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

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

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

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

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

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

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

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

Other big December losers included:

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

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

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

The biggest December winners were:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: U.S. Manufacturing Job Creation Stands Out Again

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aerospace, aircraft, aircraft engines, aircraft parts, CCP Virus, chemicals, coronavirus, COVID 19, Employment, Jobs, machinery, manufacturing, medical supplies, NFP, non-farm jobs, non-farm payrolls, non-metallic mineral products, Omicron variant, paper and paper products, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, private sector, semiconductor shortage, semiconductors, surgical equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

Make that twice in a row. Just as in its November counterpart, the December official U.S. jobs data revealed sluggish overall American employment growth but better numbers for manufacturing. Even better, the gains were broad-based and the revisions of previous solid results were nicely positive.

A glass-half-empty type could rightly point out that industry’s 26,000 sequential payrolls gain last month was its weakest monthly result since April’s 35,000 employment drop. But the sector’s previously reported 31,000 sequential employment improvement is now pegged at 35,000. And after being downgraded from 60,000 to a (still-not-too shabby) 48,000, October’s increase has now been upgraded to 52,000.

For comparison’s sake, industry’s employment improvement came to 0.21 percent – as opposed to 0.17 percent for the private sector as a whole and 0.13 percent for “non-farm payrolls” (the U.S. Labor Department’s definition of the American employment universe).    

In fact, the December results continued a record of job out-performance that’s been consistent throughout the pandemic period.

As of December, manufacturers had replaced 84.19 percent (1.166 million) of the 1.385 million employees they’d shed during the short but steep CCP Virus-induced downturn of March and April, 2020. That figure’s 3.01 percent higher the 81.73 percent of regained jobs calculable from last month’s jobs report. Consequently, manufacturing payrolls are within 1.71 percent of their levels in February, 2020 – the last full data month before the pandemic began hammering and distorting the entire economy.

As for non-farm payrolls, they’ve now regained 84.02 percent (18.790 million) of the 22.362 million jobs lost during the worst of the pandemic. That’s 1.84 percent better than the 82.50 percent share calculable from last month’s jobs report. And there are now just 2.34 percent fewer non-farm U.S. jobs than in February, 2020.

As in the recent past, at first glance today it looks like the U.S. private sector has outdone manufacturing jobs-wise since the current economic rebound began. It’s recovered 87.61 percent (18.708 million) of its 21.353 million job loss during the spring of 2020. That’s 1.80 percent higher than the 86.06 percent figure calculable from the November jobs report. So it’s workforce is now 2.04 percent smaller than just before the pandemic.

But as known by RealityChek regulars, manufacturing’s jobs decline during that terrible spring of 2020 was smaller proportionately than that of the private or non-farm sectors. So even though it’s had less ground to make up, U.S.-based industry has been creating new employment at nearly the pace of the economy as a whole.

Indeed, just before the CCP Virus struck, manufacturing jobs represented 8.45 percent of total non-farm employment and 9.87 percent of private sector employment. As of December, these shares had risen to 8.45 percent and 9.90 percent, respectively.

The list of biggest jobs winners among the major manufacturing sub-sectors tracked by the Labor Department was headed by machinery – where payrolls rose by 7,000 on month in December. That was its biggest advance since July’s 8,700, and especially encouraging both because this industry lost 6,000 jobs in November (slightly better than the 7,000 decrease previously reported), and because its products are used throughout both manufacturing and big non-manufacturing industries like agriculture and construction.

Therefore, if machinery makers are adding strongly to their headcounts, they’re probably expecting demand for their goods to grow further. December’s hiring surge brought machinery employment to within 2.14 percent of its February, 2020 level.

Another major manufacturing employment gainer – automotive, where employment increased by 4,200 sequentially in December, and where the terrible 10,100 job loss reported last month for November is now judged to be just 5,900. As a result, payrolls in automotive – which remains dogged by the global semiconductor shortage – are now 5.28 percent lower than their immediate pre-pandemic levels.

Good December results were reported as well in the very big chemicals sector, which added 2,300 positions on month, and whose November performance was upgraded from no change to a 400-worker increase. Consequently, chemicals employment is now 1.30 percent greater than in February, 2020.

Other significant December manufacturing jobs winners included non-metallic mineral products (2,100) and plastics and rubber products (2,000).

The only manufacturing jobs loser that saw payrolls down by more than 1,000 was paper and paper products, where employment was off by 1,500. Even here, though, there was a somewhat bright side, as the decline was its first since July, and followed an upwardly revised 2,800 gain – its best since September, 2020’s 3,200. And this sub-sector’s employment levels are off just 1.84 percent since pre-pandemic-y February, 2020.

