(What’s Left of) Our Economy: Are Trump’s Metals Tariffs Starting to Backfire?

Tags

aluminum, China, Jobs, manufacturing, metals, metals-using industries, steel, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

Friday’s monthly U.S. jobs report (covering April) not only included the third straight month of weak manufacturing employment gains. It contained the first notable evidence that President Trump’s tariffs (at least on imports of steel and aluminum) contributed to a payroll slowdown.

Industry created only 4,000 new jobs sequentially in April. The February and March revisions were positive (the latter from an increase of 1,000 to 8,000, and the latter from a decrease of 6,000 to no change. But these single-digit (at best) results represented manufacturing’s poorest three-month employment performance stretch (producing a cumulative net gain of 12,000 since January) since the September-December, 2016 period (when the increase was 11,000).

At least as important, the greatest weakness came in those manufacturing sectors that most heavily use the metals for which tariffs have been imposed by Mr. Trump since April, 2018. Whereas until the April, 2019 data, these industries (the main ones are listed in the table below) were generally creating jobs at a faster pace than less metals-reliant manufacturing sectors and even the private sector economy overall, that out-performance came to an end for the industries where April figures are available.

                                                 Old thru March      New thru March      Thru April

entire private sector:                +1.78 percent          +1.79 percent      +1.98 percent

overall manufacturing:            +1.48 percent          +1.58 percent      +1.61 percent

durable goods:                         +1.85 percent          +1.92 percent      +1.92 percent

fabricated metals products:     +1.60 percent          +1.82 percent      +1.80 percent

non-electrical machinery:       +2.76 percent          +2.68 percent      +2.44 percent

automotive vehicles & parts:  +0.40 percent          +0.42 percent     +0.27 percent

household appliances:              not available           -4.10 percent      not available

aerospace products & parts:     not available          +6.56 percent      not available

In other words, as the private sector and manufacturing in general both generated greater employment increases in April than in March (the latter just barely), the metals-using sectors’ April gains were smaller than March’s, and the durable goods super-sector in which they’re all found could only match its March jobs improvement rate.

Further, one point to bear in mind about the numbers for household appliances. This sector includes the large household laundry machines that saw a separate set of tariffs imposed starting in February, 2018.

As usual, the impact of the President’s tariffs on products made in China are more difficult to judge for at least four reasons. First, an enormous number of manufacturing industries use Chinese inputs – and to greatly varying extents. Second, these levies only began in July, and then on a relatively small scale. Third, the list of products tariff-ed beginning in July matches up imperfectly at best with the sectoral classification scheme used by the Labor Department to track manufacturing employment. And fourth, most of the affected products are found in relatively narrow categories of manufactures, where the jobs data is one month behind.

To muddy the waters further, in late February, the President decided to suspend an increase slated to go into effect March 1 on tariffs that began in late September on $200 billion in imports from China. His stated reason: progress in the bilateral trade talks. The levies were to rise from 10 percent to 25 percent.

This morning, however, came another apparent about-face: Mr. Trump announced that the tariff hike suspension would end this coming Friday, and that 25 percent tariffs would go into effect on the remaining $325 billion worth of imports from China “shortly.”

So with all those provisos, here are the latest available employment statistics for some major manufacturing sectors that use the Chinese parts, components, and materials that have been slapped with tariffs since July. As far as I can tell, no clear trend jumps out.

                                July-Feb     Old July-March    New July-March    July-April

private sector:     +1.11 percent   +1.24 percent      +1.25 percent     +1.44 percent

overall mfg:        +1.00 percent   +0.90 percent      +1.00 percent     +1.03 percent

aircraft engines   +0.93 percent    not available       +1.39 percent      not available

  & engine parts:

industrial            +2.46 percent    not available       +2.46 percent      not available 

  heating equip:

oil & gas            +5.83 percent    not available       + 6.11 percent     not available

  drilling platform parts:

farm mach         +1.67 percent     not available       +0.33 percent     not available

   & equipment:

ball bearings:    +1.82 percent     not available       +1.42 percent      not available

Anyone seeking to evaluate the economic effects of the Trump tariffs in a serious manner should recognize that a useful verdict may not be visible for years. But all trends (and their reversals) begin at specific points in time. Further, until the release of the April jobs numbers, tariff supporters could easily demonstrate that the apocalyptic predictions of tariff opponents had not yet come close to appearing. At least for now, that particular case has become somewhat harder to make.

Advertisements

(What’s Left of) Our Economy: Hold the Gloating on Tariffs and Manufacturing Jobs

Tags

aluminum, China, Jobs, manufacturing, metals tariffs, metals-using industries, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

Even though today’s March U.S. jobs figures overall improved dramatically on their February counterparts, the employment story in domestic manufacturing remained remarkably similar: Generally speaking the results were dismal. But the internals still don’t reveal any connection with President Trump’s tariff-heavy trade policies.

Let’s start by reviewing the manufacturing-wide March jobs performance. Industry’s payrolls dropped by 6,000 month-to-month – their first such decrease since July, 2017’s 3,000 dip. At least as bad, the weak 4,000 sequential jobs gain initially reported for February was revised down to 1,000.

