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

Tags

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

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

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

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

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

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

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

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

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

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

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

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

RealityChek has been following with special interest narrower sectors that have attracted unusual attention since the CCP Virus arrived, and the new industrial production revision shows that constant dollar output climbed by more than previously estimated in aircraft and parts (24.89 percent versus 19.08 percent) and medical equipment and supplies (14.48 percent versus 11.51 percent), and by less in semiconductors and other electronic components (22.48 percent versus 23.82 percent) and in pharmaceuticals and medicine (12.79 percent versus 14.78 percent). These Fed revisions are hardly a reason to push the panic button about U.S. manufacturing. But because domestic industry’s fortunes during the pandemic era have been so closely tied to blazing hot demand for its products, it’s hardly great news to learn that with signs abounding of a slumping American economy, manufacturing is approaching this apparent downturn in less robust shape than thought as late as yesterday.   

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

Tags

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

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

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

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

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

May’s biggest manufacturing growth winners were:

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

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

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

May’s biggest manufacturing production losers were:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tags

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tags

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

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

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

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

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

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

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

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

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

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

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

The biggest April manufacturing growth losers were:

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: U.S. Manufacturing Job Creation Gains More Momentum

Tags

aircraft, aircraft engines, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, Employment, Federal Reserve, furniture, inflation, Jobs, machinery, manufacturing, miscellaneous durable goods, non-farm payrolls, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, recession, semiconductor shortage, semiconductors, supply chains, transportation equipment, Ukraine-Russia war, vaccines, {What's Left of) Our Economy

Today’s official April U.S. jobs report featured such a strong showing by U.S.-based manufacturers that, by one measure, they reclaimed title of America’s best job-creating sector during the CCP Virus era (and its aftermath?).

Domestic industry boosted its payrolls sequentially last month by 55,000 workers, its best such performance since July’s 62,000 gain. In addition, revisions were excellent. March’s initially reported 38,000 increase is now pegged at 43,000, and February’s upgraded 38,000 rise is now judged to have been 50,000.

As a result, manufacturing’s share of U.S. non-farm employment (the federal government’s definition of the American jobs universe), has improved from 8.38 percent in February, 2020 – the last full data month before the virus began roiling the national economy – to 8.41 percent as of last month.

And during this period, manufacturing’s share of America’s private sector jobs is up from 9.83 percent to 9.86 percent.

Domestic industry has recovered a slightly smaller share of the jobs it lost during the sharp pandemic-induced downturn of spring, 2020 (95.89 percent) than the private sector (97.62 percent). But it also shed fewer jobs proportionately than the rest of the private sector during that terrible March and April. (For the record, because of a drag created by public sector hiring, the share of all non-farm jobs regaine d now stands at 94.59 percent.

In all, U.S.-based manufacturing employment is now down a mere 0.44 percent from immediate pre-pandemic-y February, 2020.

April’s manufacturing jobs winners were broad-based, but the biggest among the major sectors tracked by the Labor Department were:

>transportation equipment, whose 13,700 employment improvement was its best such performance since last October’s 28,200. (Last month I erroneously reported that the sector’s best recent monthly performance was last August’s 19,000.) Unfortunately, March’s initially reported employment advance of 10,800 was revised down to 8,800, and February’s previously estimated 19,800 jobs plunge (the worst monthly performance since April, 2021’s automotive shutdown-produced nosedive of 48,100) is now judged to be 19,900. Bottom line: This sector’s employment levels are still 3.38 percent below those of that last full pre-pandemic data month of February, 2020;

>machinery, where 7,400 jobs were added on month – an especially encouraging result since its products are so widely used throughout the rest of manufacturing and the entire economy. Even better, March’s initially reported 1,700 employment increase was revised all the way up to 6,700, and February’s perfomance – which had been revised down from an 8,300 rise to one of 6,600, recovered a bit to 6,700. As a result, machinery employment is off just 1.55 percent from its February, 2020 levels;

>automotive, which boosted headcounts by 6,400 – its best monthly gain since last October’s 34,200 plant reopening-driven burst. But March’s initially reported 6,400 jobs rise was downgraded to 3,600, and even though February’s major job losses were revised for the better again, they’re still pegged at 14,000 – the worst since the 49,100 employees shed during the shutdowns last April. These gyrations have left the combined vehicles and parts workforce 0.78 pecent smaller than in February, 2020;

>plastics and rubber products, which upped employmment by 5,700 sequentially in April, the best such performance since last August’s 7,800. Job-wise, these sectors are now 3.38 percent larger than in February, 2020.