Given the aforementioned semiconductor shortage, however, it’s worth noting that December saw the semiconductors and electronic components industries (which, as the name suggests, includes more than just microchips), suffer their first back-to-back employment decline since March and April, 2020. The job reductions of 200 in November (upgraded from the previously reported 600) and 800 in December left employment levels 0.08 percent below those just before the CCP Virus struck.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and their November job creation was mixed.

The surgical appliances and supplies sector, which contains personal protective equipment and similar goods, added 1,400 workers sequentially in November. And even though October net hiring remained unrevised at a small 100, these industries have now increased employment by 9.60 percent since February, 2020.

Yet the overall pharmaceuticals and medicines industry lost 600 jobs in November, after boosting employment by a downwardly revised 1,400 in October. Its workforce is now 5.27 percent larger than in February, 2020.

Much better results were turned in by the medicines subsector containing vaccines. October’s hiring gain was revised up from 700 to 800, and payrolls rose by another 1,400 in November. These advances have pushed these companies’ payrolls 14.66 higher than just before the pandemic’s arrival.

The mixed pattern continued in the aviation cluster, which has suffered both from aerospace giant Boeing’s manufacturing and safety problems and the pandemic’s restrictions on travel. Good news like the prospect of China allowing the troubled 737 Max model to return to its huge market reportedly have spurred the company to speed up a production rebound, and interestingly, U.S. aircraft employment climbed by 1,000 in November – the best monthly performance since July’s 4,700 jump.

But October’s previously reported small 300 jobs gain was revised down to 200, and with its workforce still 7.75 percent smaller than in February, 2020, aircraft employment’s comeback remains far from complete.

Moreover, the improving aircraft jobs picture doesn’t yet extend to aircraft suppliers. In aircraft engines and engine parts industry, October’s previously reported 100 job decline is now judged to be an increase of 100. But payrolls resumed shrinking in November (by 300), and employment in this sector is now off 13.93 percent since February, 2020.

In non-engine aircraft parts and equipment, employment was unchanged sequentially in November, but a jobs gain of 100 previously reported for October has now been downgraded to a job loss of 100. The bottom line? Its workforce is now 15.74 percent smaller than in February, 2020.

As has been so often the case, and like the rest of the economy, U.S. manufacturing faces perplexing – and in fact unprecedented crosswinds – going forward. And the uncertainties look all the more mysterious since these December jobs results pre-date the arrival of the wildly infectious Omicron variant of the CCP Virus – which could well lead to more health-related restrictions and behavioral changes, even tighter labor markets, and slower economic growth.

But unless Omicron prompts major, protracted shutdowns, manufacturing’s performance during the pandemic so far seems to justify optimism that industry will keep overcoming whatever obstacles come its way — whether policy or pathogens.

(What’s Left of) Our Economy: A New U.S. Manufacturing Growth Report That’s the Good Kind of Boring

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aerospace, aircraft, aircraft parts, automotive, Boeing, Build Back Better, CCP Virus, China, coronavirus, COVID 19, Federal Reserve, inflation-adjusted output, infrastructure, interest rates, Iran, Iran deal, Israel, Joe Manchin, machinery, manufacturing, medical devices, nuclear deal, Omicron variant, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, quantitative easing, Russia, semiconductors, stimulus, supply chains, Taiwan, tariffs, therapeutics, Trade, Ukraine, vaccines, Wuhan virus, {What's Left of) Our Economy

Today’s Federal Reserve after-inflation U.S. manufacturing data (for November) were refreshingly (though encouragingly) boring, with one exception – some genuinely eye-popping revisions in specific, high-profile industries.

Overall real manufacturing output improved on month by 0.68 percent, adding to the evidence that domestic industry has bounced back from summer and early fall doldrums caused partly by damage from Hurricane Ida and partly by a global semiconductor shortage that depressed automotive production.

And in this vein, the November results weren’t dramatically impacted by the vehicle and parts sector, whose inflation-adjusted production rose by a 2.22 percent figure that’s clearly strong but decidedly un-dramatic compared with the roller-coaster it’s been on for most of the year.

In addition, revisions for manufacturing as a whole were modest and mixed.

The list of November’s biggest monthly manufacturing growth winners indicates how broad-based industry’s sequential constant dollar output gains were in November. No fewer than six of the major manufacturing subsectors tracked by the Fed enjoyed price-adjusted production advances of more than one percent. Aside from automotive, they were aerospace and miscellaneous transportation (whose 1.64 percent increase included another strong rise in aircraft, as will be detailed below); paper (up 1.63 percent); plastics and rubber products (1.45 percent); non-metallic mineral goods (1.25 percent); and textiles (1.21 percent).