As a result, March’s 209,000 year-on-year employment increase in manufacturing was the sector’s worst annual advance since February, 2018’s 206,000 net drop.

But the tariff-test effect can only be seen upon examining the results for the manufacturing sectors most heavily affected. The best evidence comes in metals-using industries. That’s partly because Mr. Trump’s steel and aluminum tariffs marked their first birthday in March and now we have data (though still preliminary) for eleven months of their first year in effect. But it’s also because the jobs data so precisely tracks trends in those sectors.

The first table below presents the results since last April – the first full month during which the tariffs were imposed – for leading metals-using sector. As has been the case consistently during the metals tariffs era, the latest figures show that most of the metals-using industries (three out of five) have out-hired the manufacturing as a whole (non-electrical machinery, fabricated metals products, and aerospace through February) and two (non-electrical machinery and aerospace through March) have created jobs at a faster pace even than the entire private sector.

The big automotive sector, of course, is a noteworthy laggard on both scores, and suffered an especially bad March. Appliances are dealing with not only metals tariffs, but separate levies on household washing machines. But in terms of momentum, fabricated metals products (whose payrolls exceed automotive’s) have held their own, and non-electrical machinery (which also employs more than motor vehicles and parts makers) has actually picked up the pace.

So because the industries most seriously affected by metals tariffs have generated such disparate employment results, blaming the metals tariffs for whatever problems they’ve been displaying seems unjustified. Clearly, their performance is explained by many other, including many other more important, factors.

                                                     Old thru Feb       New thru Feb       Thru March

entire private sector:                  +1.64 percent      +1.64 percent       +1.78 percent

overall manufacturing:              +1.58 percent      +1.53 percent       +1.48 percent

durable goods:                           +2.04 percent      +1.94 percent      +1.85 percent

fabricated metals products:       +1.60 percent      +1.60 percent      +1.60 percent

non-electrical machinery:         +2.82 percent      +2.71 percent       +2.76 percent

automotive vehicles & parts:   +1.11 percent       +1.04 percent       +0.40 percent

household appliances:               not available        -3.63 percent        not available

aerospace products & parts:      not available      +6.40 percent         not available

The same range of employment results emerges from the manufacturing sectors that seem to be most seriously impacted by the Trump administration’s tariffs on imports from China. But much less confidence should be placed in these figures for three reasons. The first levies imposed have only been in place since last July. The match-ups between the products on that first tariff list and the categories tracked by the Bureau of Labor statistics are much less exact. And statistics for many of these categories are available only through February.

Nonetheless, here’s the best I could come up with. And this month, I’ve added overall private sector data, plus two more items I could identify from that first tariff list, to provide one more point of comparison.

                                                             Old July-Feb   New July-Feb   July-March

entire private sector                           +1.10 percent   +1.10 percent   +1.24 percent

overall manufacturing                       +1.00 percent   +0.94 percent   +0.90 percent

aircraft engines and engine parts:      not available    +0.93 percent    not available

industrial heating equipment:            not available    +2.35 percent    not available

oil and gas drilling platform parts:    not available    +5.97 percent    not available

farm machinery and equipment:        not available    +1.83 percent   not available

ball bearings:                                     not available    +1.54 percent   not available

med/surgical/personal aid devices:   not available    +1.34 percent   not available

X-ray & electro-medical equip:        not available    +2.91 percent   not available 

If anything, when it comes to employment, the China-affected sectors have outperformed the rest of manufacturing and the overall private sector to an even greater extent than the metals-using sectors. (Interestingly, moreover, all these China-affected sectors are heavy metals users as well – so like appliances, they’re impacted by two sets of tariffs.)

So it’s starting to look like President Trump, and the economy as a whole, are looking at diminishing domestic manufacturing jobs mojo. But so far, his trade policy doesn’t belong on the list of culprits.

(What’s Left of) Our Economy: Politico’s Failed Takedown of Trump’s Auto Jobs Policies

Tags

automotive, Bureau of Labor Statistics, Department of Transportation, domestic content, General Motors, GM, Jobs, Lordstown, manufacturing, Ohio, tariffs, Trade, Trump, Youngstown, {What's Left of) Our Economy

Let’s all hope that Politico doesn’t start a new publication called “Economico.” Because its latest venture into economic policy reporting – yesterday’s examination of President Trump’s trade-centric approach to strengthening America’s automotive industry – had about as much in common with sound economic analysis as Beto O’Rourke’s current talking points have with the Gettysburg Address.

The headline nicely sums up the piece’s theme: “Trump facing failing strategy on auto jobs as he heads to Ohio.” And the news hook is the President’s trip today to Ohio, where the announced closure of a long-time General Motors factory in the northeastern town of Lordstown has understandably attracted national attention given Mr. Trump’s 2016 campaign promise to ensure its survival, and given the importance of Lordstown-type manufacturing workers to his political success.

