this Chinese growth – and, most significant, its trade-fueled economic growth – has been achieved at America’s expense.

The even more chronic and much bigger manufacturing trade deficit actually declined slightly on month in November – by 1.74 percent from October’s record $110.20 billion. But at $108.28 billion, this monthly trade shortfall was still the second biggest of all time.

Year-to-date, the manufacturing trade gap stood at $1.00626 trillion – 5.83 percent bigger than last year’s $950.86 billion. As a result, the 2020 annual figure will certainly break last year’s record $1.03314 billion. But it will be important is by how much, since this trade deficit’s annual growth has slowed markedly since 2013 – from 11.78 percent in 2014 to 1.31 percent in 2019. In fact, as previously reported here, if not for Boeing’s safety woes crippling the trade performance of the big surplus-generating aerospace sector, the 2019 manufacturing trade deficit would have barely worsened at all.