(What’s Left of) Our Economy: October Costs Manufacturing Some Jobs Momentum

Tags

(What's Left of) Our Economy, automotive, CCP Virus, coronavirus, COVID 19, election 2020, Employment, fabricated metal products, food products, Jobs, Joe Biden, machinery, manufacturing, metals, motor vehicle parts, NFP, non-farm jobs, non-farm payrolls, private sector jobs, recession, regulation, tariffs, taxes, Trade, transportation equipment, Trump, Wuhan virus

The manufacturing jobs picture revealed in this morning’s October official U.S. jobs report was a classic glass-half-empty/half-full story. But for the first time since the employment rebound from its CCP Virus-induced lows, the gloomier view seems to have the edge – though a modest one. The main reason: In October, the rate of cumulative manufacturing job creation fell slightly behind that of the U.S. government’s entire employment universe (so-called non-farm payrolls, or NFP), and of the private sector.

Domestic industry increased its employment level on net by 38,000 in October on a sequential basis. That figure represented a decrease from the September total – which has been revised down from 66,000 to 60,000. But it’s an improvement over August’s also downwardly revised 30,000 total.

In addition, as opposed to dominating the manufacturing jobs picture for good and ill, as it has during the pandemic recovery period, automotive jobs, rose by a mere 1,400. The downward revision in combined vehicle and parts payrolls in September, however (from 14,300 to 7,700) did account for more than all of the total downward manufacturing revision for the month.

October’s manufacturing net jobs-creation leaders were fabricated metals products (7,200), food manufacturing (6,200), primary metals (6,000), and machinery (3,900). The first two categories enjoyed their second straight month of relatively strong job improvement, while the primary metals gain amounted to an important turnaround from September’s 3,400 net employment loss.

At the same time the October machinery results – important because that sector influences so much manufacturing activity overall, and because of its close connections to non-manufacturing industries like agriculture and construction) – were much less impressive than the 12,600 employment rise of September. Worse, this figure itself was downgraded from the initially reported 13,800.

The only significant October jobs loser in manufacturing was transportation equipment. This large category – which includes automotive – shed 2,400 jobs on net. The big problem here was motor vehicle parts, where employment fell by 2,800.

October’s employment progress means that manufacturing overall has regained 742,000 (54.44 percent) of the 1.363 million jobs it lost during the worst of the CCP Virus economic slump of March and April. (Those earlier job losses represented 10.61 percent of the last pre-virus – February – manufacturing employment level.)

As of October, non-farm payrolls total had regained 12.070 million (54.47 percent) of the 22.160 million total decrease they suffered in March and April. So although by this definition, overall U.S. employment plunged by 14.53 percent during the virus low point – more proportionately than manufacturing) — the rate of its jobs rebound is now slightly faster.

Faster still has been the bounceback in private sector jobs. Non-government employment (whose status is much more revealing of the economy’s fundamentals than government employment) fell by 21.191 million in March and April combined – greater relative losses (16.34 percent) than experienced either by manufacturing or the non-farm sector. But its strong October performance mean that it’s regained 12.317 million of these position on net – an increase of 58.12 percent.

But as if the CCP Virus and its decimation of the economy haven’t created enough uncertainties for manufacturing employment (and for the economy as a whole), this week’s Election 2020 results could further muddy the waters – especially if the White House changes hands. Despite October’s jobs slowdown, industry’s employment and output have held up well, due no doubt significantly to President Trump’s tariff-centric trade policies and domestic overhauls in taxes and regulations. The Trump manufacturing record pre-virus has also been strong. Would a Biden administration reversal of these moves put U.S. manufacturing back behind the eight-ball? Or would it find new alternative growth fuels for industry?

(What’s Left of) Our Economy: The Tariff-Induced Carnage in U.S. Metals-Using Manufacturing is Still MIA

Tags

appliances, automotive, durable goods, fabricated metal products, Federal Reserve, industrial production, machinery, manufacturing, metals tariffs, metals-using industries, tariffs, Trade, Trump, washing machines, {What's Left of) Our Economy

The July figures for after-inflation U.S. manufacturing production came in this morning from the Federal Reserve, and they further debunk widespread reports that President Trump’s tariff-heavy trade policies – and particular his levies on steel and aluminum imports – are backfiring badly by decimating metals-using manufacturing sectors that dwarf the steel and aluminum makers.

Let’s first look at the monthly numbers, and compare the (preliminary) real growth of major metals-using sectors and manufacturing overall from June to July:

overall manufacturing:  +0.31 percent

durable goods:   +0.39 percent

fab metals:  -0.03 percent

machinery:  +0.56 percent

automotive:  +0.94 percent

small appliances:  -1.41 percent

major appliances:  -4.56 percent

Clearly, most metals-using sectors actually outperformed overall, with the top exceptions being appliance makers. Those in the major appliance category, of course, have been hit not only with the metals tariffs, but with safeguard tariffs on one of their actual products – large residential laundry machines.