But the article’s treatment of the Lordstown decision and the broader Trump auto industry record is based almost entirely on cherry-picked facts presented in such stark isolation as to produce a thoroughly misleading picture to readers.

First, the piece doesn’t say that, for all the disrupted lives already caused and sure to continue due to GM’s Lordstown decision, Reuters reported the day before that

“GM Chief Executive Officer Mary Barra has said the automaker expects to have 2,700 job openings by early 2020 at other thriving plants, enough to absorb nearly all of those displaced in plants in Maryland, Ohio and Michigan willing or able to uproot for work hundreds of miles away. GM said another 1,200 affected hourly workers are eligible for early retirement.

“Based on a plant-by-plant count provided by GM, if every worker displaced or soon to be displaced volunteers for or accepts a new job – and those eligible to retire do so – that would potentially leave up to 500 GM workers jobless, far fewer than the thousands decried by the UAW [United Auto Workers union] and Trump.”

No one should underestimate the economic and other difficulties of relocation – especially from an economically struggling area like northeastern Ohio, where homes on the market don’t exactly command primo relative prices. And GM’s claims should be closely monitored going forward. But the Politico article, and all the coverage of Lordstown, should have mentioned that, based on what’s been promised, most of the released employees won’t be left on the streets (figuratively speaking).

By contrast, the Politico reporters unquestionably swallowed the claims by GM as well as Ford about the Trump administration’s metals tariffs crippling the auto companies’ prospects. Had they asked the obvious question about how the higher metals prices compared with the auto-makers’ overall costs, they’d have discovered that the tariffs barely moved the needle on overall figures – and that the companies’ could easily have found (and still can find) other economizing options to offset them.

Nor did the authors ask the equally obvious questions about overall trends in Lordstown-area and Ohio automotive and manufacturing employment. A five-minute dive into Bureau of Labor Statistics (BLS) data would have found that, during President Trump’s first 23 data months in office, the state’s manufacturers have added more jobs (20,400) than during the final three years (36 months) of former President Obama’s administration (19,700). The Trump-era gains are especially impressive since they’ve come later in the business cycle, when expansions typically lose momentum. (These time periods are chosen since they’re the stretches of each administration closest to each other during the same business cycle.)

In addition, although the latest figures only go up to September, 2018, the two Ohio counties in which Lordstown and nearby Youngstown (another victim of the GM decision) – Trumbull and Mahoning, respectively), have fared relatively well during the Trump years as well.

Specifically, during the first 19 data months under Trump, Trumbull County lost 569 manufacturing jobs. (BLS doesn’t track automotive employment at the county level.) During the final 19 months of the Obama administration, manufacturing payrolls fell by 1,150. For Mahoning, the comparable numbers are: Trump, up 294, Obama, down 468. Those are hardly gangbuster results during the Trump years. But failure?

In automotive specifically, from the state-level perspective. President Trump’s impact looks more mixed – but hardly failed, either. During his first 23 data months in office, Ohio vehicle makers added only 800 jobs. But during Mr. Obama’s final 23 months in office, they shed 1,300. In parts, the “Obama effect” looks better – Ohio-based facilities increased their payrolls by 3,600 during his last 23 months, whereas they boosted employment by only 800 under the Trump administration so far.

Interesting, a similar mixed picture emerges on a nation-wide basis. During Mr. Obama’s last 23 data months in office, U.S. auto and light truck producers increased employment by 21,400, versus a 23,400 improvement during the first 23 Trump months. But the Obama numbers for auto parts are much better – a gain of 34,900 during his last 23 months versus an 11,900 rise for the first 23 Trump months.

At the same time, are the lagging overall Trump national numbers due entirely or even mainly to his allegedly failed trade policies? Or to the topping out of American light vehicle sales that began in the fall of 2015? The Politico authors never give readers a chance to decide.

In fact, the changing automotive cycle surely accounts for much and maybe all of the declining rate of auto industry investment during the Trump years so far, especially compared with the big numbers racked up during the Obama years. Most of that spending of course came much earlier in the auto and broader economic cycle, when the sector and the rest of the nation were rebounding (with decisive federal aid) from a near-death economic experience.

The Politico article also repeats the canard that “International trade makes it difficult to distinguish between what’s truly American and what’s truly foreign.” Actually, it’s not difficult at all. U.S. Transportation Department data annually presents the U.S./Canadian and foreign content figures for every auto and light truck model sold in America. As reported by a recent analysis of the figures:

“Detroit has the bulk of cars with high domestic content. GM, Ford and Fiat Chrysler Automobiles build 37 of the 57 U.S.-assembled cars with 60 percent or higher domestic content. Foreign-based automakers are responsible for dozens of imported cars with zero percent domestic content, according to the National Highway Traffic Safety Administration [NHTSA]. Detroit automakers have just two cars below 5 percent….”

Finally, the authors express puzzlement that despite “the threat of auto tariffs….the foreign automakers who would be targeted by the tariffs are bolstering bolstering manufacturing in the U.S. with investments in auto plants across the Midwest and South.” To which anyone not infected with Trump Derangement Syndrome would respond, “Exactly.”

