(What’s Left of) Our Economy: The Latest Data Remain Full of Normalization Puzzles

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Biden, CCP Virus, China, construction, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, inflation, inflation adjusted wages, labor shortages, leisure and hospitality, lockdowns, manufacturing, metals, non-oil goods trade deficit, non-supervisory workers, private sector, real wages, reopening, retail, services trade, shutdowns, tariffs, Trade, Trade Deficits, transportation, wage inflation, wages, Wuhan virus, {What's Left of) Our Economy

While I was away for a few days last week, two major U.S. government reports came out both giving off conflicting signals on on whether the economy has started to return to normal in critical ways as the CCP Virus subsides and reopening, along with consequent changes in consumer behavior, proceed.

The monthly trade figures (for April) showed a sequential decline, following a record surge, in America’s chronically huge gap between exports and much larger amounts of imports. Moreover the monthly drop took place as economic growth sped along at unusual rates after being shut down by government mandates and consumer caution. So maybe they’re an early sign that a return to immediate pre-virus conditions has begun?

Or is their most important message that these deficits, and especially the import levels, are still hovering near all-time highs in (the most widely followed) pre-inflation terms even though the economy as of the latest (first quarter) numbers is still a bit smaller in (the most widely followed) inflation-adjusted terms than during the last full pre-pandemic quarter (the fourth quarter of 2019)?

Indeed, the deficits are gargantuan even though President Biden has left former President Trump’s substantial tariffs on metals and goods from China practically untouched. 

The monthly inflation numbers (for May) are similarly confusing. They revealed that consumer prices (just one inflation measure published by Washington, but an important one) rose by 4.93 percent in seasonally adjusted terms. That was their fastest annual pace since September, 2008’s 4.95 percent. Surely, as widely claimed (including by the Federal Reserve, which wields so much influence over the economy, this upswing stems from a combination of bottlenecks resulting from (1) the sudden, widespread reopening; (2) the unusually low overall inflation numbers generated a year ago, when the economy was near the depths of its viruts- and shutdown-induced slump; and (3) the immense dose of stimulus injected into the economy by both elected politicians and the unelected Fed.

At the same time, the Fed has told us that its stimulus isn’t ending anytime soon, and although the Biden administration and Congressional Democrats are displaying some cold feet about approving more such levels of economic fuel (e.g., in the form of outlays on infrastructure, and a wide variety of income supports and enhanced unemployment benefits), it’s difficult to imagine that most or even much of this spending will actually be withdrawn even once a post-virus recovery is an indisputable reality.

But the biggest surprise of all: Despite the economy-wide inflation pressures, and by-now-routine claims that employers are dealing with nearly crippling labor shortages, wages overall adjusted for inflation keep going down.

Compounding the confusion over whatever conclusions can legitimately be drawn from these two reports: They cover two different months.

But let’s begin with the most important details from the April trade report. The ambiguity embodied in the data begins with the total deficit figure. The record March result was revised up from $74.45 billion to $75.03 billion but April’s $68.90 shortfall for goods and services combined, though the second worst monthly figure ever, was 8.17 percent smaller. That’s the biggest sequential drop since February, 2020 (8.39 percent), when China’s export-heavy economy was still largely closed because of the virus.

The same holds for the goods trade gap. The record March figure was revised up, too, from $91.56 billion to $92.86 billion. But April’s $86.68 billion result represented a 6.65 percent monthly decline, and this falloff was the biggest since the 8.39 percent plunge of January, 2019 – when American businesses were still adjusting both to Trump’s tariffs and anticipated tariffs.

Also still fueling the high U.S. deficits – a worsening of services trade balances. Here, U.S. trade has long been in surplus, but the surpluses keep shrinking because service sectors like travel are still suffering from the pandemic’s arrival and the consequent decimation of travel and othe transportation in particular. In fact, the April figure of $17.78 billion was the lowest since September, 2012’s $18.62 billion.

One key set of trade flows does, however, provide some evidence of Trump tariff effectiveness – U.S. non-oil goods trade, which encompasses those exports and imports whose magnitudes are most heavily influenced by trade policy (because, as known by RealityChek regulars, trade in oil is almost never the subject of any trade policy decisions and services trade liberalization remains at very early stages). In April, the monthly shortfall retreated 4.16 percent from its March record of $90.12 billion to $86.37 billion – which is only the fourth highest such total ever.