The only significant jobs losers in April were furniture and related products and miscellaneous durable goods. The former lost 1,100 positions in April, but employment has still inched up by 0.57 percent since pre-pandemic-y February, 2020. The latter – which includes much of the protective gear needed to fight and contain the CCP Virus – reduced employment by 1,400 sequentially last month. But this decrease was the first since last August’s 600 loss, and followed a strong 3,100 jobs gain in March. This catch-all category’s employment is now 1.54 percent higher than in February, 2020.

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

The semiconductor and related devices sector is still struggling to meet demand, but hiring continued its slow-but-steady pandemic-era increase in March with job gains of 700. February’s initially reported 100 employment loss now stands at a 100 employment gain, and January’s numbers stayed at plus-300 – the best monthly performance since last October’s 1,000. This sector now employs 1.34 percent more workers than in February, 2020 – impressive since during the sharp spring, 2020 economic downturn, it kept adding jobs.

The latest employment results were mixed for surgical appliances and supplies makers – a category within the aforementioned miscellaneous durable goods sector, and one in which personal protective equipment and similar medical goods abound. In March, the industry added 1,100 workers, but revisions completely wiped out February’s initially reported 800 jobs gain. The January hiring increase stayed at a downwardly revised 1,300. Even so, since just beforet the pandemic’s arrival in force in the United States, these companies have increased payrolls by 4.07 percent.

The very big pharmaceuticals and medicines industry continued to be a moderate employment winner in March. It hired an additional 900 workers on month, and though its February improvement was downgraded (from 1,300 to 1,000), the number was solid. Moreover, January’s hugely upgraded 1,100 employment rise stayed intact. Since February, 2020, this sector’s headcount is up fully 9.23 percent.

March jobs gains were more subdued in the medicines subsector containing vaccines, but they still totaled 400. February’s initially reported employment increase of 800 is estimated at just 500 now, and January’s identical increase stayed the same. But over time, this industry’s jobs growth has been impressive – 23.15 percent since the last pre-pandemic data month of February, 2020.

Good job gains continued in March in the aviation cluster as well. Aircraft manufacturers (including still-troubled industry giant Boeing) rose by 1,100 sequentially – the best monthly gain since last June’s 4,400. February’s increase was upgraded from 500 to 600, but January’s sequential job loss stayed unrevised at 800. This net increase brought aircraft employment to within 11.08 percent of its February, 2020 level.

The aircraft engines and engine parts industry followed February’s unrevised 900 hiring increase by adding 500 more workers in March. January’s results, however, stayed at a slightly downgraded 900 loss. And these companies’ still employ 12.65 percent fewer workers than in February, 2020.

The deep jobs depression in the non-engine aircraft parts and equipment sector remained deep in March, but a little less so. Jobs gains for the month totaled 700, February’s initially reported 200 increase was unrevised, and January’s way upwardly revised job rise was downgraded only from 1,500 to 1,400. But since just before the pandemic, the non-engine aircraft parts and equipment sector has still shrunk by 15.74 percent.

Having recently navigated its way skillfully through a once-in-a-century pandemic, a virtual shutdown of the entire U.S. economy, continuing supply chain disruption, multi-decade high inflation, a major war in Europe (so far), former export champ Boeing’s woes, and sluggish-at-best growth in much of the foreign markets it relies on heavily, it’s tempting to say that U.S-based manufacturing will have finally met its match if the Federal Reserve’s inflation-fighting campaign dramatically slows growth domestically — or worse.  But since the pandemic began, the next time the manufacturing pessimists are right will be the first.       

