Making News: CNBC Interview on China Trade Talks Set for this Afternoon, New Podcasts…& More!

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aerospace, Boeing, China, CNBC, IndustryToday.com, Making News, manufacturing, manufacturing recession, Market Wrap with Moe Ansari, recession, The John Batchelor Show, Trade, trade talks, trade war

I’m pleased to announce that I’m scheduled to appear this afternoon on CNBC’s “Power Lunch” program in a segment focusing on the latest U.S.-China trade talks underway in Washington, D.C.  The interview is slated for 2 PM EST and, as usual, I’ll post a link to the video as soon as one’s available.

Speaking of podcast-like items, here’s a link to the one featuring my China trade policy interview on Moe Ansari’s nationally syndicated “Market Wrap with Moe” radio program.  Our discussion begins at about the 27:30 mark.

And this link will take you to my segment on the same subject last night on John Batchelor’s nationally syndicated radio show.

Finally, on Tuesday, IndustryToday.com re-posted (with permission, of course!) my RealityChek piece from earlier this week on how Boeing’s safety-related woes have helped drag U.S. domestic manufacturing into (a very shallow) recession for reasons having nothing to do with President Trump’s trade policies.  Click here to read.

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

 

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(What’s Left of) Our Economy: A Boeing Drag on US Manufacturing Unrelated to Trump’s Trade War

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737 Max, aerospace, aviation, Boeing, exports, manufacturing, manufacturing recession, safety, tariffs, Trade, trade wars, {What's Left of) Our Economy

Ever since Boeing ran into safety problems that early this year resulting in the widespread grounding of one of its most successful airliners, authoritative (as opposed to anecdotal) signs have been elusive that the aerospace giant’s woes have been contributing to the slowdown being experienced by domestic manufacturing. This matter matters because a sizable Boeing Factor would rebut claims that President Trump’s tariff-heavy trade policies deserve nearly all the blame for industry’s recent troubles.

Boeing’s commercial jets, after all, haven’t been subjected to any retaliatory duties from tariff-ed foreign economies – largely because the company is half of a practical duopoly (along with Europe’s Airbus) in large passenger aircraft production. As a result, no countries (including China) want to be left with a single supplier. (Possible European responses to American levies on Airbus products authorized by a U.S. win at the World Trade Organization in a trade dispute long predating Mr. Trump’s inauguration could change that situation.)

Moreover, Boeing uses enormous amounts of manufactured intermediates to assemble its planes (which also include military aircraft), and especially durable goods ranging from fabricated metals products to machine tools. So hard times for Boeing will clearly mean hard times for all these suppliers if they haven’t already.

Last Thursday, however, a Boeing Factor finally became clear in official U.S. economic data – specifically in the monthly trade report (which contained figures through August). These statistics reveal that U.S. exports of civilian aircraft began falling sharply on a year-to-date basis beginning in May – just two months after national aviation authorities and airlines around the world began grounding the 737 Max 8 model or banning it from their airspaces.

Skeptics could still contend that a tariff-induced slump in global economic activity has reduced demand for Boeing’s jets, but the trade data also show significant strengthening of civilian aircraft imports, meaning that, at least in the United States, demand remains healthy.

The most important comparison entails the April-through-August results for civil aircraft exports and imports over the last few years. These ensure the best apples-to-apples findings over respectable periods of time.

According to the trade statistics, the U.S. civil aircraft industry dominated by Boeing hasn’t been killing it recently. From April-through-August, 2017 to April-through-August, 2018, its exports declined by 13.94 percent. And then between the same 2018-19 stretch, the rate of deterioration sped up markedly – to 24.51 percent.

Meanwhile, imports of civil aircraft performed a u-turn. From April-through-August 2017 to April-through-August, 2018, they fell by 7.95 percent. But then between the same 2018-19 period, they actually rose – and by a strong 18.37 percent.

Also pointing to a Boeing/civil aircraft-specific problem – the major difference between civil aircraft’s trade performance in recent years and that of domestic manufacturing as a whole. Between the April-through-August 2017 and 2018 periods, while civil aircraft exports were dropping, overall manufacturing exports rose by 6.76 percent. Between the following April-through-August periods, both kinds of exports decreased, but overall manufacturing exports were down only 3.44 percent versus aircraft’s 24.51 percent. And while civilian aircraft imports were surging, overall manufacturing imports edged up only 0.60 percent.

Could this great recent disparity between civil aircraft’s trade performance and overall manufacturing’s trade performance caused the manufacturing slowdown all by itself? Probably not. Current figures aren’t available for civil aircraft as such, much less for aircraft-specific supply chain output. But a 2016 study from the Federal Aviation Administration reported that in 2014, civilian aircraft and parts manufacturing totaled a little more than $100 billion (in 2012 dollars), and that inputs from the supply chain brought the figure up to just under $258 billion.