The import figures I focused on last month exhibit the same overall patterns: April saw big drops from record levels but the absolute numbers remain distressingly high. March’s initially reported record $274.48 billion in total imports was revised up considerably – to $277.69 billion. April’s total of $273.89 billion represented a 1.37 percent drop, but nonetheless was the second worst such figure on record.

March’s record monthly goods import figure was upgraded, too – from $234.44 billion to $236.52 billion. April’s total of $231.97 billion was a 1.92 percent drop but these purchases also still represented the second highest of alll time.

As for non-oil goods imports, the $215.33 billion April total was 1.98 percent down from an upwardly revised record $219.68 billion, and also the second biggest ever. Biggest drop since last April’s 10.91

Whether normalization is returning in manufacturing is more difficult to tell. Imports in March hit a record $207.59 billion, and did drop by 4.59 percent sequentially to $198.06 billion in April. That decrease, however, was a typical monthly move for manufacturing imports, and the April figure was still the third highest ever.

Incidentally, the April manufacturing deficit of $103.60 billion was 4.64 percent lower than March’s $108.66 billion. The March total was the second highest on record, but April’s figure was only the seventh all-time worst. The record, $110.20 billion, came last October, and it’s notable that the gap has narrowed on net despite the resilience shown during the pandemic period by manufacturing output.

More evidence of the Trump tariffs’ impact comes from the data on goods trade with China – whose products have attracted nearly all of these levies, and that cover hundreds of billions of dollars worth of products. The April figure of $37.59 billion was 6.56 percent lower than its March predecessor – a thoroughly unexceptional sequential decline and monthly level by historical standards. But the monthly dropoff was consideraby greater than the aforementioned 1.98 percent decrease for non-oil goods – the closest global proxy.

As a result of all these inconclusive developments, I’ll be awaiting the May trade report with even more interest than usual.

But despite all the uncertainties I mentioned at the start of this post, those May inflation figures have made me more confident than before in my previous contention that current price surges are anomalies by the extremely low inflation generated by the CCP Virus-battered economy of a year ago, and by the sudden reopening of so much of the economy following the long shutdowns and lockdowns. Even clearer, as I see it: Claims of significant, troubling wage inflation are especially weak.

After all, that 4.93 percent year-on-year May price increase followed a previous May-to-May rise that was just 0.22 percent. That was the feeblest such rise since September, 2015’s 0.13 percent. In addition, May’s month-to-month 0.64 price advance was smaller than April’s 0.77 percent. Two months do not a trend make, but these numbers certainly don’t point to raging inflation fires.

Nor do the wage data. Otherwise after-inflation total private sector wages wouldn’t be down more on-month in May (-0.18 percent) than in April (-0.09 percent). And the same couldn’t be said of constant dollar wages for non-supervisory workers (-0.20 percent in May versus flat in April).

Getting more granular, the price-adjusted wage trends are as bad or worse in construction; trade, transportation and utilities overall; retail trade; and education and health services.

The two big exceptions: the leisure and hospitality workforces that have been so decimated by the virus (and especially the non-supervisory group) and the transportation and warehousing sub-sector of the transportation and utilities industry category that contains a trucking sector unusually strained by the rapid reopening. In both cases, however, (and especially the leisure and hospitality industry), inflation-adjusted wages in absolute terms are well below the national private sector average. If anything, therefore, it seems like some wage inflation for these workers is long overdue.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: Strong Crosswinds Roil the New U.S. Manufacturing Jobs Figures

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aerospace, air travel, automotive, CCP Virus, chemicals, coronavirus, COVID 19, Employment, fabricated metals products, infrastructure, Jobs, machinery, manufacturing, miscellaneous durable goods, miscellaneous non-durable goods, non-farm jobs, pharmaceuticals, PPE, private sector, regulation, semiconductor shortage, semiconductors, stimulus package, taxes, vaccines, wood products, Wuhan virus, {What's Left of) Our Economy

It’s tough to imagine a U.S. official monthly jobs report giving off so many conflicting signals about the health of domestic manufacturing and its outlook than the one that came out this morning (for April).