(What’s Left of) Our Economy: Why the Lousy February Jobs Numbers Don’t Vindicate Tariff Alarmism

Tags

aluminum, China, Jobs, Labor Department, manufacturing, metals, metals-using industries, steel, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

The stunningly poor February overall and manufacturing jobs figures released by the Labor Department today surely caused rejoicing in the ranks of America’s trade alarmists. Here, finally, was evidence that President Trump’s tariff-centric policies are backfiring on the U.S. economy and especially its manufacturing sector.

Actually, however, the new employment data show that the alarmists will need to wait at least another month for the statistics even remotely to justify their claims and warnings. For however disappointing the 20,000 net monthly increase in total American job creation and the 4,000 improvement in manufacturing payrolls, the internals provide no reason to assign significant – or any – blame to trade.

The first clue of course was the steep sequential drop in non-farm employment (the Labor Department’s U.S. jobs universe) generally speaking recorded in this first survey of February trends. After all, if the trade wars were mainly behind February’s results, why was the monthly drop-off in job creation nearly three times steeper in the overall economy (most of which has little global trade exposure) than in manufacturing (which has lots of it)?

At least as important, although the President began imposing tariffs on imports of steel and aluminum eleven months ago, manufacturing sectors heavily reliant on these metals keep outperforming the rest of manufacturing in employment terms. And similar trends are becoming apparent for the enormous number of industries that use various inputs from China that have been tariff-ed starting in July.

Below are the net hiring increases since April (the first full month of the new metals trade regime) for the American private sector as a whole, for all of manufacturing, and for the main heavy metal-using industries.

                                                   Old thru Jan.         New thru Jan.         Thru Feb.

entire private sector:                +1.36 percent         +1.62 percent      +1.64 percent

overall manufacturing:            +1.39 percent         +1.55 percent      +1.58 percent

durable goods:                         +1.72 percent         +1.97 percent      +2.04 percent

fabricated metals products:     +1.57 percent         +1.80 percent      +1.60 percent

non-electrical machinery:       +2.57 percent         +2.54 percent      +2.82 percent

automotive vehicles & parts:  +1.15 percent         +0.97 percent      +1.11 percent

household appliances:             not available           -2.52 percent        not available

aerospace products & parts:    not available          +5.93 percent        not available

The only metals-using sector that seems to have encountered employment trouble in February was the fabricated metals industry. And even in this segment of manufacturing, hiring since April has been slightly stronger than in manufacturing overall.

Automotive job creation has been weak as well, but actually enjoyed a relatively good February, relatively speaking. And although the appliance employment picture remains very weak, it needs to be remembered that it’s been laboring under an additional set of product-specific tariffs since late January.

Yet the entire durable goods sector continued to punch above its job creation weight in February, including the crucial machinery and (at least through January), aerospace industries. Why haven’t higher metals prices darkened their employment picture.

As for the impact of the China tariffs, that’s harder to judge for four reasons. First, an enormous number of manufacturing industries use Chinese inputs – and to greatly varying extents. Second, these levies only began in July, and then on a relatively small scale. Third, the list of products tariff-ed beginning in July matches up imperfectly at best with the sectoral classification scheme used by the Labor Department to track manufacturing employment. And fourth, most of the affected products are found in relatively narrow categories of manufactures, where the jobs data is one month behind.

So the following table shows the post-July employment performance of some major manufacturing sectors that use the Chinese parts, components, and materials tariff-ed that month. But it should be viewed with caution. Nonetheless, they show a heavy burden of proof on the tariff alarmists to identify any damage resulting from the China levies – especially since most of the July-January gains have been so strong.

                                                Old July-Jan.       New July-Jan.          July-Feb.

overall manufacturing           +0.91 percent      +0.98 percent        +1.00 percent

aircraft engines/engine parts: not available       +0.70 percent         not available

industrial heating equipment: not available      +3.02 percent         not available

oil/gas drilling parts:              not available      +3.93 percent         not available

farm machinery/equipment:   not available     +2.67 percent         not available

ball bearings:                         not available     +2.32 percent          not available

“Even a stopped clock is right twice a day” is a popular expression explaining why individual accurate statements or correct predictions shouldn’t automatically signal an information source’s broader credibility. The February jobs figures indicate once again that the trade alarmists haven’t even met this rock-bottom bar.

Glad I Didn’t Say That! A Mixed Media Message on U.S. Farm Labor Shortages

Tags

agriculture, automation, farm workers, Glad I Didn't Say That!, illegal aliens, Immigration, Jobs, labor shortages, Mainstream Media, robots

“With fewer undocumented workers to hire, U.S. farmers are fueling a surge in the number of legal guest workers”

– The Washington Post, February 21, 2019

 

“One February afternoon, they work about an acre apart on a farm the size of 454 football fields: dozens of pickers collecting produce the way people have for centuries — and a robot that engineers say could replace most of them as soon as next year.”