Since the Commerce Department pegged total American manufacturing output that year at just under $6 trillion (in those same 2012 dollars), civil aircraft production would have represented 4.27 percent of domestic industry’s total. It’s true that that share isn’t overwhelming. But given that the Federal Reserve’s (inflation-adjusted) manufacturing data show that the sector’s after-inflation output has edged down from only +0.90 percent to +0.89 percent between the April-through-August 2018 and 2019 stretches, civil aircraft’s seriously worsening trade situation may bear noteworthy responsibility. And it certainly could be behind a comparable share of the slight (just 0.36 percent) real output decline over the past year that represents manufacturing’s latest technical recession.

A big complication could still put the spotlight back on the trade wars: Although safety problems have plainly hurt Boeing orders and production, and therefore new business throughout its supply chain, civil aircraft production and sales both feature long time lags between orders and deliveries. Indeed, the company says that its backlog is still considerable – and growing.

Nonetheless, it’s also true that the company’s progress toward regaining its reputation has lagged far behind its initial predictions, and new problems keep emerging with the 737s and other planes . In addition, a leading aerospace industry consultancy reported in August that Boeing-related concerns were depressing civil aircraft production globally. And within Boeing, the damage hasn’t been confined to 737 Max production. The safety crisis is affecting output of other airliners, too.

Moreover, other non-trade-related problems obviously have been weighing lately on U.S.-based manufacturing, too – notably the confusion in Europe created by the ongoing Brexit mess and the long-time abject failures of the European Union and Japan to generate respectable growth. For now, there’s little evidence that Mr. Trump’s trade policies have been a net plus for domestic industry (although the counter-factual needs to be mulled, too – i.e., how would manufacturing be faring under a pre-Trump policy regime?). But the same, at very best, can be said for the Boeing Factor.

(What’s Left of) Our Economy: The Trade Wars’ Bite on Manufacturing Jobs Looks Deeper

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2020 elections, aluminum, China, Jobs, Labor Department, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, trade war, wages, {What's Left of) Our Economy

Today’s U.S. jobs report (for September) contained much better news for President Trump and his supporters in terms of the economy’s overall performance than it did in terms of his trade policies. American employment on net rose by a decent 136,000 sequentially last month, and the revisions (which boosted the July and August numbers by a total of 45,000) were especially encouraging.

But payrolls in domestic manufacturing – a sector heavily exposed to trade – shrank month-to-month by 2,000. That decline was the first such dip since March’s 3,000. And despite the big positive revisions in overall employment, manufacturing’s left its modest recent hiring record virtually unchanged.

Worse for the President, manufacturing’s metals-using industries in September continued their worrisome recent transition from employment out-performers for the first half year or so after the first duties on steel and aluminum were levied to employment laggards.

Moreover, although manufacturing employment does face two obstacles having nothing to do with the Mr. Trump’s trade wars – Boeing’s safety woes and the strike that began last month against General Motors – damage from the former isn’t yet evident in the jobs data, and the latter probably began too recently to be showing up in the numbers yet.

The impact of the much broader China tariffs remained as elusive as ever, largely because of the on-again, off-again nature of the President’s policies, along with changes and threatened changes in tariff rates on so many goods. But even if Mr. Trump was a model of consistency on this score, the China levies’ effects would be fiendishly difficult to gauge because manufacturing inputs from China are used so broadly but so unevenly by domestic manufacturers.

By contrast, the trends for the metals-using industries look clear enough. This time, I’ll present not only their employment changes since April, 2018 (the first full month in which the metals levies were in effect) and September, but the same employment changes for an earlier post-tariff period. First, the latest numbers:

                                                   Old thru Aug     New thru Aug      Thru Sept

entire private sector:                  +2.30 percent    +2.31 percent    +2.40 percent

overall manufacturing:              +1.73 percent    +1.73 percent    +1.71 percent

durable goods:                           +2.10 percent    +2.10 percent    +2.05 percent

fabricated metals products:        +1.58 percent   +1.56 percent    +1.36 percent

non-electrical machinery:          +2.19 percent    +2.20 percent   +1.95 percent

automotive vehicles & parts:        0 percent         -0.23 percent    -0.69 percent

household appliances*:               not available     -6.31 percent    not available

aerospace products & parts*:      not available    +8.38 percent    not available

*data are one month behind

The loss of the metals-using sectors’ employment momentum in relative and absolute terms can be easily seen. But the more important comparison is between the above figures and those below, which present these trends for the first 10 months of the metals tariffs.

                                                   Old thru Dec    New thru Dec      Thru Jan

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

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

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

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

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

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

household appliances*:            not available      -2.21 percent     not available

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

*data are one month behind

This table shows that except for the household appliances sector (which has faced a separate, product-specific set of tariffs on large household laundry equipment since February, 2018), and automotive, the metals-using sectors were creating new employment at a considerably faster pace than both the overall private economy and overall manufacturing. And automotive was closing the gap.