The biggest losers were petroleum and coal products (down 1.24 percent on month); machinery (off by 0.66 percent); apparel and leather goods (0.53 percent); and printing and related support activities (0.50 percent).

But even in this group, hopeful signs can be found. As RealityChek regulars know, drps in machinery production are worrisome because its products are used so widel in the rest of manufacturing and in big non-manufacturing sectors like construction and agriculture.

But the November decline followed one of those eye-popping revisions. October’s originally reported 1.27 percent sequential decrease is now judged to be a 0.59 percent increase.

Moreover, the printing and petroleum and coal products fall-offs were both preceded by October real production advances that have been downwardly revised (from 4.97 percent to 3.79 percent for the former, and from 1.41 percent to 1.18 percent for the latter) but were still impressive.

Manufacturing industries that have been prominent in the news during the pandemic generally performed worse in November, save for aircraft and parts – whose performance was spurred by news from industry giant Boeing that continues to be pretty good. (See, e.g., here and here.) After-inflation production climbed by 1.90 percent month-to-month in November, and October’s 1.43 percent increase was revised up to 1.54 percent.

Even with a second downward revision to September’s inflation-adjusted output (from 0.45 percent all the way down to a negligible 0.09 percent), constant dollar output in aircraft and parts is now 15.86 percent higher than in February, 2020 – the last full data month before the CCP Virus began seriously distorting the U.S. economy.

Pharmaceuticals and medicines, however, lost even more growth momentum. Despite major demand for and use of vaccines, their price-adjusted output dipped by 0.15 percent sequentially in November, and October’s decrease was revised from 0.51 percent to 0.76 percent. But September saw another one of these enormous revisions – from a downgraded 1.04 percent production fall to a 0.76 percent gain. All told, these industries are now 13.54 percent bigger in constant dollar terms as of November than in February, 2020.

The news was worse in the crucial medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators. Real production in November was off by 0.61 percent month-to-month in November, and October’s previously reported 1.08 percent decrease is now estimated at a greater 1.91 percent. Moreover, September’s results saw their second big downgrade – first from an initially reported 1.53 percent growth to a 0.73 percent gain, and this morning to one of just 0.16 percent. So since February, 2020, after-inflation production in this sector is up a mere 0.65 percent.

As with the entire economy, the manufacturing sector is being pushed and pulled by what seems to be an unprecedented number and type of forces and government decisions. On balance, though, unless the Omicron variant of the CCP Virus prompts much more voluntary or officially mandated disruption at home or abroad than seems likeliest now, further manufacturing growth still looks like the best bet for the foreseeable future.

Although prospects for stimulus from President Biden’s Build Back Better bill seem barely on life support due to West Virginia Democratic Senator Joe Manchin’s continuing objections, and the Federal Reserve yesterday announced further reductions in its stimulative bond-buying (AKA quantitaive easing), infrastucture bill money should soon begin flowing.  Further, the central bank still made clear that heavy levels of quantitative easing will continue for months more, and is in no rush to start raising interest rates.

Most consumers still have plenty of money to spend, even though further inflation could weaken their appetites. U.S. employment levels keep rebounding strongly by most measures. Supply chain knots continue untangling, albeit not always quickly. Mr. Biden is keeping nearly all of his predecessor’s China tariffs in place, which is preventing predatory Chinese competition from taking customers from domestic manufacturers. The brightening Boeing picture will help its entire vast U.S.-based supply chain. And American and overseas demand for both CCP Virus vaccines and now therapeutics will surely keep growing whatever the rest of the domestic or global economies do.

One set of gathering clouds shouldn’t be neglected, however. I don’t mean to sound alarmist, and don’t believe conflicts are imminent, but what the investment community calls “geopolitical risk” is troublingly on the rise in Asia (due to mounting Chinese pressures on Taiwan) and Europe (due to Russia’s military buildup on the Ukraine border). Moreover, although negotiations to slow Iran’s progress toward nuclear weapons capability have resumed, this has been ongoing and nearing critical threshholds. And it’s far from clear how well a nuclear Iran would go down with Israel – just as it’s far from clear how well domestic manufacturing and the rest of the economy could withstand a second major non-economic disruption in a very few years.

(What’s Left of) Our Economy: Steady as She Goes for U.S. Manufacturing Employment

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737 Max, aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, Biden administration, Boeing, Build Back Better, CCP Virus, China, computer and electronics products, coronavirus, COVID 19, electrical equipment, Employment, fabricated metals products, Federal Reserve, food products, Jobs, Labor Department, machinery, manufacturing, miscellaneous durable goods, miscellaneous non-durable goods, NFP, non-farm payrolls, Omicron variant, personal protective equipment, pharmaceuticals, PPE, private sector, stimulus, surgical equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

However disappointing America’s November economy-wide job creation was, the official U.S. statistics released this morning show that you shouldn’t blame the nation’s manufacturers. Although total non-farm payrolls (NFP – the domestic employment universe of the U.S. Labor Department, which tracks these trends) advanced sequentially by a modest 210,000 (the worst such figure since last December’s 306,000 monthly loss), U.S.-based industry added a solid 31,000 net new positions. And revisions of the previous few months strong numbers were revised downward only moderately.