– The Washington Post, February 17, 2019

 

(Sources: “With fewer undocumented workers to hire, U.S. farmers are fueling a surve in the number of legal guest workers,” by Kevin Sieff and Annie Gowen, The Washington Post, February 21, 2019, https://www.washingtonpost.com/world/the_americas/with-fewer-undocumented-workers-to-hire-us-farmers-are-fueling-a-surge-in-the-number-of-legal-guest-workers/2019/02/21/2b066876-1e5f-11e9-a759-2b8541bbbe20_story.html?utm_term=.225cc2cc55fe; and “Farmworker vs Robot,” by Danielle Paquette, The Washington Post, February 17, 2019, https://www.washingtonpost.com/news/national/wp/2019/02/17/feature/inside-the-race-to-replace-farmworkers-with-robots/?utm_term=.24166019b5dc)

(What’s Left of) Our Economy: Private Sector U.S. Jobs Increasingly Really Deserve the Name

Tags

Barack Obama, Employment, healthcare, Jobs, private sector jobs, recession, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Although unemployment in America has hovered near multi-decade lows for most of the last year, concerns about job quality rightly persist – largely because wage gains have only recently showed signs of recovering to historically normal levels for a recovery. But the latest official data from the Labor Department demonstrate that the makeup of the country’s employment picture and how it’s changed make clear continued improvement in one key measure: Growing private sector employment increasingly reflects gains in what I’ve called the real private sector, as opposed to the subsidized private sector.

Also apparent from the employment figures: The resurgence of the real private sector in relative terms as well as in absolute terms has been a Trump era phenomenon.

As known by RealityChek regulars, this trend is encouraging because the subsidized private sector consists of parts of the economy that are often (and even officially) viewed as parts of the private sector, but whose health depends largely on government largesse. That is, its total employment and its employment gains would be much smaller without huge government payouts – i.e., politicians’ decisions. The healthcare services industry is the main example.

By contrast, the real private sector consists of parts of the economy whose health flows largely from free market forces. So without getting involved in the debate over whether the United States supports too many subsidized private sector jobs or not, it should be clear that they have little to do with the state and health of the economy as a whole – unlike real private sector jobs.

According to the Labor Department’s Bureau of Labor Statistics, from 2013 through 2016, the subsidized private sector’s share of total annual employment increases more than doubled: from 11.34 percent to 25.99 percent. And its share of annual total private sector jobs gains (that is, employment increases by the private sector as conventionally defined), soared from 11.02 percent to 28.59 percent.

During 2017 and 2018 (and the data for late 2018 is still preliminary), the subsidized private sector’s share of total annual U.S. jobs gains dropped to 21.04 percent and then to 19.90 percent. And its share of the growth of total private sector jobs fell to 21.91 percent and then to 20.74 percent.

Another way to look at the Obama-era growth of subsidized private sector employment is to examine its growth as a share of the growth of real private sector jobs. In 2013, this figure stood at 12.38 percent. In 2016? Just over 40 percent. In other words, in the last year of Barack Obama’s presidency, some four in ten of the net new jobs created in the private sector came in the subsidized private sector – meaning that they were heavily dependent on government largesse.

In 2017 and 2018, subsidized private sector jobs growth as a share of total private sector jobs growth sank all the way to 28.05 percent, and then to 26.16 percent.

Looking at the economy from a static standpoint – i.e., through snapshots taken at crucial dates – illustrates these trends, too, although less dramatically. After all, even major relative changes can take many years to show up as major absolute changes in a supertanker as big as the U.S. economy.

At the outset of the last recession the subsidized private sector represented 13.67 percent of all U.S. jobs and the real private sector’s share was 70.16 percent. And the subsidized private sector’s share of the total (conventionally defined) private sector was 19.49 percent.

By the time the recovery began, in mid-2009, these figures stood at 14.97 percent and 67.80 percent – showing that during an economic downturn that decimated the overall American jobs market, subsidized private sector employment rose not only in relative terms but in absolute terms (from 18.92 million to 19.61 million. Meanwhile, the subsidized private sector’s share of the total private sector employment had risen to 22.07 percent.

By January, 2017 – the final month of the Obama administration and eight and a half years into the recovery – the subsidized private sector comprised 15.75 percent of all American jobs, and the real private sector was back up to 68.94 percent. Subsidized private sector employment had grown to 22.84 percent of total private sector jobs.

By December, 2018 (results that are still preliminary) the subsidized private sector’s share of all American employment had kept increasing – to 15.91 percent. And the real private sector’s share grew modestly, too – to 69.11 percent, as did the subsidized private sector’s share of the total private sector (to 23.02 percent).

Nevertheless, this examination of the changing dimensions of subsidized private sector employment also reveals that the national jobs market still hasn’t returned to pre-recession normality. In particular, even though the current recovery is nearing it’s tenth anniversary, that real private sector share of total employment (69.11 percent) is still below where it stood at the downturn’s onset (70.16 percent).

Making News: A Border Crisis Interview, with Piscopo in the Morning…& More!