 

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

Tags

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

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

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

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

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

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

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

March’s biggest manufacturing production winners were:

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

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

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

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

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

The biggest March manufacturing growth losers were:

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

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

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

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

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

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

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

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

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

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

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

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

Tags

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: Pre-Ukraine War, Anyway, U.S. Manufacturing Employment Regained Momentum

Tags

aircraft, aircraft engines, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, fabricated metals products, food products, Jobs, Labor Department, machinery, manufacturing, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, semiconductor shortage, semiconductors, surgical equipment, Ukraine-Russia war, vaccines, Wuhan virus, {What's Left of) Our Economy

As strong as U.S.-based manufacturing’s jobs performance looked on the surface in February, a closer look at the numbers released by the Labor Department this morning reveals that it was even better. The big reason? The 36,000 jobs that domestic industry gained last month came despite an 18,000 falloff in the automotive sector, which remained troubled not only by a global semiconductor shortage that will clearly end one of these days, but by a Canadian truckers’ protest that closed a bridge that’s a key transit route for Canadian-made auto parts needed by U.S. auto plants.

Moreover, revisions of previous months’ data were excellent. January’s initially judged 13,000 sequential employment pickup is now pegged at 16,000 and December’s advance was increased from an already upwardly revised 32,000 to 41,000.

Manufacturers didn’t quite keep pace with the rest of the country’s non-farm businesses in February (the Labor Department’s definition of the American employers’ universe). But given the torrid rate of recent economy-wide net job creation, that performance is hardly shabby, and it’s held its own – literally – during the entire sharp recovery achieved by the economy since its April, 2020 pandemic low point.

Before the CCP Virus began seriously distorting the economy’s behavior (in February, 2020), manufacturing jobs accounted for 8.38 percent of total non-farm payrolls. Including the new revisions, this figure had hit 8.40 percent in January of this year, but the February report showed a dip back to 8.38 percent.

The private sector story has been remarkably similar. Manufacturing employment represented 9.83 percent of that sector’s total jobs in February, 2020. Including the new revisions, the share had risen to 9.86 percent in January of this year, but as of Februay, it had retreated back to 9.83 percent.

Put differently, the entire non-farm economy has now replaced 19.886 million (90.43 percent) of the 21.991 million jobs lost during the terrible months of March and April, 2020. The private sector has replaced fully 20.092 million (fully 95.60 percent) of the 21.016 million positions it shed that spring. Manufacturing has replaced 1.184 million (86.93 percent) of its 1.362 million employment drop. But industry’s share of total jobs has stayed stable because its jobs depression in 2020 was less severe than the entire economy’s or the larger private sector’s

February’s biggest manufacturing jobs winners among the major sectors tracked by the Labor Department were highly concentrated – and all were among January’s stellar performers. They were:

>Fabricated metals products added 10,500 jobs on month – though January’s previously reported 5,000 advance is now estimated at 3,700, and the industry’s employment is still 2.95 percent below its immediate pre-pandemic February, 2020 levels (versus 1.39 percent for all of manufacturing);

>Machinery, whose 8,300 increase is especially encouraging, because its products are used so widely throughout the entire economy. But it’s still 2.92 percent shy of its job level in February, 2020;

>and food products, whose payrolls climbed by 7,200, and whose January results were revised up from a 5,200 improvement to 5,800. This progress brought pushed food manufacturing employment levels to 1.01 percent above those in February, 2020.

Meanwhile, automotive was February’s only significant jobs loser. Its 18,000 monthly employment nosedive was its worst such performance since last April’s 49,100 plunge (also due to semiconductor woes). At least its previously reported 4,900 January sequential jobs drop has been revised up to a 3,500 loss. But automotive employment is still 2.55 percent below immediate pre-pandemic levels.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and their January employment picture showed improvement overall.

Payrolls in the semiconductor and related devices segment increased by 200 on month in January, consistent with their very slow growth over the last five years – including during the pandemic era. Interestingly, its companies actually hired more on net during the very sharp CCP Virus-induced recession of 2020 (by 0.59 percent). Since February, 2020, its payrolls are up by 0.86 percent.