On the one hand, the sector’s 18,000 jobs loss was its worst monthly performance since the identical January setback. On the other hand, the problem was heavily concentrated in the automotive sector, which has been forced to cut back production due to the ongoing global semiconductor shortage. On the other, other hand (!), this shortage is unlikely to ease for many months. On still another hand, the revisions were strong. And some key manufacturing industries continued a recent pattern of solid results. At the same time, even removing the automotive results would still leave the rest of domestic manufacturing’s April employment performance decidedly weak.

I could go on in this vein – and will below.

The decisive automotive/semiconductor effect on the April manufacturing figures becomes clear enough upon realizing that this sector’s 27,000 sequential employment loss was considerably greater than manufacturing’s total on-month job decline. Nonetheless, even had automotive held its employment line, the consequent 9,000 manufacturing job increase would have been unimpressive at very best.

And yet there are those revisions. March’s initially reported 53,000 monthly manufacturing payroll increases – the best such figure since last September’s 55,000 – are now pegged at 54,000. Even better, February’s initially downgraded (from 21,000 to 18,000) monthly employment increase has now been revised all the way up to 35,000.

As a result, domestic industry has now regained 63.83 percent (or 870,000) of the 1.363 million jobs it shed during the height of the CCP Virus pandemic in spring, 2020. It’s still behind the private sector overall (which has recovered 66.88 percent of its pandemic peak employment loss), but still ahead of the overall economy’s (called the non-farm sector by the Labor Department, which issues the monthly jobs reports) 63.26 percent.

The only major April manufacturing jobs loser other than automotive was the small wood products sector (7,200). The big fabricated metals products industry saw employment fall by 2,900 on month in April, but the drop followed a large March gain that’s been downwardly revised but still stands at a strong 10,400.

The machinery numbers were downright encouraging, and that matters because as I keep reminding, this subsector’s products are used not only throughout the rest of domestic manufacturing, but in other important parts of the economy like construction and agriculture. Its April employment boost of 3,700 followed March job creation that was upgraded strongly to 5,400.

In the big miscellaneous durable goods sector, a catchall category that includes everything from surgical equipment and supplies (like personal healthcare protection equipment – PPE – more on which later) to jewelry to gaskets and fasteners to musical instruments, payrolls jumped by 12,600 – their best monthly performance since its 15,300 advance last July.

And two other significant manufacturing employers –miscellaneous non-durable goods and the big chemicals sectors (whose output is also used all over the economy) – each generated enjoyed healthy payrolls increases of 4,300 in April.

Even the industries closely related to the fight against the CCP Virus, whose employment performance since the pandemic’s arrival generally have disappointed, showed some signs of job-creation life in April.

The overall pharmaceutical industry added 1,500 jobs on month in March (the latest available figures) and Februay’s improvement remains a strong 1,700. Since the last pre-pandemic month (February, 2020), this sector’s payrolls have grown by 3.11 percent.

Hiring slowed in the pharmaceuticals subsector containing vaccines – from 1,300 sequentially in February (unchanged from the first estimate) to 500 in March (also the latest available figures). But these companies’ employment is still 6.77 percent higher than in that last pre-pandemic month of February, 2020.

The employment signals were mixed in the manufacturing category containing PPE goods like facemasks, gloves, and medical gowns. Monthly job creation in February was downgraded from zero to a loss of 100, but March’s results (also the most recent) came in at 900, and this sector now employs 8.75 percent more workers than in February, 2020.

In an aerospace industry troubled for years by Boeing’s safety woes, the recent jobs figures are literally all over the place. The latest (March) results show that payrolls for aircraft fell month-to-month in March by 1,800 – surely reflecting the continuing virus-generated slump in air travel. But February’s upward revisions were nothing less than stunning – skyrocketing from a jump of 1,000 to one of 11,700. Fluctuations – though more modest – were also evident in aircraft engines and parts, and non-engine aircraft parts.

Yet as confusing as the new manufacturing jobs figures have been, the future seems just as cloudy. Optimism remains justified by developments like the enormous amounts of stimulus still pouring into the U.S. economy, by the apparent certainty that a major injection of infratructure spending is (finally) on the way, and by the continuing reopening of the economy spurred by vaccinations and less consumer caution.