Tags

AM 970 The Answer, border security, caravans, Henry George School of Social Science, Immigration, IndustryToday.com, Jobs, Joe Piscopo, Jorge Castaneda, Making News, manufacturing, Mexico, New York Knicks, Smart Talk, State of the Union, wages

What with the State of the Union address and the ongoing Border Wall/government shutdown showdown and the Virginia political scandals, it’s been a more amazing last week or so than usual to be administering RealityCheks to the national scene.  As a result, I’ve fallen behind on tracking media appearances, so in this posting I’ll be catching up.

I’m especially pleased to report that an interview I was recently privileged to conduct with former Mexican Foreign Minister Jorge Castaneda has just gone on-line at the Henry George School of Social Sciences website.  As some of you may know, I’m a Trustee of the School, and the session was the latest in its “Smart Talk” sessions with some of the world’s leading economic thinkers.

The interview was conducted in late November, but trust me when I say that clicking on this link will bring you to a great conversation about numerous issues still in the headlines – especially concerning the continuing immigration crisis along the U.S.-Mexico border.

Last Friday, I appeared on Joe Piscopo’s morning drive-time radio talk show on New York City’s AM 970 The Answer to preview the State of the Union and discuss the state of the economy.  Special bonus:  We also briefly reviewed the big New York Knicks trade of injured star Kristaps Porzingis that was announced the day before!  Here’s the link.  My segment begins just past the 35-minute mark.

Finally, on January 22, IndustryToday.com published an detailed analysis of mine on which American manufacturing industries fared the best and worst last year in terms of job and wage growth.  Click here to read.

And keep checking in with RealityChek for news of upcoming media appearances and other development.

(What’s Left of) Our Economy: Inside that Big New Manufacturing Jobs Revision

Tags

inflation-adjusted wages, Jobs, manufacturing, non-farm payrolls, private sector, wages, {What's Left of) Our Economy

Last Friday’s U.S. jobs report (for January) contained a special bonus: On top of the usual monthly numbers, and the insights they yielded on the impact of Trump tariffs on domestic manufacturing (described in this post), the statistics incorporated an annual revision that goes back several years – and they change the picture of industry that’s been available to date.

The big takeaways: U.S.-based manufacturing’s job creation performance has been slightly weaker lately than initially reported. But its wage performance has been more mixed – better in absolute terms but worse compared with the private sector overall. (The focus in this post when discussing relative performance is mainly on the private sector, because its economic performance stems largely from market forces. For the overall non-farm employment figure – the definition of the American employment universe used by the Labor Department, which reports these data, includes government jobs. Their results are driven largely by politicians’ decisions.)

First, let’s examine those latest monthly jobs numbers. They show that manufacturing hiring kicked off the new year on a soft note. Only 13,000 net new jobs were added – the worst such figure since August’s 8,000. And revisions were negative – with December’s initially reported 32,000 growth in payrolls downgraded all the way to 20,000.

As a result, 2018 still stands as manufacturing’s best job-creation year since 1997 – when employment grew by 304,000 on net. But the annual increase of 284,000 now stands at 264,000. Also noteworthy: The 2018 jobs gain far exceeded 2017’s 190,000 (which itself was first reported as 209,000.)

The downward revisions also decreased the improvement manufacturing had shown as a share of total non-farm employment. According to the previous employment release, manufacturing’s share of this U.S. jobs total came in just short of 8.56 percent – the best such figure since July, 2016’s 8.56 percent.

Today’s report lowered that December number to 8.52 percent – and kept July, 2016 at 8.56 percent. January’s share is 8.52 percent as well. The revised data show that manufacturing payrolls during the Trump administration have still been rising faster than total non-farm payrolls, since the figure for the first full Trump month stayed at 8.49 percent. But the out-performance has been more modest than previously judged.

So has the total increase in the number of manufacturing jobs since this figure bottomed in early 2010 – shortly after the official mid-2009 beginning of the current economic recovery. Before the latest revisions, Labor Department data showed that, through December, domestic industry had regained 1.389 million (60.58 percent) of the 2.293 million net jobs it had lost during the recession and its aftermath. Now, this figure stands at 1.356 million (59.14 percent of the lost jobs), and in January, it rose slightly to 1.369 million (59.70 percent).

Worse, the revised results show that manufacturing has been just as much of an employment laggard during this recovery than previously thought. Pre-revision, the Labor Department reported that overall private sector employment fell by 8.785 million from the December, 2007 onset of the last recession through its own February, 2010 bottom. These figures also pegged private sector jobs gains as 20.608 million from that low point through last December.

The revised private sector figures are 8.794 million jobs lost during the recession and its immediate aftermath, and 20.533 million regained through December. The January results pushed the jobs rebound figure up to 20.829 million.

On the pay front, the revisions show that manufacturing wages during the current recovery have actually risen slightly faster than previously reported, but that the gap with overall private sector wages actually widened.

First, the new monthly numbers. Pre-inflation hourly pay in manufacturing sank by 0.44 percent sequentially in January – the worst such performance since May, 2012’s 0.62 percent monthly drop. This decline greatly overshadowed the upward revision in December’s current dollar manufacturing wage improvement from 0.26 percent to 0.33 percent.