Aside from trade, the White House, and everyone seeking the best for the U.S. economy, should also be troubled by the drop in September in the year-on-year manufacturing jobs increase to 117,000. That’s the worst such performance since August, 2017’s 112,000 and less than half the rate of the previous September annual improvement (266,000).

Better news for Trump-ers? Manufacturing job creation during the first 31 months of the Trump presidency is still much better (464,000) than during the last 31 months of former President Barack Obama’s administration (198,000).

Matters look better for the President (and manufacturing workers) on the wages front. Although industry’s pre-inflation hourly pay only inched up on month by 0.07 percent, that result beat the 0.04 percent dip for the overall private sector. (The Labor Department, which tracks the employment and wages figures, doesn’t monitor public sector wages since they’re set largely by politicians’ decisions, not largely by market forces. Therefore, they say almost nothing about the state of the labor market or the economic in general.)

Moreover, this relatively good manufacturing’s wage performance continued a slow relative catch up trend that began this year. Since January, current-dollar private sector pay is up 1.92 percent, versus 2.20 percent for manufacturing workers.

All the same, since the current economic recovery began, in mid-2009, private sector wages have risen by 26.87 percent. Manufacturing’s increase? Only 21.03 percent. And these manufacturing wages rose faster during the last 31 months of the Obama presidency (6.04 percent) than during the first 31 months of the Trump administration (5.53 percent). 

The safest economic conclusion seems to be that manufacturing hiring is hardly in the dumps – as suggested by the latest (also September) soft data from the Institute for Supply Management.  Nor does this looks like a “Tariff-mageddon” is upon us. But manufacturing job creation is also well off 2018’s robust pace, and the more so in major trade-affected industries . And its underlying situation will as more difficult to describe the Boeing and General Motors effects become visible (assuming the auto strike isn’t settled quickly).

But as cautious as that analysis is, the political implications as the 2020 presidential campaign heats up are even murkier. For barring a dramatic change in the manufacturing picture, they’ll depend on voters deciding whether the Trump manufacturing, trade, and overall economic record are good enough.   

(What’s Left of) Our Economy: Is Trump’s Trade War Really Killing Manufacturing Exports?

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{What's Left of) Our Economy, manufacturing, Trade, recession, exports, tariffs, dollar, exchange rates, Institute for Supply Management, Trump, trade war, IHS Markit

The economics and investment worlds have plunged into near-panic mode over a report yesterday on American domestic manufacturing whose headline number was the worst since recessionary 2009. The September results from the Institute for Supply Management (ISM) have been interpreted as a sign that a U.S. recession has just become much more likely, and an unusually bad finding for export orders triggered a burst of analyst claims that President Trump’s tariff-heavy trade policies were the main problem. (See, e.g., this article.)

In fact, the ISM report itself stated that “Global trade remains the most significant issue….”

So is the evidence finally reaching critical mass that the President’s approach to trade is backfiring? Here’s why that conclusion seems like a big stretch.

First, the ISM and similar reports present “soft data.” That is, they don’t contain actual figures on production, employment, export orders, or other indicators. Instead, they feature findings on how many of the manufacturers they survey say their results on these and other fronts are worsening and how many are observing improvement.

The scope for error here is made clear by the release yesterday of another closely followed American manufacturing gauge – from IHSMarkit.com. According to this soft data report, September was domestic industry’s best month in the last five, and better orders from American customers were enough to keep U.S. manufacturing in growth mode despite a seriously sagging export business.

Second, as for the most authoritative hard data on manufacturing output, it comes from the Federal Reserve. As my latest update on RealityChek showed, its latest industrial production statistics show that the sector remains in a shallow recession, but that production has been turning up recently.

At the same time, manufacturing employment continues to stumble, and in particular, industries most affected by the Trump tariffs have turned in recent month from employment leaders to employment laggards.

Third, just as I’ve presented the evidence showing that manufacturing’s current recession is anything but its first slump since the U.S. economy’s current expansion began in mid-2009, the current export downturn (which is supported by the hard data) is anything but unprecedented during this period, either.

The table below shows the recovery-era annual changes in total manufacturing exports (the broadest measure of such shipments), global economic growth, and the value of the dollar. The export and growth figures are in pre-inflation dollars.

         total exports         % change          world growth           dollar’s value

08     $1.121872t

09     $0.916726t       -18.29 percent      -5.15 percent          +11.43 percent

10     $1.100394t      +20.04 percent     +9.44 percent             -7.13 percent

11     $1.276906t      +16.03 percent   +11.08 percent            +0.41 percent

12     $1.341398t        +7.40 percent     +2.30 percent            +1.58 percent

13     $1.375170t        +2.52 percent     +2.86 percent             -0.67 percent

14     $1.403782t        +2.08 percent     +2.73 percent            +1.62 percent

15     $1.317019t         -6.18 percent      -5.41 percent          +15.65 percent

16     $1.246011t         -5.39 percent     +1.47 percent            +5.45 percent

17     $1.323574t        +6.22 percent     +6.29 percent            +2.26 percent