Moreover, the output data since the advent of the first metals tariffs – in late March – show that the metals-using sectors in general have at least held their own. Here are the inflation-adjusted output percentage changes since April; they include the initially reported numbers through June (released by the Fed last month), and the revised June and initial July figures (released this morning).

                                                       old thru June   new thru June    new thru July

overall manufacturing                     – 0.21                +0.06                 +0.25

durables manufacturing                    -0.05               +0.09                  +0.48

fabricated metals products               +0.90               +0.82                 +0.79

machinery                                         -0.75                -0.47                  +0.09

automotive                                        -0.68                -1.56                   -0.63

small appliances                               -3.31                -3.98                   -5.33

major appliances                              -3.16                -0.73                    -5.25

Although the results for the very large machinery and automotive sectors look worse than the overall manufacturing numbers at first glance, they’ve each been undermined by some one-off developments.

In machinery, as reported here last month, the subpar post-April constant dollar growth clearly reflects some giveback from a big production jump between March and April. This increase was initially reported as a 2.27 percent surge, and it was estimated this morning at a still impressive 2.21 percent.

In automotive, production is still recovering from the effects of a fire in early May at a factory that produced parts for a popular Ford pickup truck, and which depressed after-inflation output that month by a huge 8.52 percent.

The post-April numbers confirm that both appliance sectors continue to be the big tariff losers, but the rest of the data show that they’ve been the exceptions, not the rule.

As usual with data, “past performance does not guarantee future results.” But the new Fed figures (along with comparable employment figures I’ve reported) also make clear that, so far, claims of major tariff-induced losses for domestic metals-using manufacturing belong in the realm of speculation, not of facts.

(What’s Left of) Our Economy: No Serious Evidence That Tariffs are Killing U.S. Metals-Using Industries

Tags

aluminum tariffs, appliances, automotive, durable goods, fabricated metal products, Federal Reserve, inflation-adjusted growth, Jobs, Labor Department, machinery, manufacturing, media bias, steel tariffs, tariffs, Trade, Trump, {What's Left of) Our Economy

With the mainstream media filled with articles (see, e.g., here, here, and here) on how President Trump’s current and proposed trade tariffs are already inflicting major damage on the U.S. economy, it’s useful to look at the official data capable of shedding maximum light on the situation. Fortunately, in this respect, Washington just released U.S. employment and manufacturing production statistics that can achieve just such a goal, and their message couldn’t be clearer: Although anecdotal accounts point to possible reasons for concern, the most comprehensive information available portrays these reports as completely unrepresentative – at least so far.

Principally, in late March, the Trump administration began imposed levies on steel and aluminum imports. It’s logical to suppose that the nation’s steel-using industries and their workers in particular would be big losers so far, since the steel tariffs of 25 percent are much higher than the ten percent levies on aluminum. But the data make clear that no such conclusions are justified to this point.

Let’s start with production, where statistics (from the Federal Reserve) go through June (on a preliminary basis). They show that, since April (the first few months during which any tariffs had any effects), overall domestic American manufacturing output (which includes all the industries that aren’t major steel users) has dipped by 0.21 percent.

Real production in durable goods sectors (which include all the big steel-using industries) is down, too – but by a bare 0.05 percent.

And many especially heavy metals-using industries have been doing better still. After inflation output in fabricated metal products rose by 0.90 percent between April and June. Constant dollar machinery production is down 0.75 percent – but that drop clearly reflects some mean reversion from the 2.27 percent jump between March and April. Automotive (combined vehicles and parts production) has fallen by 0.68 percent in real terms since April, but much of the decline stems from the supply chain effects of a fire at a factory producing parts for a popular model.

Appliances look like an important exception. Between April and June, constant dollar production in small appliances has tumbled by 3.31 percent, and in major appliances by 3.16 percent. But both sectors had been struggling for years before the Trump tariffs. In the former, it was down on net since February, 2015; in the latter, since September, 2016. By contrast, real output in the other metals-using industries was up strongly during those periods.

The jobs figures (from the Labor Department, which also go through June, preliminarily) tell a similar story. Overall manufacturing output has advanced by 0.43 percent since April. In durable goods industries, it’s improved by 0.57 percent.

In fabricated metals, however, payrolls have grown by 0.72 percent since April, and in machinery, by 0.95 percent during this period. The automotive sector has trailed these two in job creation, but has still nudged its employment up by 0.04 percent since April. And the 0.47 percent decrease in overall appliance employment (separate figures for small and major products aren’t available) continues that sector’s record as a significant jobs laggard.

What will the future hold? That’s anyone’s guess. It’s also true that tariff-produced price increases tend to take their time working their way through corporate supply chains, and that at the end of May, the administration imposed a second, big round of metals tariffs on three big metals-exporting trade competitors exempted from the first round: the European Union, Canada, and Mexico.

But it’s also true that there’s no statistical evidence to date that the metals tariffs, many of which have been in effect since late March, have harmed upstream industries, and plenty of statistical evidence that these metals consumers have been faring just fine – and then some. Fake News, anyone?