The overall private sector didn’t enjoy a great wage month in January, either: Pre-inflation hourly pay increased sequentially by only 0.11 percent – its worst such performance since October, 2017’s 0.15 percent decline. In addition, December’s monthly gain was revised down from 0.40 percent to 0.36 percent. But these latest results still beat manufacturing’s.

The January drop-off depressed manufacturing’s year-on-year pre-inflation wage gains down to 1.38 percent – the weakest such advance since February, 2015’s 1.25 percent. But the upward December monthly revisions did push that month’s annual increase up from 1.98 percent to 2.02 percent.

By contrast, the revisions increased December’s yearly current dollar private sector wage gain from 3.15 percent to 3.34 percent – the best since April, 2009’s 3.42 percent. January’s annual increase was 3.18 percent – also much better than manufacturing’s.

The new revisions improve manufacturing’s wage performance throughout the recovery, but not by much. Previously, such hourly pay was reported to have risen only by 18.60 percent from the expansion’s June, 2009 onset through December. Now that increase is judged to have been 18.72 percent, but the January monthly drop dragged down the new cumulative figure to 18.20 percent.

But from mid-2009 through December, pre-inflation hourly wages for the overall private sector also rose faster than previously thought – by 24.35 percent rather than 24.21 percent. As a result, the gap between the two widened, with private sector wages having increased by 30.07 percent faster than manufacturing wages during this period, not the 29.68 percent originally reported.

And the January numbers broaden the gap still further – to 34.50 percent.

The January inflation-adjusted wage figures won’t be out till later this month, but they don’t favor manufacturing, either, especially over the longer run.

In real terms, December’s monthly manufacturing wage increase has been upgraded from 0.28 percent to 0.37 percent, but the November results are literally a mirror image. They’ve been revised down from a 0.37 percent improvement to 0.28 percent.

The overall private sector’s after-inflation December wage gains have been revised down, too – from 0.46 percent to 0.37 percent. It’s 0.19 percent November advance was left unchanged.

On an annual basis, the new revisions still leave manufacturing’s December real wage gains at zero. At least that represented an improvement over the previous annual decrease of 0.28 percent. The overall private sector’s performance was upgraded from 1.12 percent to 1.30 percent – its best such results since 2015’s 1.82 percent.

The story is scarcely better for manufacturing when extended to the entire recovery. As with current-dollar wages, constant-dollar wage growth during this period was revised up – from 0.75 percent to 0.84 percent. The real private sector wage increase was upgraded, too – from 5.43 percent to 5.63 percent. So the real wage performance gap widened actually decreased – from 7.24 to 1 to 6.70 to 1.

Nonetheless, manufacturing remains in a real wage recession.  After-inflation hourly pay is down 0.09 percent on net since February, 2017. 

 

(What’s Left of) Our Economy: It’s Still the Same Old Story – No Tariff Damage to U.S. Manufacturing’s in Sight

Tags

China tariffs, Jobs, Labor Department, Mainstream Media, manufacturing, metals tariffs, metals-using industries, tariffs, Trade, Trump, {What's Left of) Our Economy

At this stage, despite what you read in the Mainstream Media, it would be genuinely newsy to report that official U.S. government data were indeed showing any significant damage to domestic manufacturing from the President Trump’s tariffs. Figures showing no significant damage at all from either the levies on steel and aluminum, or on products from China? They’ve become old hat, and this morning’s Labor Department report on the job market for January was no exception.

As of this January data, we now have ten months’ worth of statistics shedding lots of light on whether the metals tariffs have harmed the country’s metals-using industries. As you’ll recall, a main argument against the metals tariffs held that because the metals-using sectors were much larger, even if the levies helped steel and aluminum makers, they’d become an exercise in cutting one’s nose off to spite one’s face. For the number of workers and factories hurt by higher costs for a key material would far outnumber those helped by more expensive steel and aluminum.

Nonetheless, the January jobs report shows once again that nothing of the kind is happening. Indeed, as the table below makes clear, most of the country’s main metals-using manufacturing industries keep outperforming the rest of manufacturing. And some are creating jobs at a faster pace than the private sector overall.

And the laggards? Automotive is unmistakably gaining momentum, and household appliances are still experiencing the effects not only of metals tariffs, but of narrower tariffs on household laundry machines, and of a slumping housing sector.

                                                         Old thru Dec.    New thru Dec.     Thru Jan.

entire private sector:                       +1.37 percent    +1.36 percent    +1.60 percent

overall manufacturing:                   +1.45 percent    +1.39 percent    +1.49 percent

durable goods:                                +1.67 percent    +1.72 percent   +1.97 percent

fabricated metals products:            +1.75 percent    +1.57 percent   +1.78 percent

non-electrical machinery:              +2.20 percent     +2.33 percent   +2.57 percent

automotive vehicles & parts:         +0.77 percent     +1.07 percent   +1.15 percent

household appliances:                     not available      -2.21 percent    not available

aerospace products & parts:            not available     +5.51 percent     not available

But maybe the story is different for the China tariffs? Here the picture is fuzzier, both because the first tranche has only been in place since early July, and because the jobs data doesn’t match up that well with the categories of products tariff-ed in that first group (except for farm machinery and equipment). In addition, most of these categories are too narrow to show up in the Labor Department interactive data bases without a one-month lag. But the numbers below, which represent major manufacturing sectors that contain the tariff-ed goods, don’t show much tariff-related damage on the employment front since (and including) July.