18     $1.400022t        +5.76 percent     +6.07 percent           -10.85 percent

18 ytd  $0.812914t

19 ytd  $0.796902t    -1.97 percent         2.60 percent*          +3.82 percent

*latest World Bank estimate for 2019

As should be clear, manufacturing exports so far this year are off by less than two percent (the new U.S. monthly trade figures, for September, will be out Friday morning) – a decline much smaller than those in 2015 and 2016, when no President was conducting a trade war. Quite the contrary. And once the current expansion ended its early “snapback” phase, manufacturing export growth was pretty underwhelming. Indeed, manufacturing export growth rates sank below global growth rates in 2013 and haven’t recovered by this measure since – although the gap closed markedly during the first two Trump years.

Overall, in fact, since Mr. Trump’s trade policy about-face began in earnest (with metals tariffs imposed in March, 2018), manufacturing exports have held up pretty well considering that global growth (i.e., the health of the foreign markets to which American manufacturers are trying to sell) has slowed considerably (partly due of course to the impact of the trade war in a world outside the United States that’s still overwhelmingly dependent on amassing exports and trade surpluses in order to grow adequately).

And don’t forget exchange rates – which go far toward determining the cost and therefore appeal of U.S. exports versus the competition. Their impacts operate with a time lag, but even with all the complexities of measuring such effects, with the dollar hitting 29-month highs in absolute terms on Tuesday, it’s difficult to argue credibly that the Trump tariffs are the predominant cause of American manufacturing’s export woes.

Indeed, it’s at least as plausible to contend that manufacturing exports’ performance this year has been especially encouraging given that disrupting global supply chains and returning them to the United States – which obviously adds to the near-term challenges faced by American multinational and domestic manufacturers alike – are among the President’s main trade war objectives. And since the full benefits of Mr. Trump’s new trade policy approach can’t possibly quickly, these indications of resilience by U.S.-based industry have to be seen as good news for anyone hoping for an enduring American manufacturing revival.       

(What’s Left of) Our Economy: The AP’s Manufactured Nonsense About Manufacturing

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AP, Associated Press, Calvin Woodward, fake news, innovation, Jobs, manufacturing, productivity, research and development, technology, Trump, {What's Left of) Our Economy

The Associated Press (AP) is a ginormous global news organization, and its reach is especially widespread here in the United States (although I couldn’t find figures breaking out its American clientele specifically). So it’s a big deal when one of its highest profile writers spreads the kind of utter claptrap about domestic U.S. manufacturing that Calvin Woodward just peddled in his new piece on President Trump’s views on the economy.

In an article posted today, Woodward portrayed Mr. Trump’s emphasis on industry (and other elements of his worldview) as nothing more than a pathetic and downright dangerous exercise in nostalgia for the “grunt work of old” that ignores how “Industry, technology and much of the culture are finding new ways of doing and living” and how “U.S. prosperity has been driven for decades by services, technology and new things….”

Some confidence in Woodward’s conclusions might be justified if he relied on manufacturing specialists or even economists to support them. But the authorities he cites are a “professor of communications” and a psychologist who “studies nostalgia from Britain’s University of Southampton.”

Not that economists have been killing it in recent decades in properly evaluating the importance of manufacturing. But if Woodward had bothered to consult one,  the odds would have been higher that he’d have encountered the idea that industry is kind of important for any country seeking to build or maintain a world-class military. Or” that it’s historically been the U.S. economy’s leader in productivity growth (although as RealityChek regulars know, it’s recently been losing its mojo on that score). Or that it boasts one of the nation’s biggest employment multipliers – meaning that the creation of each American manufacturing job generates an outsized number of jobs elsewhere in the economy compared with employment increases in most other sectors. Or that manufacturing accounts for the lion’s share of American business research and development spending. 

That last fact is especially important for Woodward and others of his ilk to know. For it makes clear that if the United States is to keep generating the “technology and new things” that of course are central to its hopes for continued (much less greater) prosperity, it has better keep its manufacturing base world class.

I’ll leave it to you to judge whether Woodward’s article qualifies as Fake News.  But there can’t be any legitimate doubt that it’s manufactured nonsense.   

(What’s Left of) Our Economy: The Offshoring Lobby Admits Americans are Standing Tall in the China Trade War

Tags

2020 elections, capex, Charles Koch, China, CNBC.com, consumers, Democrats, inflation, manufacturing, national security, recession, slowdown, Trade, trade war, Trump, Xi JInPing, {What's Left of) Our Economy

Another trade war myth bites the dust! And its demise is especially big news, given that its killers are some of the leading myth-makers.

Specifically, as reported by CNBC,com, top officials of a major lobbying campaign aimed at forcing President Trump to overturn his tariff-heavy trade policies, and in particular, to make nice with China, have openly admitted that the ace-in-the-hole they thought they held turned out to be joker. According to a CNBC posting yesterday, the political network funded partly by billionaire libertarian Charles Koch has concluded that their efforts to restore the pre-Trump, offshoring-happy, U.S. trade policy status quo have failed because it completely misread the American public’s willingness to pay an economic price for combating China’s trade predation.