Speaking of revisions, it’s especially important today to note that the new NFP statistics are still preliminary – and will be for two more months. It’s especially important because recently – and no doubt largely due to the unprecedentedly weird nature of the CCP Virus-era U.S. economy – revisions have been enormous. For example, August’s initially reported NFP increase was just 235,000. Since then, it’s been upgraded all the way up to 483,000. The first September result – 194,000 – is now judged to be 379,000. So there’s no reason yet to conclude that the national economic sky is falling, or even changing much.

At first glance, based on this preliminary November data, manufacturing’s latest monthly employment performance slightly trailed that of the rest of the economy.

As of last month, including the revisions, industry has regained 1.132 million (or 81.73 percent) of the 1.385 million jobs it lost during the worst of the pandemic-induced recession in spring of 2020. So the manufacturing employment recovery improved by 1.53 percent on month.

The private sector overall as of November has now regained 18.376 million of the 21.353 million jobs it shed during peak CCP Virus. That 86.06 percent figure is 1.76 percent higher than October’s.

And the total non-farm sector has now recovered 18.450 million of the 22.362 million jobs it lost during that pandemic-triggered downturn. The resulting 82.50 percent mark is 1.60 percent better than October’s.

But don’t forget – manufacturing’s jobs decline during that terrible spring of 2020 was smaller proportionately than that of the private or non-farm sectors. So even though it’s had less ground to make up, U.S.-based industry has been creating new employment at nearly the pace of the economy as a whole.

November’s manufacturing jobs improvement was also noteworthy because it took place despite job losses of 10,100 in the automotive sector – which accounted for more than 40 percent of October’s advances. In fact, automotive revisions also accounted for 70 percent of the downgrading of that overall manufacturing October monthly manufacturing jobs improvement (from 60,000 to 48,000).

Other important November manufacturing job losers in the larger categories monitored by the Labor Department were computer and electronics products, which contains semiconductors, and which saw employment drop by 1,300 (its worst monthly decline since the 4,900 recorded in July, 2020); and – at least as troublingly, machinery. That latter industry, whose products are used throughout manufacturing and big non-manufacturing industries like agriculture and construction, shed 6,000 positions. That was its biggest month’s worth of job losses since the 861,000 disaster during the dark days of April, 2020.

These losses leave computer and electronics employment levels just 0.85 percent higher than just before the pandemic began distorting the American economy (in February, 2020) and machinery employment levels 2.63 percent lower.

November’s big manufacturing jobs winners were topped by the miscellaneous durable goods sector – which includes the major CCP Virus-related medical goods. Its payrolls surged by 10,000 – the most since July, 2020, during the first post- pandemic economic bounce, when they soared by 15,000. The fabricated metals products industry generated a 7,900 payroll jump that was its biggest since March’s 10,100. Food products added 7,400 employees for its best gain since August, 2020’s 19,000. Miscellaneous non-durable goods manufacturing was up 3,500. And electrical equipment and appliances’ payrolls grew by 3,300.

As always, the most detailed employment data for pandemic-related industries is one month behind those in the broader categories, and their October job creation was generally solid.

On the disappointing side was the surgical appliances and supplies sector. This industry contains personal protective equipment and similar goods, and the miscellaneous durable goods sector in which it’s been classified saw employment rise by a respectable 2,900 sequentially in October. But only 100 of these new positions came in the surgical appliances and supplies sub-sector. At the same time, September’s initially reported 900 jobs increase was revised up to 1,300, so maybe October will be a statistical blip – assuming of course that it’s not substantially revised, too. And as of October, payrolls in this sector have climbed by 8.27 percent over their immediate pre-CCP Virus February, 2020 levels – compared with the 7.79 percent calculable from the previous jobs report.

The overall pharmaceuticals and medicines industry performed better, with payrolls swelling by 1,500 in October. Still, September’s initially reported jobs rise of 1,500 was revised down to 1,200. Therefore, employment in these sectors now stands 5.49 percent higher than in February, 2020 – better than the 4.62 percent calculable last month.

The medicines subsector containing vaccines expanded employment by 700 in October – down from September’s 1,700, but better than August’s 400. These results mean that this industry’s workforce is now 13.25 percent larger than in February, 2020.