Employment increases stayed strong in January in the surgical appliances and supplies sector, which contains personal protective equipment and similar goods. This industry added 1,700 jobs on net, December’s monthly advance remained at 1,100, and November’s results stayed at an upgraded 3,100 increase. Consequently, the surgical appliances and supplies workforce is now 3.41 percent bigger than in pre-pandemicky February, 2020.

January pharmaceuticals and medicines employment dipped by 100 sequentially, however, and December’s 2,400 hiring jump was downgraded to just 900. November’s 700 jobs growth figure was unrevised. Even so, employment in this sector is 8.23 percent higher than just before the major initial CCP Virus hit to the economy.

As for the medicines subsector containing vaccines, the January figures and revisions seem to reveal some lost hiring steam. January monthly job growth was just 500 – the weakest since July’s 100 – and December’s excellent initially reported 2,400 rise is now judged to have been 2,000. November’s own 2,000 increase was unrevised, though, and job growth in this sector since February, 2020 is still a robust 22.23 percent.

January was a much better month than December for the aviation cluster – except oddly for aircaft. That sector, dominated by Boeing, saw employment shrink by 800 sequentially – is worst such performance since July’s 900 drop. Yet December’s originally estimated 600 employment decrease was upgraded to a decline of 400, and November’s results remained at a downgraded 500 job gain. After these latest fluctuations, aircraft industry employment fell to 11.78 percent less than in February, 2020.

Aircraft engines and engine parts makers, however, hired 1,000 workers on net in January – theit best performance since May, 2020’s 4,700, which came early during the strong late-spring recovery from the virus-induced recession. December’s initially reported jobs gain of 500 was revised up to 700, but November’s loss of 300 stayed unrevised. So although employment in these companies in January was 14.07 percent less than in February, 2020, it’s been closing the gap lately.

A notable employment rebound came in non-engine aircraft parts and equipment, where payrolls rose by 500 in January sinking by an unrevised 900 in December. But November’s results were downgraded from no change to a decrease of 100. And the sector payrolls are still down 17.30 percent since Februay, 2020.

I’m holding off on my usual prognosis for U.S. manufacturing employment because of the Russian invasion of Ukraine and its likely non-trivial economic fallout for the United States, and its probably greater repercussions for the rest of the world (to which domestic manufacturers sell a great deal). U.S.-based industry’s resilience throughout the pandemic has been extraodinary, but big power conflict could create a new and much more formidable set of challenges entirely.

(What’s Left of) Our Economy: No Winter of Discontent for U.S. Manufacturing Production

Tags

aerospace, aircraft, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, Federal Reserve, food products, inflation-adjusted output, machinery, manufacturing, medical equipment, Omicron variant, pharmaceuticals, real output, semiconductor shortage, semiconductors, supply chains, textiles, Wuhan virus, {What's Left of) Our Economy

Today’s Federal Reserve report on industrial production (for January) showed once again that if you’re looking for clickbait-y news about the economy, don’t look at U.S. manufacturing. The new figures showed not only that inflation-adjusted domestic manufacturing output grinded out another pretty good monthly gain (0.22 percent), but that whatever Omicron-related hit to industry’s growth was delivered in December was much smaller than first estimated (a decline of just -0.07 percent instead of -0.28 percent). And revisions overall for previous months were positive.

This performance left real manufacturing production 2.49 percent above the levels it hit in February. 2020 – the last full data month before the CCP Virus and its effects began impacting the economy (and everything else). December’s revision, moreover, pushed industry’s constant dollar expansion in 2021 up from 3.71 percent to 4.06 percent. That’s still the highest level since 2011’s 6.48 percent, but this strong growth also partly reflected one of those CCP Virus baseline effects – since between 2019 and 2020, domestic manufacturing shrank by 1.94 percent after inflation.