This news comes on the heels of ongoing evidence that, contrary to widespread predictions from economists, think tank hacks, globalist politicians, and the Mainstream Media reporters who keep taking their cues from all these trade zealots, raging American inflation has not been ignited, business investment has not been paralyzed, domestic manufacturing has not suffered a death blow (though it’s been in a shallow recession for a year), and the economy has not plunged into recession (though growth has slowed).

The advertising-focused Koch drive sought to convince President Trump to back off his strategy of trade pressure by exploiting the selfishness of U.S. consumers in particular and the supposed vulnerabilities of the U.S. political system. The apparent central assumptions (and they’ll be familiar to anyone who’s been following Mainstream Media coverage of trade issues): Affluent, and indeed spoiled, Americans have much less tolerance for economic pain than their long impoverished Chinese counterparts; and China’s dictators will find it much easier to resist any public pressure that did develop than American leaders. Therefore, the Koch operatives reasoned, stoking fears that Mr. Trump’s tariffs would supercharge retail prices in particular and kill jobs by prompting retaliatory Chinese measures and slumping American capital spending would set off a political firestorm that the President would need to extinguish if he hoped to win reelection.

But at a briefing it held in New York City yesterday, a Koch official told reporters that “The argument that, you know, the tariffs are adding a couple thousand dollars to the pickup truck that you’re buying is not persuasive. It doesn’t penetrate with the people that are willing to go along with the argument that you have to punish China.”

Nor did the Koch campaign make this decision lightly. The CNBC.com piece noted that “the network came to this conclusion after conducting weekly focus groups on trade policies.” Also cited in the post was a recent national poll showing that “63% of registered voters believe tariffs will ultimately hurt the United States more than China, but 67% of the electorate is convinced it’s necessary to confront China over its trade practices.”

In other words, the American public is wiser and more farsighted than the U.S-owned businesses that have worked overtime to help strengthen the Chinese economy – including by voluntarily transferring to the Chinese the technology they need to upgrade their mechanisms of repression and modernize their military. And everyday Americans are much smarter than those companies that China has begun victimizing once Beijing concluded they’d outlived their usefulness, but that keep hoping against hope that enough boot-licking will save their corporate skins in the Chinese market. Because the American public evidently understands that U.S. prosperity and national security alike require reversing these China-enabling policies, and that slightly more expensive imports from China are a small price to pay for preserving and achieving these goals.

Ironically, the poll indicates that the Koch campaign (along with similar efforts) has succeeded in one respect: It represents some evidence that Americans believe that their country is more vulnerable to a trade war than China – even though the Chinese economy is much more trade dependent, and even though, as noted above, the United States keeps growing (albeit more slowly), and its overall inflation remains subdued by any reasonable standard.

Maybe that’s why the Koch network says it’s far from giving up, and is considering delivering the same message with different tactics. Two seem especially promising to these Friends of China:

>“putting together a team of almost 100 business leaders to call on the Trump administration and lawmakers to end the trade war with China”; and

>educating “100,000 activists in at least 35 states about the potential negative impact of using tariffs to battle China. Those volunteers will then be expected to start reaching out to their congressional leaders. The network hopes these activists can convince lawmakers on Capitol Hill to stand up against the administration’s current trade policy. The latest phase of the Koch campaign is expected to cost the network millions of dollars.”

Of course, short of a major economic downturn, if the Koch network has already established that the public is rejecting its advertising-carried China fear-mongering, it’s unclear why President Trump would be more responsive to the 100 business leaders than he’s been to date? And why would most Members of Congress not already backing China coddling pay more much attention to the 100,000 activists?

That’s a question that also needs to be asked by some other major actors in the U.S.-China trade war: the majority of current Democratic presidential candidates, who clearly believe that there’s lots of voter China-related trade whining that they can turn into votes, and ultimately into victory over Mr. Trump; and Chinese dictator Xi Jinping himself, who just as clearly believes that if the President is defeated, he’ll be back to dealing with Uncle Sucker on trade – and so many other fronts.

(What’s Left of) Our Economy: Some Manufacturing Pushback Versus Tariff Gloom-Mongering

Tags

aluminum, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, metals tariffs, metals-using industries, steel, tariffs, Trade, trade war, {What's Left of) Our Economy

Is U.S. domestic manufacturing emerging from its recent funk? This morning’s Federal Reserve industrial production figures (for August) certainly supply some compelling evidence. And some of the nation’s major metals-using industries – widely portrayed as major victims of Trump administration tariffs that have been in place since early 2018 on steel and aluminum – led the pack last month.

August’s 0.53 sequential real output increase wasn’t enough to pull domestic industry out of its current technical recession. But it did shorten the length of the downturn considerably. As of the previous industrial production report, manufacturing had been in recession since April, 2018 – with its inflation-adjusted output down 0.004 percent.