U.S. aerospace giant Boeing’s manufacturing and safety problems have depressed employment in aircraft production along with the pandemic’s restrictions on travel, and payrolls improved by just 300 on month in October following an unrevised drop of 500 in September. But help may be on the way, with China having just decided that its troubled 737 Max model has passed safety inspections and may return to the China market after a two-year ban that greatly reduced the company’s – and overall U.S. – exports.

So although the American aircraft industry’s workforce in October was still 8.12 percent smaller than it was just before the CCP Virus era (down from the 8.24 percent shrinkage calculable last month), look for the sector to start closing the gap meaningfully.

Good news sure could be used by the U.S. aircraft engines and engine parts industry. In October, its employment dipped by 100, and September’s initially reported jobs gain of 600 has been downgraded to 400. This sector’s workforce is now down 13.82 percent since immediate pre-pandemic-y February, 2020 – more than the 13.49 percent calculable last month.

The situation in non-engine aircraft parts and equipment was a good deal better. It grew payrolls by just 100 in October, but September’s initually reported jobs increase of 900 is now pegged at 1,200 – the best such performance since April, 2008. Consequently, whereas employment in this sector as of last month’s data was 15.82 percent less than in February, 2020, the figure is now 15.48 percent.

A significant Boeing comeback would add to the tailwinds identifiable behind the manufacturing jobs scene at this time. Others of course are the expected continued strong growth of the entire economy, a possibly stronger recovery globally, an easing of the supply chain crisis, the prospect of infrastructure bill money starting to be spent, and the seemingly shrinking odds that manufacturers and other U.S.-based businesses will face significant tax increases related to the Biden administration’s Build Back Better legislation.

Not that clouds are gone from the scene completely. Inflation seems to be picking up (although so far, and by the same token, manufacturers in toto have been able to pass on price increases to business and household customers). A defeat or postponement of Build Back Better will reduce the amount of government stimulus supporting consumer spending – and if the Federal Reserve follows through with its decision to start cutting back on some of its own stimulus, contractionary forces will strengthen. And of course there’s the virus wild card that’s just appeared in the form of the Omicron variant.

Still, the tailwinds now seem more impressive than the clouds, so I’m still optimistic about the future of manufacturing’s jobs recovery.

(What’s Left of) Our Economy: Headwinds Finally Undercut U.S. Manufacturing Output

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aircraft, aircraft parts, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Federal Reserve, health security, Hurricane Ida, machinery, manufacturing, medical devices, personal protective equipment, petrochemicals, petroleum refining, pharmaceuticals, plastics, PPE, printing, supply chains, {What's Left of) Our Economy

The new Federal Reserve industrial production figures indicate that all the headwinds it’s faced recently are finally proving too much for U.S. domestic manufacturing – at least for the time being. Moreover, revisions show that they – started taking a significant toll earlier than previously reported.

There’s still a case for optimism, as the numbers showed that damage inflicted by Hurricane Ida to the petrochemicals, plastics resins, and petroleum refining sectors originally revealed in the previous industrial production release (covering August) continued depressing the overall September figures (which came out this morning). Presumably, those effects have already begun to wear off.

The main argument for pessimism? The supply chain snarls that have been hamstringing manufacturers – especially in the automotive industry – seem certain to persist for many more months.

At the 30,000-foot level, U.S.-based manufacturing’s recent struggles can be seen by the 0.76 percent monthly drop suffered by its real output in September, and the new 0.40 percent decline now estimated for August – a significant downward revision from the previous 0.11 percent growth number. Moreover, such back-to-back after-inflation sequential production decreases are the first since the brief but savage recession triggered by the CCP Virus’ arrival in force in the United States in the spring of 2020.

Behind both these last two contractions have been Ida and supply chain woes.

Specifically, in August, the automotive sector was originally judged to have grown fractionally over July levels. Now this fall-off is pegged at 3.19 percent. And in September, constant dollar production tumbled another 7.17 percent – the worst sequential result since April’s 7.23 percent.

As for the most Ida-affected industries, the revisions left their dreary August performances intact overall, but real monthly output shrinkage accelerated in September for the petrochemicals-related organic chemicals sector (from 2.98 percent to 6.63 percent). It moderated somewhat in the resins and synthetic rubber segment (from 3.08 percent to 2.54 percent). And it turned from growth to contraction in petroleum refineries (from a 1.03 percent gain to a 2.64 percent drop).

Domestic manufacturing’s biggest September monthly growth winners among the broadest industry categories tracked by the Fed? The champ hands down was printing and related support activities, which expanded by 2.69 percent in price-adjusted terms. Next came textiles at 1.72 percent (although its fractional August decrease was revised way down to 1.68 percent); followed by electrical equipment, appliances and components (up 1.34 percent, though its August decline was also downgraded, from 1.16 percent to 1.56 percent, and its previously upgraded 3.95 percent July surge was knocked way down to 1.13 percent); miscellaneous durable goods, which contains many key healthcare related products (up 1.29 percent); and fabricated metal products (up 1.22 percent).