Even so, the semiconductor shortage is not only here to stay for some time, but has affected many other industries other than automotive. The rate of U.S. vaccinations is slowing and the virus – including the new variants – appears likely to stage something of a comeback when the weather cools again in the fall. Air travel may never recover to pre-virus levels, which will harm not only the aerospace industry per se, but its vast domestic supply chain. And higher taxes and many more regulations could well hit U.S.-based manufacturers – at least until the Congressional elections of 2022.

On balance, I’d still bet on a bright future for domestic industry – mainly because all the sentiment surveys show that manufacturers themselves are full of confidence, and because President Biden has kept in place all the Trump China and metals tariffs that have priced much foreign competition out of the U.S. market. But I’m far from willing to bet the ranch.

(What’s Left of) Our Economy: The Virus Keeps Trade Figures, Like the Whole U.S. Economy, on a Roller Coaster

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Advanced Technology Products, CCP Virus, China, coronavirus, COVID 19, goods imports, imports, lockdowns, manufacturing, reopening, shipping, Trade, trade deficit, West Coast ports, Wuhan virus, {What's Left of) Our Economy

Since I keep writing that U.S. trade figures – as well as other economic data – have been and continue to be thoroughly distorted by the sudden stop-start nature of the CCP Virus-era economy, it seems time to replace my usual monthly format with one that shows just how out-of-the-ordinary trade flows have become.

The best evidence? The latest (March) monthly changes in imports reported today by the Census Bureau. Although the understandable headlines for the press coverage of this release focused on the record shortfalls in the overall trade gap ($74.45 billion) and in the goods shortfall ($91.56 billion), to me, the real story for March concerns the big, practically across-the-board jumps in American purchases from abroad – which of course also owe in part to the long-awaited easing of big (virus-related) backups in the West Coast ports through which so many goods enter the nation from Asia. (This congestion has also hampered American exports.)

So on to the March import figures. For combined goods and services, these purchases rose by 6.34 percent sequentially, to $274.45 billion. The absolute total is an all-time record, and the monthly increase the biggest since July’s 10.88 percent, when the economy was starting its first reopening phase.

Goods imports alone grew by 6.98 percent on-month in March, to $234.44 billion. That advance was also the biggest since July, when they surged by 12.31 percent. And the actual March level was the highest on record, too.

Interestingly, the import flows affected most by tariffs and other U.S. trade policy decisions – in goods other than oil – climbed a bit more slowly in March than overall goods imports: by 6.48 percent, to an all-time best (worst?) $217.69 billion. As with that non-oil goods category, the sequential rise was the fastest since July (12.18 percent), but these inflows rose only half as much.

The CCP Virus effect seems to have been especially pronounced in manufacturing. March imports of industrial goods hit a record $207.59 billion, and soared by 22.98 percent sequentially. That increase was the biggest since March, 2015 – when a 23.44 percent rise largely represented a February slump caused by harsh winter weather. By contrast, manufactures imports grew strongly last July, too – during the first economy-wide virus rebound – but by just 12.08 percent.

Within manufacturing, advanced technology imports in March, at $44.54 billion, fell short of their all-time high ($47.25 billion in October, 2018). But the sequential increase of 24.06 percent was the greatest since that weather afffected March, 2015 (24.87 percent).

March goods imports from China expanded a healthy 18.23 percent sequentially in March. But the $40.23 billion monthly total was well below record levels, too. This increase was also way less than the 59.02 percent rocket ride these purchases took in April, 2020, but that occurred when China’s economy was rebounding from its own CCP Virus lockdown. So the March figure could indicate that the Trump tariffs have started to fail.

At the same time, March goods imports from Asia-Pacific countries as a whole (a U.S. government grouping that includes China) ballooned by 25.11 percent on month – considerably faster than China’s increase, and their biggest monthly rise since that weather-affected March, 2015 (32.43 percent). That’s evidence that the Trump tariffs have indeed kept disadvantaging China.