Today’s data revealed that constant-dollar production has now fallen 0.36 percent since the previous August. In addition, since its latest bottom (this April), after-inflation manufacturing output is up 0.89 percent. And sequentially, this production is up three of the last four months.

Moreover, the strong August performance of the metals-using sectors was noteworthy. These industries have faced wide-ranging tariffs on steel and aluminum since March, 2018, with April being the first full month in which the duties were in effect. (Major appliances have been an exception – they have also been coping with separate levies on large household laundry equipment since February, 2018.) As reported by RealityChek last month, some of these metals-users suffered a miserable July, indicating that the metals tariffs were finally taking a measurable toll, either because of the higher input costs they created, the greater uncertainty they generated, the impact of retaliatory foreign tariffs, or some combination of all three.

But as demonstrated by the following table, they regained much of their momentum relative to the rest of manufacturing last month. These figures represent the changes in their real output since April, 2018, with the data for manufacturing overall used as a control group.

                                              April thru June    April thru July    April thru August

overall manufacturing:         +0.42 percent       -0.01 percent        +0.54 percent

durables manufacturing:      +1.57 percent       +1.37 percent       +1.98 percent

fabricated metals products:  +1.89 percent      +0.95 percent        +1.88 percent

machinery:                           +0.78 percent       -0.88 percent        +0.67 percent

automotive:                          +0.69 percent      +1.20 percent       +0.17 percent

major appliances:                 -4.84 percent       -4.39 percent        -2.04 percent

aircraft and parts:                +2.39 percent      +3.59 percent       +4.39 percent

With the exception of the automotive sector (where a big inventory overhang could finally be slowing output significantly) and aircraft and parts (which keeps chugging along, so far despite Boeing’s safety troubles) these major metals-using sectors enjoyed Augusts that were much stronger in terms of growth than their Julys. And in August, durable goods overall (the manufacturing super-sector in which the main metals-using industries are located), major appliances, and aircraft and parts have recaptured the relative growth lead they’d lost the previous month.

The effects of President Trump’s China tariffs have been much more difficult to ascertain for many reasons: Even the earliest have been in effect only since last summer. Their nature has been so on-again-off-again nature. The original tariff levels on some have been increased. Their use is so widely (but often so thinly and non-uniformly) spread throughout American industry. And the official lists of tariff-ed products don’t match up precisely with the classification system used by the Fed (and the rest of the U.S. government) to track trends in manufacturing and the rest of the economy.

All the same, here are results for a handful of sectors reasonably certain to have faced tariff pressure since last August. Each column measures real output changes since that month.

                                                   Aug thru June    Aug thru July    Aug thru Aug

overall manufacturing:              -0.48 percent     -0.89 percent      -0.36 percent

ball bearings:                             -2.48 percent     -2.30 percent      -2.23 percent

industrial heating equip:           -4.96 percent     -4.16 percent      -2.52 percent

farm machinery & equip:         -6.44 percent     -6.91 percent     +9.71 percent

oil/gas drilling platform pts:   +2.18 percent     -0.84 percent       -1.04 percent

The sample size is obviously very small, and the results are almost as obviously a wash.

Looking ahead, domestic manufacturing – and especially the metals-using industries – faces at least two visible possible hurdles: Boeing’s ongoing woes, and a new strike at General Motors. And literally no one outside the Oval Office (assuming President Trump does) knows what the future will bring in terms of tariffs on imports from China, retaliation from Beijing. And don’t forget the Congressional vote on the U.S.-Mexico-Canada [trade] Agreement that may be coming.

But the August manufacturing production data were unquestionably solid. They continued a decent recent streak for the nation’s industries, and indicated considerable resilience – including possibly a growing ability to adapt to a radically different and volatile trade policy environment.

Im-Politic: Has Trump’s Record on Real Wages Been Good Enough Politically?

Tags

Barack Obama, China, Im-Politic, inflation-adjusted wages, Labor Department, manufacturing, private sector, real wages, tariffs, Trade, trade war, Trump, wages

Given the on-again-off-again nature of President Trump’s tariff policies (which against China went partly off again yesterday in the form of an announced short delay in the imposition of $250 billion worth of levies originally set for October 1), I figured there was no sense in performing my now-standard analysis of this morning’s new monthly U.S. consumer price inflation figures (for August).

Instead, I’ll focus on today’s inflation-adjusted wage data – which is always released by the Labor Department in tandem with the consumer inflation report –  and here there’s definitely some good news for President Trump, his supporters, and for manufacturing workers. One notable qualification: The shorter the memories of Trump working class voters, the better for his political future.

The table below makes clear what I mean. It shows the price-adjusted wage changes for the last three January-thru-August periods for private sector workers overall, for “blue-collar” private sector workers (that is, those not in management or supervisory positions), for manufacturing workers overall, and for blue-collar workers in general and their manufacturing counterparts. (To remind:  The Labor Department doesn’t track wages for public sector employees, since their pay stems mainly from politicians’ decisions, not economic fundamentals.) 