Another important winner – the machinery sector, whose products are used throughout the rest of manufacturing and in big non-manufacturing industries like construction and agriculture. Its August monthly contraction was revised down from 0.80 percent to 1.01 percent, but in September it eaked out a 0.18 percent gain. And its big July jump stayed above three percent.

The biggest losers, aside from the aforementioned automotive and hurricane-affected industries? Non-metallic mineral products (down 0.87 percent on month); wood products (off by 0.61 percent); and the very big food products sector (a 0.56 percent slide).

Manufacturing industries that have been prominent in the news turned in overall fair performances in September. Aerospace giant Boeing’s manufacturing troubles continue, but inflation-adjusted aircraft and parts production climbed by 1.83 percent on month and revisions to these sectors’ strong recent results were generally even stronger. As a result, real output in this complex is now 16.33 percent above the levels it hit in February, 2020 – the last full data month before the pandemic struck.

After-inflation production slipped on month in phamaceuticals and medicines by 0.74 percent, but this decrease might be a breather following their August growth – which was revised all the way up from 0.89 percent to 2.75 percent. Thanks to this big upgrade, the sector is now 14.14 percent bigger now than in February, 2020.

The crucial medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators – generated almost precisely the opposite results. Price-adjusted production increased sequentially by 1.53 percent in September, but August’s initially reported 1.73 percent real output decline is now estimated to have been a 2.22 percent fall-off. Consequently, real output of these products has grown by just 5.54 percent during the CCP Virus period.

Manufacturing bulls can point to future growth catalysts – like Congressional passage of a “hard” infrastructure bill, an end to the CCP Virus as a public health emergency (however anyone wants to define that goal), and a resulting new boost to American and global growth. But these catalysts seem unlikely to arrive quickly, meaning that further growth struggles could mark at least the short-term future for domestic manufacturing.

(What’s Left of) Our Economy: A Strong Fall Kickoff for U.S. Manufacturing Employment

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aircraft, aircraft engines, aircraft parts, aluminum, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Employment, fabricated metals products, health security, Jobs, machinery, manufacturing, manufacturing trade deficit, metals, metals-using industries, NFP, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, private sector, semiconductor shortage, steel, supply chains, tariffs, Trade, vaccines, Wuhan virus, {What's Left of) Our Economy

Although the disappointing official September U.S. jobs figures released this morning might have been depressed significantly by “strange [CCP Virus-related] statistical quirks around school reopening,” it’s still noteworthy that manufacturing employment rose nicely during the month – by 26,000 workers. These results are all the more impressive given all the supply chain and semiconductor shortage headwinds faced by domestic industry, especially in the automotive sector.

Moreover, revisions of the strong July and August payroll figures for U.S.-based manufacturers were only slightly negative, with the former’s upgraded 52,000 sequential gain now judged to be 57,000, and August’s initially reported 37,000 improvement downgraded to 31,000.

As a result, in September, domestic industry closed still more of the gap that had opened up in its hiring performance versus that of the total American non-farm sector (the government’s definition of the U.S. employment universe, which includes government jobs), although it lost some additional ground against the private sector.

According to this latest jobs report, manufacturing had regained 74.51 percent of the 1.385 million jobs it lost during the steep pandemic-related recession of March and April, 2020 – up from the 72.71 percent reported in the August jobs release. That’s a faster rate of improvement than for the non-farm sector (whose payroll recovery grew from 76.60 percent of jobs lost during that early spring of 2020 to 77.77 percent) but slower than that of the private sector (which has now seen an 80.71 percent employment recovery from the spring, 2020 lows – up from 78.72 percent).

It’s certainly plausible that the non-farm jobs recovery has been most recently held back by those school reopening problems, and therefore manufacturing’s laggard status will resume once they’re cleared up. At the same time, the relatively slow industry employment rebound is also explained by its superior jobs performance during the CCP Virus recession. Specifically, its payroll levels fell then by 10.82 percent, versus 16.46 percent for private employers and 17.18 percent for the non-farm sector.

And indeed, since February, 2020 (the last full data month before the pandemic and related lockdowns and behavior changes began seriously distorting the economy), manufacturing’s share of non-farm jobs has risen from 8.39 percent to 8.43 percent. In addition, it’s increased as a share of private sector jobs fromThe 9.87 percent to 9.91 percent.