As a result, even if the March trade figures simply extend an already lengthy string of CCP Virus-era official U.S. economic data, and say little about the economy’s fundamentals or even the effectiveness of U.S. tariffs, it still seems valuable to me to be reminded every now and then just how out-there these statistics remain.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Im-Politic: Why Progressives (& Mainstream Democrats) May Ditch American Workers For Good

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Bernie Sanders, Biden, budget deficits, Democrats, Donald Trump, economics, Elizabeth Warren, Im-Politic, Immigration, imports, manufacturing, Modern Monetary Theory, productivity, progressives, Stephanie Kelton, The New York Times, Trade, wages, working class

If you want to start a (hopefully verbal only) fight about American politics, one good way is to tell a Democrat that his or her party – and especially its powerful progressive wing – has been abandoning the country’s private sector working class in favor of what New York Times columnist Ross Douthat just called “the winners of globalization, from wealthy suburbanites to Wall Street and Silicon Valley elites….”  (Here’s some polling evidence for this proposition.)

So it’s more than a little interesting that if you take this position, you’ve recently gotten some devastating ammunition from no less than one of progressivism’s leading intellectual lights – economist Stephanie Kelton.

Kelton has achieved renown for her pioneering “Modern Monetary Theory” take on economic policy. As she has explained, it holds that “Governments in nations that maintain control of their own currencies — like Japan, Britain and the United States, and unlike Greece, Spain and Italy — can increase spending without needing to raise taxes or borrow currency from other countries or investors.”

Naturally, Democrats of most stripes have seized on this argument to varying extents to justify running much bigger federal budget deficits to deal much more ambitiously with a whole host of national problems – to engineering an adequate recovery from the CCP Virus-induced recession to remedying major social and economic ills that they believe dangerously plagued the economy before the pandemic.

One aspect of Kelton’s views, though, has been widely ignored, and it’s this stance that led her last week to support explicitly measures with proven records of harming domestic U.S. private sector workers but with which the increasingly elitist Democratic Party has grown increasingly comfortable over the last decade or so – on trade and especially immigration policy.

The ignored Kelton stance: on inflation. As she has specified (in the column linked above), “Politics aside, the only economic constraints currency-issuing states face are inflation and the availability of labor and other material resources in the real economy.” And in the author’s latest column, she argues that it’s precisely the appearance of these threats today that require the Biden administration to embrace unfettered trade and mass immigration policies.

As Kelton puts it, the combination of (1) President Biden’s massive spending plans and (2) undeniable contraints on the nation’s capacity to supply all the new demand that they’ll create will produce worrisome inflationary pressures. Too many customers will be chasing too few products to buy, thereby forcing up the prices of the latter and possibly generating more economic problems than this new consumption solves.

Among the solutions she offers? Enabling the economy much more easily to satisfy all the new demand by accessing productive capacity from abroad. Thus she suggests both

“Repealing tariffs would make it easier and cheaper for American businesses to buy supplies manufactured abroad and easier for consumers to spend more of their income on products made outside of our borders, draining off some domestic demand pressures” and

“loosening legal-immigration policies, so that even once America nears full employment there would still be an adequate labor pool to meet the increased demand for workers.”

These arguments are entirely consistent with more conventional schools of economic thought – which have long insisted that the freest possible worldwide flows of goods, services, and people will lead to the greatest possible degree of prosperity for the world as a whole.

The problem, though, is that recent decades have taught that when the United States opens its economy wide to a world full of countries that still tightly protect their own markets, and when it opens its borders wide to enormous foreign populations with much lower living standards, American workers take major hits. Abundant research even in the mainstream economics community, for example, has documented the devastating impact of the “China shock” on trade, and the Trump years showed that when immigration curbs helped U.S. labor markets tighten to unprecedented levels, wages for low-income workers, who overall compete directly for employment against illegal aliens, rose especially strongly.   

For many years, Kelton’s fellow Democrats and progressives have been increasingly determined to deny these immigration realities – even when employment levels have been less than stellar. And although private sector labor union-oriented Democrats and even progressives like Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont still champion what might be called America First trade policies, the party’s rank and file has grown much more enthusiastic about the pre-Trump version of economic globalization — as indicated by the below survey results from the Pew Research Center.

Even more curious, and troubling for the economy as a whole: Kelton sorely neglects the concept of productivity, and the importance of continually boosting the economy’s efficiency in order to boost living standards in sustainable, as opposed to bubbly, ways.