January thru Aug. real wages                  2019                2018                 2017

private sector:                                 +0.55 percent   +0.75 percent    +0.94 percent

private sector blue-collar:               +1.27 percent   +0.76 percent   +0.76 percent

manufacturing:                               +0.65 percent     -0.19 percent   +0.46 percent

manufacturing blue-collar:            +0.23 percent         0 percent      +1.15 percent

As you can see, manufacturing workers in particular have seen January-through-August constant-dollar wage gains in 2019 that were much better than in the comparable last year – but largely because the 2018 results were terrible. Moreover, for blue-collar manufacturing workers, the 2019 improvement was still much weaker than the 2017 increase. Private sector blue-collar after-inflation hourly wages accelerated year-on-year in 2019 as well, but the 2018 gain was at least identical to 2017’s.

Short blue-collar worker memories will also help Trumpworld if the Obama administration’s real wage record is forgotten. For Mr. Trump’s record trails that of his predecessor for all of these major worker categories (although the advance in inflation-adjusted manufacturing blue-collar wages under both Presidents during comparable periods of their terms in office is pretty similar).

                                                   Last 30 Obama months       First 30 Trump months

private sector:                                  +3.39 percent                      +2.62 percent

private sector blue-collar:               +3.97 percent                      +2.72 percent

manufacturing:                                +3.25 percent                     +0.37 percent

manufacturing blue-collar:              +3.22 percent                     +3.11 percent

Let’s end on a fairly positive note for Mr. Trump and his backers: The table below shows that overall, price-adjusted wages in manufacturing fared better after his tariffs’ advent in March, 2018 (for the most part) than during the pre-tariff phrase of his presidency. Because the two time periods have been of different lengths, I’m presenting the results in terms of average monthly changes in absolute dollars and cents terms.

                                                         Pre-tariffs                            Post-tariffs

Manufacturing:                               -0.31 cents                           +0.50 cents

Blue-collar manufacturing:           +0.85 cents                            +0.75 cents

Again, what these statistics mean for the future of American workers is anyone’s guess, especially in trade-heavy manufacturing, since trade policy decisions seem so ragged. And politically, the key question remains: Have times been good enough for working class and other voters during the Trump era to offset other concerns about his leadership sufficiently to bring him a second term?

(What’s Left of) Our Economy: Economic and Political Productivity Puzzles

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labor productivity, manufacturing, non-farm business, Obama, productivity, Trump, {What's Left of) Our Economy

It’s U.S. labor productivity data time – in other words, the point at which all Americans interested in their economy and its future should be examining the latest news about a major measure of economic efficiency that speaks volumes about the nation’s chances of boosting living standards on a healthy, sustainable, rather than bubble-ized and therefore dangerous, basis.

And the Labor Department figures released last week continue to show a split personality performance: decent results for non-farm businesses (the Department’s main category for the economy as a whole), and woeful, worsening results for manufacturing.

According to these revised numbers for the second quarter of the year, output per each hour on the job by each worker (the narrower but most timely of two productivity measures tracked by Labor), increased over the first quarter’s level by the same 2.3 percent annual rate initially reported. In manufacturing, however, the originally published 1.6 percent annualized sequential decline is now judged to be a 2.2 percent drop – the worst such performance since the four percent nosedive in the third quarter of 2017.

As shown in the table below, the new data leave the current economic expansion (which began in mid-2009) as a major labor productivity laggard. After all, the cumulative growth rate for non-farm businesses is little better than half that of the 1990s expansion, even though they lasted for approximately the same period of time. And it’s even slower than the labor productivity growth rate of the bubble decade’s expansion – which was about 40 percent shorter. As for manufacturing, the table makes clear that the deterioration has been much greater.

                                                                          Non-farm business    Manufacturing

1990s expansion (2Q 1991-1Q 2001):                 +23.74 percent      +45.86 percent

bubble expansion (4Q 2001-4Q 2007):                +16.59 percent     +30.23 percent

current expansion (2Q 2009 thru prelim 2Q 19):  +12.80 percent      +9.19 percent

current expansion (2Q 09 thru revised 2Q 19):     +12.80 percent      +9.02 percent

Nonetheless, the new figures do contain some good news for President Trump. So far during his administration, overall labor productivity has grown faster than during the last comparable period under former President Obama. Manufacturing labor productivity has grown more slowly, but the difference is only fractional:

                                                                         Non-Farm business   Manufacturing

last 8 Obama quarters:                                         +1.33 percent        +0.38 percent

first 8 Trump quarters:                                         +3.46 percent        +0.25 percent

Even better, although the second quarter’s non-farm business annualized 2.3 percent labor productivity growth was lower than the first quarter’s 3.5 percent, the trend under Mr. Trump has generally been up. During those last two Obama years, the growth rate slowed significantly. In manufacturing, however, the momentum picture has been the reverse – modest but overall strengthening under Obama, major weakening under Mr. Trump.