Among the manufacturing sector categories broken out in the official monthly U.S. jobs reports, the biggest September employment winners were fabricated metals products (up 8,200 on month – its best performance since March’s 10,100 jump); machinery (a 6,300 sequential advance); printing and related support activities (4,200 – its best since March’s 5,300); and food products (up 3,500).

Strong machinery hiring is always particularly encouraging, as the sector’s products are used so widely in the rest of manufacturing, as well as in big non-manufacturing industries like construction and agriculture. Almost as important, whereas its August monthly job creation was previously reported as having flatlined, now its estimated to have climbed by 2,600. And fabricated metals products good recent jobs increases are noteworthy given the continuing U.S. tariffs on the steel and aluminum on which they rely so heavily – which supposedly are decimating metals-using industries.

The aforementioned U.S. vehicles and parts-makers were by far the biggest monthly jobs losers recorded in the September release, shedding 6,300 positions on month. That sequential drop was their worst since semiconductor shortage-induced layoffs plunged their employment levels down by 41,600 in April. No other major manufacturing category mentioned in the September jobs report lost more than 800 jobs.

The most detailed employment data for pandemic-related industries is one month behind those in the broader categories, but their job creation performance remained mixed in August.

In surgical appliances and supplies (the sector containing PPE – personal protective equipment – and similar goods), payrolls fell by 2,500 – their worst monthly performance since the previous August’s identical number. July’s 500 sequential jobs gain was upgraded to 900 and June’s 500 improvement remained the same, but jobs in these industries are now just 7.03 percent more numerous than in pre-pandemic February, 2020. As of last month’s jobs report, the figure was 9.22 percent.

The overall pharmaceuticals and medicines industry saw hiring dip by 400 in August – its worst monthly result since May’s 300 decrease. July’s job gains were revised up from 400 to 500, but June’s losses remained at a downgraded 2,300.

These sectors’ payrolls, therefore, have now risen by only 4.62 percent since February, 2020 – not the 4.72 percent published last month.

The pharmaceuticals subsector containing.vaccines fared better. Employment rose by 400 sequentially in August, July’s flatline was upgraded to an increase of 200, and June’s 1,000 jobs improvement remained unrevised. Whereas as of last month, this sector’s payrolls had grown by 10.21 percent since just before the pandemic hit, that figure is now 10.82 percent.

U.S. aircraft producer Boeing continues to suffer from manufacturing and quality problems, but jetliner employment inched up on month in August anyway – by 200. But July’s 1,500 sequential jobs decline was revised down to 1,600, while June’s upwardly revised 4,700 jump remained the same. All told, aircraft employment is now down by 8.04 percent since February, 2020 – a bit better than the 8.08 percent shortfall reported in last month’s jobs report.

The story was similar in aircraft engines and engine parts. These industries added 600 workers seqentially in August, and July’s previously reported payroll increase of 200 is now estimated at 300. June’s downgraded 400 jobs gain was unrevised, and so employment in these sectors is now off by 14.04 percent since February, 2020 – some progress over the 14.80 percent reported last month.

Non-engine aircraft parts and equipment are still stuck even deeper in the doldrums. August’s 500 jobs loss drove its payrolls down to 16.60 percent lower than in February, 2020, versus the 16.17 percent drop reported as of last month.

With manufacturing employment still powering ahead even with its supply chain issues (which reportedly don’t seem likely to end till sometime next year), and with the CCP Virus threat still hanging over the economy, betting against more of the same going forward seems foolish. And interestingly, industry’s jobs prospects look bright despite signs that its mammoth trade deficit is heading back up, at least in absolute terms. (We don’t yet have recent enough figures to know whether it’s rising in relation to manufacturing output, which is the much more important measure.)

As they say in the investment world, past performance is no guarantee of future results.  But domestic manufacturing’s recent employment performance has overcome so many obstacles over the past year-plus that it might be the best basis we have right now for prediction.  

(What’s Left of) Our Economy: U.S. Manufacturing’s Now Defying Hurricanes and Delta

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aircraft, aircraft parts, appliances, Boeing, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, Delta variant, electrical equipment, fabricated metal products, facemasks, Federal Reserve, furniture, Hurricane Ida, inflation-adjusted growth, machinery, manufacturing, masks, medical devices, medicines, oil refining, paper, personal protective equipment, petrochemicals, pharmaceuticals, plastics, PPE, real output, semiconductor shortage, supply chain, travel, ventilators, Wuhan virus, {What's Left of) Our Economy

Domestic manufacturing’s done it again. Just as with the Labor Department’s August jobs report, the Federal Reserve’s new release on manufacturing output for the month shows that industry kept dodging whatever potholes the CCP Virus and its highly infectious Delta variant keep digging for the rest of the U.S. economy.