Kelton does write that “Over time, the Biden plan’s investments in our physical and human infrastructure will enhance our economy’s productive capacity, leaving us with a better educated and more productive work force, more efficient railways, less congested roadways, improved technologies and much else.”    

But she also adds, crucially, “this can’t happen overnight. It will take years.”  Presumably, then she’d be OK with dropping the open trade policies at least to some degree.  What she misses, however, are the (further) productivity-killing effects bound to emerge during that period of re-enabling imports in sectors like manufacturing – which are central to the nation’s hopes for retaining sufficient productive capacity. 

Indeed, she seems unaware that those manufacturing sectors that have been heavily dependent on artificially cheap imports have been major productiviy laggards. (The same holds for parts of the economy that have leaned heavily on the comparable crutch of immigrant labor – especially low-wage, low-skill immigrant labor).

Kelton of course is only one Democratic party thinker, and as she complained in her latest Times column, too many Democratic leaders – including the President – are still clinging to their supposedly outmoded views on spending and taxing and promoting U.S.-made manufactures.  And as mentioned, even within progressive ranks, her views on trade may not prevail against the Warren and Sanders perspective.

But it’s just as reasonable to believe that progressives hold the whip hand among  Democrats today on many issues, and Kelton played the biggest role in turning their spending-happy views into virtual party orthodoxy.  If her immigration and especially trade positions take the same course, the Democrats’ once unchallengeable identity as “the party of the common man” will become an example of transparently false advertising.       

P.S. Special thanks to my Twitter friend who goes by the handle @RocCityBuilt for first alerting me to the trade and immigration material in Kelton’s latest article.   

Making News: Podcast On-Line on Biden’s Infrastructure Plan and China…& More!

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American Jobs Plan, Biden, CCP Virus, China, competitiveness, coronavirus, corporate taxes, COVID 19, Donald Trump, Gatestone Institute, Gordon G. Chang, green energy, green manufacturing, IndustryToday.com, infrastructure, Making News, manufacturing, recession, tariffs, tax policy, tax reform, taxes, The John Batchelor Show, Wuhan virus

I’m pleased to announce that the podcast is now on-line of my latest interview on John Batchelor’s nationally syndicated radio show. Click here for a timely discussion among John, co-host Gordon G. Chang, and me on whether President Biden’s infrastructure and competitiveness package really will strengthen America’s position relative to China. Oh yes – we also speculated about the fate of former President Trump’s China tariffs in the Biden era.  

In addition, yesterday, Gordon quoted my views on the matter in a post for the Gatestone Institute. Here‘s the link.

Finally, on March 31, IndustryToday.com re-published my RealityChek post on recent U.S. manufacturing data strongly indicating that those Trump tariffs have greatly helped domestic industry weather the CCP Virus pandemic and subsequent recession in impressive shape. Click here to read (or re-read!).

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

(What’s Left of) Our Economy: March U.S. Manufacturing Job Gains Lagged – For a Good Reason

Tags

aerospace, aircraft, aircraft engines, aircraft parts, American Jobs Plan, automotive, Biden, Build Back Better, CCP Virus, coronavirus, COVID 19, Donald Trump, Employment, fabricated metal products, Jobs, Labor Department, lockdowns, machinery, manufacturing, non-farm jobs, pharmaceuticals, PPE, recession, recovery, regulation, semiconductor shortage, semiconductors, tariffs, taxes, Trade, travel services, vaccines, Wuhan virus, {What's Left of) Our Economy

This morning’s figures from the Labor Department show that U.S. domestic manufacturing was a bit of a jobs creation laggard in March – and that was good news. The reason? The employment gains for the rest of the economy were so enormous.

This latest monthly U.S. jobs report showed that non-farm payrolls (the definition of the U.S. jobs universe used by the Labor Department, which tracks these data), rose by 0.64 percent in March – to 144.210 million. Job-creation in the private sector advanced at a virtually identical rate.

Payrolls in manufacturing were up by a lower 0.43 percent – to 12.284 million. But they still increased by 53,000 – their best performance since September’s 55,000. It’s also possible that hiring in the automotive sector was held down by a global shortage of semiconductors – which has led to production cutbacks and even some layoffs.