One reason for this recent manufacturing deterioration could actually be good news politically for the President and his supporters: During his months in office so far, manufacturing workers’ compensation cumulatively has risen at more than twice the rate (8.52 percent) than during the final eight quarters of the Obama administration (4.06 percent). And workers, of course, are often voters.

Yet this development brings up a real puzzle: When it comes to non-farm businesses, the Trump productivity performance has been considerably better than the Obama even though compensation under the current administration has also risen much faster (11.30 percent cumulatively) than during the comparable period under the previous administration (6.96 percent).

On the one hand, puzzling productivity results aren’t all that puzzling, since most economists admit that it’s the performance measure that’s the most difficult to track. On the other, these Obama-Trump puzzles look pretty mysterious even by productivity’s standards.

(What’s Left of) Our Economy: The New Jobs Report’s Wage Details are Mixed, Too – Economically and Politically

Tags

inflation-adjusted wages, Jobs, manufacturing, Obama, private sector, real wages, Trump, wages, {What's Left of) Our Economy

The latest U.S. government report on the nation’s employment picture (for August) produced unusually mixed jobs results. (See, e.g., this report.) Maybe that’s why analysts seem to have missed one of its more encouraging takeaways: Hourly wages in the manufacturing sector, which have remained weak throughout the current economic expansion and into the Trump era, have picked up notably so far this year.

Yet the new data also make clear that, when it comes to the gap between U.S. blue-collar workers’ in the private sector overall and those of their better paid white-collar counterparts, the former have lost some ground under the Trump administration, even though their hourly wages are up in absolute terms.

So for a President who’s going to run for reelection largely as a populist champion of forgotten Americans, the August results were unusually mixed as well. 

That manufacturing-specific pickup has taken place in pre-inflation wages, and we won’t get the latest constant dollar figures until this coming Thursday. But the progress before adjusting for price changes (and don’t forget – inflation has been awfully low lately) has been so notable that, for now, manufacturing wages’ performance is no longer worsening in comparison with the trends in the overall private sector. Indeed, the gap has narrowed a smidge.

Chiefly, from this January through August, current dollar manufacturing wages are up 2.09 percent. That’s the best such increase since 2008 (2.44 percent) – when the economy was still mired in recession, and employers’ tendency to jettison less experienced and thus more poorly paid workers produced a statistical wage increase for the remaining manufacturing workforce.

Moreover, this improvement was slightly faster than the two percent rise achieved by the private sector overall – also the best such performance since 2008 (2.36 percent). (This Labor Department wage series only goes back to 2006.)

The story is similar for blue-collar workers in both manufacturing and the private sector overall. (Data for these wages in the overall private sector goes back all the way to 1964 and for manufacturing to 1939.) For blue-collar manufacturing workers (called “production and nonsupervisory employees” by the Labor Department), January-through-August pre-inflation hourly pay is up 1.74 percent. That’s of course less than for the manufacturing workforce as a whole, but it’s the best such number since 2016 (1.98 percent) and, perhaps more important, the second best since 2006.

For the overall private sector, current-dollar blue-collar wages have advanced by 2.08 percent between January and August of this year. That’s their best such performance since 2008’s 2.48 percent.

As a result, from the beginning of the current economic recovery (mid-2009) this August, overall pre-inflation private sector wages had risen 1.2906 times faster than comparable hourly pay in manufacturing. That’s ever-so-slightly slower (but still slower) than the ratio through last August (1.294 times faster).

Manufacturing’s relative improvement was greater for blue-collar workers. From the mid-2009 beginning of the current economic recovery through this August, private sector nonsupervisory etc current dollar hourly wages have risen 1.2131 times faster than blue-collar manufacturing wages. That’s a smaller gap than the 1.228:1 ratio from the recovery onset through last August.

Nonetheless, the data show that, after narrowing slightly under former President Obama, the pre-inflation hourly wage difference between blue-collar and white-collar workers overall has been growing slightly again under President Trump.

When the recovery began, in mid-2009, private sector production and non-supervisory workers’ hourly wages were 83.83 percent of the wages earned private sector workers overall. By January, 2017 – the last Obama month in office, this figure had grown to 83.99 percent. As of this August, however, it’s back down to 83.92 percent.

Interestingly, the Trump record looks better when only the manufacturing trends are examined. In mid-2009, blue-collar manufacturing wages stood at 78.93 percent of manufacturing wages overall before inflation. By January, 2017, the share had dipped to 78.25 percent. The latest statistics show that it’s grown to 79.88 percent.

None of these changes is anywhere close to dramatic – a timely reminder, as a presidential campaign year rapidly approaches, that the U.S. economy really is akin to a supertanker, and barring sudden catastrophes or windfalls, typically takes a frustratingly long time to turn significantly.