With January’s price-adjusted monthly production increases broad-based, the list of significant winners was longer than usual. For the major industry groupings tracked by the Fed, it includes (in descending order):

>the 1.43 percent monthly jump in textiles and products’ constant dollar production, which continued a strong recent run. All the same, these industries remain 1.61 percent smaller in real terms than in pre-pandemic-y February, 2020;

>an especially encouraging 1.37 percent real output rise in miscellaneous durable goods – a category that contains the personal protective equipment and respirators so crucial to the pandemic response. This advance did follow a big sequential production drop in these products in September, but at least it’s now judged to be 1.91 percent, rather than 2.68 percent. As a result, the miscellaneous durable goods industries put together are now 7.20 percent larger than in February, 2020;

>a 1.08 percent rise in inflation-adjusted machinery production that’s also encouraging because this sector’s products are used so widely throughout the rest of manufacturing and the non-manufacturing economy. This increase was the best since July’s 2.85 percent pop, and December’s good initially reported 0.68 percent improvement is now pegged at 0.87 percent;

>food products’ 0.90 percent after-inflation growth, which continues a long stretch of steady improvement. Inflation-adjusted output in this sector is only 1.25 percent higher than in February. 2020 – but it never suffered the huge downturn of spring 2020 that the rest of manufacturing and the economy experienced, So it’s never benefited much from any baseline effect;

>a 0.87 percent increase in the aerospace and miscellaneous transportation sector. January’s performance didn’t make up for the 0.97 percent December drop that was these industries’ worst since August’s 2.31 percent nosedive. But output in this cluster is still 13.08 percent greater after inflation than in February, 2020.

Manufacturing’s biggest January production losers included:

>petroleum and coal products, where a 1.47 percent monthly after-inflation slump was its second consecutive significant decrease (although December’s decrease is now judged to be 1.46 percent, not 1.58 percent). Price-adjusted production in this sector is now down by 5.92 percent since February, 2020, just before the pandemic rocked the economy;

>the 1.44 percent retreat registered by printing and related support activities. December’s initially reported 1.82 percent downturn is now estimated at just 1.02 percent, but real output in these sectors is still down 4.95 percent since Febuary, 2020;

>and a 0.89 percent constant dollar monthly production fall-off in automotive, which keeps struggling with the global semiconductor shortage. Both the December and November results received big upgrades (from a 1.29 percent decrease to a 0.38 percent slide in the former, and from a 1.69 percent drop to a 0.41 percent decline in the latter). But real output of vehicles and their parts is 6.25 percent short of their February, 2020 figure.

January’s generally good manufacturing output results carried over into industries that have been prominent in the news during the pandemic.

In aircraft and parts, price-adjusted monthly production rose 1.37 percent – the best rate since August’s 3.44 percent. Revisions were mixed, with December’s 0.38 percent decrease revised down to a 0.74 percent fall-off, and November’s once-upgraded 1.04 percent decrease pushed up again to a 0.69 percent dip. Even so, inflation-adjusted output in these industries is now 13.14 percent higher than in pre-pandemicky February, 2020, as opposed to the 10.71 percent growth calculable from last month’s Fed release.

Pharmaceuticals and medicines saw a January constant dollar output advance of 0.27 percent, and December’s previously reported 0.13 percent decrease was revised all the way up to a 0.81 percent gain. In real terms, therefore, these industries are 14.91 percent bigger than in February, 2020, as opposed to the 13.42 percent calculable last month.

In line with the pattern revealed in their miscellaneous durable goods super-sector, inflation-adjusted output of medical equipment and supplies rebounded in January, with its 2.50 percent increase representing the best monthly performance since July, 2020’s 10.78 percent burst. (In last month’s report, I mistakenly wrote that April, 2020 had seen the previous best.)

Moreover, the initially reported 2.75 percent after-inflation output swoon for December has been upwardly revised to a decrease of 1.97 percent. These developments were enough to leave real medical equipment and supplies production 4.43 percent above their levels of February, 2020. As of last month, they were 1.50 percent below.

Finally, let’s add semiconductors to the list of pandemic industries examined. In tandem with “other electronic components” (the joint category tracked by the Fed), their real output declined fractionally on month in January, which broke a streak of steady growth that resumed last June. Price-adjusted output in this group of industries is fully 20.66 percent above its immediate pre-pandemic level – and was never significantly depressed by the steep virus-induced recession of early spring, 2020.