The only disappointment in the new manufacturing jobs numbers concerned revisions – which were mostly negative. February’s initially reported 21,000 net employment gain is now estimated at 18,000. January’s 14,000 job loss (already downgraded from an initially judged 10,000) is now pegged at a still greater 18,000. But December’s improvement was upwardly revised again – from 34,000 to 35,000.

As a result, manufacturing has now regained 63.83 percent (870,000) of the 1.363 million jobs the sector shed during the peak CCP Virus lockdowns period of last March and April. That’s fewer relatively speaking than the recovery in private sector employment – 66.88 percent (14.172 million) of the 21.191 million jobs it lost during that period.

But because of continuing weakness in the public sector – which has recovered just 66.42 percent of its 22.362 million job loss last spring – manufacturing’s payrolls’ rebound is still ahead of the entire economy’s. In fact, manufacturing jobs now account for a higher (8.52 percent) of total non-farm employment than during the last full pre-pandemic data month (8.39 percent in February, 2020).

The biggest manufacturing jobs winners in March? Far and away the champ was the big fabricated metals products industry, which expanded employment by 13,700 – more than a quarter of the manufacturing total. Next came two smallish sectors – miscellaneous non-durable goods and printing and related support activities (up 7,400 and 5,900, respectively). Encouragingly, jobs increased by 3,500 in the big machinery sector – whose products are used throughout not only the rest of manufacturing but the entire economy.

The worst performers were transportation equipment – whose 3,000 lost March jobs included 1,000 in the automotive sector, which has been forced into production cutbacks and some layoffs due to the global semiconductor shortage – and furniture (down 1,300).

Unfortunately, these latest figures indicate that employment in many CCP Virus-fighting goods continues to lag. To be sure, their payrolls seem to be up from the last pre-pandemic levels whereas overall manufacturing jobs are down (by 4.02 percent). But given the nature of the emergency, and the shortages it revealed, it’s surprising they’re not higher still.

The relevant numbers only go through February, and in the broad pharmaceuticals sector, employment rose by 1,600 sequentially. And January’s initially reported 700 job loss has been upgraded to a decrease of only 100. But the sector’s payrolls have grown by a mere 2.60 percent since that last pre-pandemic month of February, 2020.

The performance of the pharmaceuticals subsector containing vaccines was considerably better. February payrolls expanded by 1,300 sequentially, and January’s gains are now estimated at 500, not 100. As a result, this vaccine-related sector’s employment levels are now 6.23 percent higher than in February, 2020.

The story, however, has been more discouraging lately in the manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns. Payrolls were flat on month in February, and the initially reported January job loss of 800 was only upgraded to a decline of 700. Still, payrolls in this sector have climbed by 7.98 percent since February, 2020.

Interestingly, despite the rebounding orders for Boeing’s popular but previously grounded 737 Max jetliner, the recovery of national and global travel, and the resumption of deliveries of its also-troubled 787 Dreamliner, none of these positive developments has shown up in the aerospace jobs numbers.

For example, aircraft employment in February (also the latest available figures) grew by only 1,000 on month and not only remains down 10.66 percent on year, but substantially lower than all of last year’s safety crisis- and the worst of the CCP Virus-plagued months. Similar trends hold for aircraft engines and engine parts, and non-engine aircraft parts.

The outlook for domestic manufacturing job creation still seem bright, as vaccinations are being administered rapidly, reopenings are spreading, igniting renewed overall economic activity, Boeing does seem to be emerging from its safety and manufacturing-related troubles, and the high, sweeping Trump tariffs keep pricing many Chinese goods out of the U.S. market, thereby creating new opportunities for American producers.

But that global semiconductor shortage, which will eventually affect much more than automotive output, may not end until late next year. It’s tough to know the overall impact of the Biden administration’s American Jobs Plan and other Build Back Better virus recovery proposals on the one hand, and the tax increases proposed to pay for them on the other, as well as the new regulations that will be involved – assuming even that they pass Congress reasonably intact. And vaccines production won’t be booming forever.

So no one concerned about domestic manufacturing’s health and prospects has any excuse not to peruse carefully all the industry-related data and news that are in store in the weeks and months ahead.