As has been the case during this period, some industries have outperformed; others have under-performed. The resulting takeaway? Lots of factors other than China tariffs are affecting payrolls in these manufacturing segments.

                                                             July-December                     July-January

overall manufacturing                         +0.80 percent                      +0.91 percent

aircraft engines and engine parts:       +0.58 percent                       not available

industrial heating equipment:             +1.12 percent                       not available

oil and gas drilling platform parts:     +2.71 percent                       not available

farm machinery and equipment:        +0.20 percent                       not available

ball bearings:                                     +1.05 percent                       not available

But although the coverage of the Trump tariffs has stubbornly remained an exercise in gloom-mongering in the face of increasingly overwhelming evidence (here’s just one recent leading example), one reason for hope can be identified. Maybe the gulf between the trade reporting and the trade facts simply results from inherent argumentativeness and contrarianism – the kind that’s often seen in teenagers. If I’m right, the minute the tariff data becomes bad, the Mainstream Media will start serving up anecdotes about plucky exceptions to the rule.

 

Following Up: More on Those Great New U.S. Manufacturing Jobs Figures

Tags

Following Up, inflation-adjusted wages, Jobs, Labor Department, manufacturing, real wages, Trump, wages

Friday’s post focused on what the new U.S. jobs report that morning (containing December data) revealed about the Trump tariffs’ impact so far on domestic American manufacturing. (Overwhelmingly, they’ve done no harm.) But it’s also worth noting other industry-related highlights of this Labor Department release – and highlights they were.

First, the headline figure (32,000 net new manufacturing jobs created on-month in December) was the best such performance since last December’s 39,000. And the total revisions for October and November together added 3,000 jobs to the results for those two months. (The November and December figures are still preliminary. Further, starting next month, the Labor Department will start publishing revisions of the key data back to January 2014 – which will further change yesterday’s findings.)

Partly as a result of the last few months’ numbers, 2018 stands preliminarily as the best year for U.S. manufacturing job creation (284,000) since 1997 (304,000). The previous December-to-December manufacturing employment gain was 209,000.

Also, manufacturing jobs as a share of total non-farm jobs (the Labor Department’s definition of the total U.S. employment universe) rose to just under 8.55 percent – their highest level since July, 2016 (8.56 percent). At the start of the Trump administration (February, 2017 was its first full month in office), this figure stood at 8.49 percent. In other words, manufacturing payroll growth has been faster than overall payroll growth under President Trump.

Even so, manufacturing’s prior relative employment creation has been so weak that the sector still remains a laggard on this front for the recovery era as a whole.

Since bottoming out in February and March of 2010, manufacturing has regained 1.389 million (60.58 percent) of the 2.293 million jobs it had lost during the Great Recession and its aftermath. Overall private sector employment sank by 8.785 million during the downturn, but since then has regained 20.608 million jobs.

Manufacturing keeps trailing the overall private sector on the pay front, too. In December, pre-inflation manufacturing wages rose by 0.26 percent – considerably slower than the overall private sector’s 0.40 percent.

Year-on-year, current-dollar manufacturing wages are up by 1.98 percent – their best such performance since September, 2017 (2.18 percent). Between the previous Decembers, manufacturing hourly pay before inflation has advanced by 1.75 percent. But overall current-dollar private sector wages improved by 3.15 percent year-on-year in December.

In fact, since the current recovery began, in mid-2009, pre-inflation manufacturing wages have improved by only 18.60 percent. Overall private sector wages are 24.12 percent higher.

Moreover, the gap has been widening. The above figures show that, as of the latest data, private sector wages had grown 29.68 percent faster than manufacturing wages. As of the previous December, the difference was 24.80 percent.

Manufacturing’s pay performance looks even worse after adjusting for inflation. The latest data are from November – when manufacturing’s sequential increase (0.37 percent) actually topped that of the private sector (0.19 percent). (December’s won’t be published until the middle of this month.) But the November figures also show that, whereas private sector wages inched up year-on-year by 0.84 percent, manufacturing paychecks actually dipped by 0.27 percent.

Indeed, real manufacturing wages are cumulatively down by that amount since February, 2016 – meaning that, technically, they remain mired in a long recession (two or more date quarters of net deterioration).

Moreover, during the current economic recovery, inflation-adjusted manufacturing wages have risen less than a tenth as fast (0.47 percent) as private sector wages (4.95 percent). And the gap has widened significantly over the past year, when it stood at a 0.75 percent real wage increase for manufacturing versus a 4.07 percent rise for the private sector overall.