Especially if the CCP Virus actually moves to the rear-view mirror in upcoming weeks and months (in the form of becoming endemic, not disappearing altogether), then the outlook seems bright for domestic manufacturing. Granted it’s benefited from gigantic stimulus from fiscal and monetary policy, and those spigots are being tightened and crimped. But historically speaking, they’re by no means tight or closed, and there’s no reason to believe that if smaller amounts of stimulus start slowing growth meaningfully, that Washington won’t open the floodgates again. In addition, consumers’ finances still seem healthy, and Americans’ determination to spend seems unchecked (which is in part why inflation has been so persistent).

A return to public health normality should further untangle supply chain snags, ease labor shortages, and open recovering foreign economies wider to U.S. exports (though U.S. imports can be expected to rise as well). Just as important, it will remove most of the unprecedented uncertainty manufacturers have faced for the last two years and counting.

And although inflation is still likely to be elevated (not least because of energy prices, which are a big major cost to many manufacturing industries), so far domestic industry has shown the ability to handle it. As they say on Wall Street, past performance is no guarantee of future returns. But it’s at the least impressive evidence for optimism.

(What’s Left of) Our Economy: An Omicron Bump in the US Manufacturing Recovery

Tags

aircraft, aircraft parts, automotive, CCP Virus, chemicals, coronavirus, COVID 19, facemasks, Federal Reserve, machinery, manufacturing, masks, medical devices, miscellaneous durable goods, monetary policy, non-metallic mineral products, Omicron variant, personal protective equipment, petroleum and coal products, pharmaceuticals, plastics and rubber products, PPE, printing, semiconductor shortage, semiconductors, stimulus, ventilators, wood products, Wuhan virus, {What's Left of) Our Economy

The big takeaway from today’s Federal Reserve after-inflation U.S. manufacturing data (for December) is that it may show domestic starting to suffer from the arrival into America of the super-infectious Omicron strain of the CCP Virus and the renewed economic curbs and behavioral changes it’s spurring, along with the spread of vaccine mandates in the ranks of U.S. businesses (of course, before yesterday’s Supreme Court decision striking down such policies for the private sector).

And especially discouraging: Just as Omicron began taking off, inflation-adjusted domestic output of medical equipment and supplies – including all the protective gear and treatment devices needed to fight the virus – fell sequentially at its fastest rate since the worst of the spring, 2020 pandemic-induced depression. Indeed, monthly real production in this category is now lower than in February, 2020 – the last full data month before the virus’ first variant began distorting the U.S. economy.

December’s 0.28 percent monthly decline in price-adjusted American manufacturing output represented industry’s first sequential retreat since September’s (hurricanes-affected) 0.52 percent drop. But the solid growth of recent months stayed largely unrevised.

The December results (which will remain preliminary for several more months) brought 2021’s yearly improvement in inflation-adjusted manufacturing output to 3.71 percent. That’s the best growth since 2011’s 6.48 percent, but as known by RealityChek regulars, it’s important to look at possible baseline effects nowadays. And this strong performance in part reflected the virus-fostered 1.94 percent fall-off in such growth in 2020.

The December downturn stemmed in part from problems (like the global semiconductor shortage) in the automotive sector, which shrank on month by 1.29 percent – following sequential expansion in November of a downwardly revised 1.69 percent. But even without the drag from vehicles and parts, domestic industry’s constant dollar production would still have been off by 0.22 percent.

Aside from automotive, the most important December real manufacturing growth loser by far was miscellaneous durable goods – a category that includes those pandemic-fighting essential medical devices and equipment industries. Its price-adjusted output slumped by 2.68 percent – the biggest downturn since April, 2020’s18.43 percent, during the worst of the CCP Virus’ first wave. Even so, measured by real production, the sector is 2.49 percent larger than in February, 2020, right before the pandemic’s initial major economic impact.

Other big December losers included:

>printing and related support activities, whose 1.82 percent slide was also the worst since April, 2020 (23.94 percent), and whose real output is now down by 5.14 percent since February, 2020;

>plastics and rubber products, whose 1.78 percent decrease was the worst since April, 2020 as well (19.12 percent), but that also followed seven months of strong gains. As a result, its real production is off just 1.08 percent since February, 2020; and

>petroleum and coal products, whose 1.58 percent fall-off was its worst since February’s seven percent, and whose after-inflation production is 4.49 percent lower than in February, 2020.