(What’s Left of) Our Economy: New U.S. Manufacturing Data Bolster Case for Keeping Trump’s Tariffs

Tags

CCP Virus, China, China tariffs, consumer electronics, coronavirus, COVID 19, Donald Trump, exports, GDP-by-industry, gross domestic product, imports, manufacturing, Port of Los Angeles, recession, recovery, tariffs, Trade, trade deficit, value added, Wuhan virus, {What's Left of) Our Economy

As known by RealityChek regulars, throughout the CCP Virus period, I’ve been writing about how resilient the American domestic manufacturing industry has been, and how a good chunk of the credit should go to the Trump era tariffs. I’ve argued that they’ve rendered lots of imports – especially from China – much less price competitive, and created new opportunities for U.S.-based industry to sell to American customers.

With the release last Friday of the U.S. government’s latest “GDP (Gross Domestic Product) by Industry” data, this case looks ever more convincing.

The new figures bring the story up to the end of last year, and the key numbers entail the production and the trade deficit figures for the second quarter of 2020 (the first full quarter when the virus and related lockdowns and other mandated and voluntary economic activity curbs impacted economic data) and for the fourth quarter (the most recent numbers from this quarterly data set).

These new figures show that, during that period, according to an output measure called “value added” (a favorite of economists, because it seeks to eliminate the double-counting that inevitably results from including in manufacturing production levels both final products and all the parts, components, and materials that go into those products), manufacturing production increased by 14.32 percent. (This figure does not account for inflation’s effects, because the U.S. government doesn’t publish detailed inflation-adjusted data for the trade statistics we’ll also be examining.)

The comparable growth figure for the whole U.S. economy between the second and fourth quarter? Just 10.12 percent.

It’s true that the trade deficits for manufacturing and the whole economy rose strongly as well during this period. But manufacturing outperformed here as well, as its shortfall climbed by 24 percent, versus 24.46 percent for all U.S. goods and services industries combined.

That’s a tiny edge, of course, but any edge at all is pretty remarkable, especially given the massive pandemic-era popularity of the consumer electronics products sold so massively to Americans by China, and that most of these goods escaped the Trump levies. In this vein, it’s revealing that net imports of laptops, cell phones, and the like represented fully 22.07 percent of the second-to-fourth quarter manufacturing trade deficit’s worsening.

And even so, during this period, the manufacturing-dominated China goods trade shortfall increased by just 13.53 percent – a clear testament to the Trump tariffs.

It’s important to remember that many major U.S. services industries have taken outsized pandemic- and lockdowns etc-related hits because their business models depend on personal contact. But interestingly, between the first and second quarters, manufacturing output fell faster than total GDP – by 12.47 percent versus 9.47 percent on an annualized basis versus 9.47 percent. So industry had an unusually deeper hole to climb out of. And despite this challenge, whereas total U.S. current dollar output in the fourth quarter was still a bit (0.31 percent) lower than in the first quarter (the final full pre-CCP Virus-affected quarter), manufacturing value-added was fractionally higher.

There’s still a possible fly in the ointment – and a big one. Due to equipment and labor shortages, since late November there’s been there’s a big, growing backup in unloading ships laden with Asian imports at the Port of Los Angeles – a prime gateway for such commerce. And on a monthly basis, since November (and through January), U.S. goods imports from China are down 14.43 percent.

But underscoring the tariffs’ effects all the same: Goods imports from Vietnam, which is supposed to be a major winner from the U.S.-China trade conflict, dipped by just 3.93 percent during this period. And many Vietnamese products enter the United States through Los Angeles, too.

The manufacturing trade deficit remains way too high, and manufacturing’s value-added growth slowed dramatically last year – from an its all-time high of 13.4 percent between the second and third quarters to a mere 0.80 percent between the third and fourth.

But as the entire U.S. economy recovers from the pandemic due to vaccinations and the approach of herd immunity, as the lockdowns and consumer caution ebb, as more immense government stimulus kicks in, as aerospace giant (and traditional trade surplus star) Boeing recovers from its safety woes, as vaccine production booms, and as the Biden administration continues to keep the Trump tariffs in place, unless Washington makes some big policy mistakes, it seems tough at best to be a U.S. manufacturing pessimist these days.