The biggest December winners were:

>non-metallic mineral products, which not only generated a 1.49 percent increase, but whose November inflation-adjusted output advance was revised all the way up from 1.25 percent to 3.03 percent. All the same, this sector’s constant-dollar production is still 1.32 percent lower than in February, 2020;

>wood products, whose 1.18 percent real increase in production was its best since March’s 4.05 percent, and which is now 3.03 percent bigger by this measure since February, 2020;

>the big chemicals sector, where real growth hit 0.69 percent following an upwardly revised 0.65 percent in November (from 0.50 percent), and which has grown by 7.93 percent in real terms since just before the pandemic; and – most encouragingly –

>machinery, a manufacturing bellwether because its products are so widely used throughout both industry and big non-manufacturing sectors like construction and agriculture – not to mention many services sectors. Its price-adjusted output increased by 0.68 percent sequentially in December – its best such result since July’s 2.85 percent, and revisions were unchanged on balance. Machinery production is now 5.20 percent higher than in February, 2020.

As for manufacturing industries that have been prominent in the news during the pandemic, they had a lousy December generally.

Aircraft and parts saw its monthly output down by 0.38 percent, and in stunning news, November’s initially reported 1.90 percent increase is now judged to be a 1.04 percent decrease. With October’s after-inflation production rise downgraded, too, aircraft and parts output is now just 10.71 percent higher than in February, 2020. As of last month’s Fed manufacturing data, this figure was a much higher 15.86 percent.

In pharmaceuticals and medicines, December’s 0.13 percent real output dip was the third straight monthly decline, and November and October revisions were fractionally negative on balance. Consequently, in price-adjusted production terms, these sectors were 13.42 percent larger than in February, 2020 – as opposd to the 13.54 percent calculable from last month’s industrial production report.

And as mentioned at the outset, the December results for medical equipment and supplies sector were awful – especially considering that for the next few months at least, Omicron’s metastasis will greatly increase demand for face masks, protective gowns, ventilators, and the like.

Real production of these products tumbled seqentially by 2.75 percent – the worst such performance since April, 2020’s 15.97 percent, during that first CCP Virus wave. Revisions for November and October were mildly positive, but whereas last month’s report revealed that inflation-adjusted production in these sectors was up since just before the first wave struck in force (though by a bare 0.65 percent), it’s now down by 1.50 percent. 

And let’s add another sector to the pandemic industries list – semiconductors and related devices. As implied by the category name, the numbers include more than the microchips that have been in such global short supply in recent months – and whose U.S. production revival has been such a high stated Washington, D.C. policy priority.

Still, it’s noteworthy that constant dollar output in this grouping rose a mere 0.12 percent on month in December, But it is up 16.86 percent since the pre-pandemicky February, 2020.

So far, betting against domestic manufacturing during the virus era has been a losing bet, But the headwinds for the near future at least look especially strong, topped of course by the spread of Omicron not only in the United States but in all the countries to which its manufacturers sell exports. Add to the list the apparent death of President Biden’s Build Back Better bill – which whatever its long-term economic wisdom and other effects, will certainly reduce government support for domestic economic activity – what seems like greater odds of more monetary policy tightening by the Federal Reserve sooner rather than later; and inflation that might be getting high enough to dampen U.S. consumer outlays.  

Tailwinds are by no means absent – like the beginning of spending made possible by the infrastructure bill, the still considerable amount of stimulus being provided by the Fed, and the easing of global supply chain knots. But even this last depends heavily on the medical, regulatory, and behavioral effects of Omicron in the United States and, perhaps even more important, in China, where the regime’s Zero Covid policy looks like a formula for ever broader lockdowns that will paralyze its ports and other infrastructure systems. 

Domestic manufacturers keep telling major surveys that they remain optimistic about the future.  (See here and here for the latest soundings.)  If anything’s certain about the circumstances they’re heading into, it’s that they’ll need every bit of this optimism to keep succeeding.