America-based manufacturers’ inflation-adjusted production grew by a meager 0.11 percent sequentially in August. But output was held down by facility closures forced by Hurricane Ida in the petrochemicals, plastics resins, and petroleum refining sectors. Overall revisions were mixed, but some upgrades and downgrades in individual major industries were pretty remarkable, as will be seen below.

The biggest winners in the new price-adjusted manufacturing production report were the small, catch-all “other manufacturing” category (2.42 percent); furniture and related products (up 2.07 percent); computer and electronics products (whose 1.21 percent output rise may have been a response to the worldwide shortage of semiconductors); paper (up 1.07 percent); and fabricated metal products (up 0.74 percent).

The biggest losers were electrical equipment, appliances, and components (down 1.16 percent); textiles products (down 0.81 percent on month); machinery (down 0.80 percent); and the big chemicals sector (down 0.49 percent).

Normally, the machinery results would be discouraging, since its products are used so widely both in the rest of manufacturing and also in big non-manufacturing industries like agriculture and construction. But its August dip followed a July jump of 3.31 percent – its best production improvement since January’s 4.63 percent – which was dramatically upgraded from the previously reported 1.91 percent.

The electrical equipment category followed a similar pattern. Its July real production results were revised all the way up from 2.31 percent to 3.95 percent – its best such performance since January, 2010, when the economy was still in its early bounce-back from the Great Recession that followed the global financial crisis.

Also enjoying a solid August were two narrower manufacturing categories that remain in the news due to the ongoing effects of the CCP Virus. Air travel has of course suffered throughout the pandemic-era, and aerospace manufacturing giant Boeing has been hit with numerous related manufacturing and safety problems (including some pre-dating the pandemic, like the grounding of the popular 737 Max jetliner).

Yet aircraft and parts production in constant dollars advanced by 0.34 percent in August, and in another major revision, July’s previously reported 2.78 percent increase is now pegged at 4.10 percent – its best such result since January’s 6.79 percent burst. And June’s downgraded 3.57 percent rise was bumped back up to 3.84 percent. As a result, aircraft and parts production is now 12.63 percent higher in after-inflation terms than in February, 2020 – the last full data month before the virus began significantly affecting the U.S. economy.

The pharmaceuticals and medicines sector (which includes vaccines) saw a real month-to-month production increase of 0.89 percent in August, and revisions were modest and mixed. These results left inflation-adjusted output 12.33 percent higher than its immediate pre-pandemic levels.

But August real production sank sequentially by 1.73 percent in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators.

On the brighter side, July’s initially reported 1.71 percent constant dollar production rise was revised up to 2.42 percent. June’s dramatically downgraded 1.54 percent decrease was upgraded to a 0.13 percent drop, and May’s upwardly revised 1.86 percent real growth was downgraded only slightly – to 1.78 percent. Even so, on a price-adjusted basis, this crucial industry is just 2.66 percent larger than before the CCP Virus arrived in force.

Domestic industry still faces important headwinds of course – and not just from the possibility that Delta keeps worsening America’s public health and economy, and that approaching winter weather triggers a new wave of infections, hospitalizations, deaths, and restrictions. Those global supply chain snags are still with us, too.

But throughout the pandemic era, U.S.-based manufacturers have overcome obstacles just like this, and their consistent vigor indicates that it’s the pessimists about their future prospectswho now face the biggest burden of proof.

(What’s Left of) Our Economy: U.S. Manufacturing Hiring’s Sloughing Off Delta – For Now

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aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Delta variant, electrical equipment, Employment, fabricated metal products, food products, healthcare goods, Jobs, logistics, machinery, manufacturing, medical equipment, metals, non-farm payrolls, pharmaceuticals, plastics and rubber products, PPE, private sector, semiconductor shortage, supply chains, tariffs, transportation, vaccines, {What's Left of) Our Economy

This morning’s official monthly U.S. jobs report (for August) brought a notable departure from recent trends. Athough the overall results were lousy (as total employment rose by just 235,000 during the month), manufacturing hiring soared by 37,000.

It’s true that nearly two-thirds of these gains (24,100) came from the automotive sector, which has been roiled recently by a shortage of semiconductors that’s wreaked havoc on the output of today’s increasingly electronics-stuffed vehicles. It’s also true that this progress might be snuffed out soon by the still widening spread of the CCP Virus’ highly infectious Delta variant and whatever new curbs on economic activity and consumer behavior it might keep prompting.

But it’s also true that domestic industry’s strong hiring in August came during a month when Delta had already become front-page news – which surely expains much of the much-weaker-than expected rise last month in overall non-farm payrolls (NFP – the U.S. jobs universe of the Labor Department that produces the employment data).

And it’s true as well that the major upward revision revealed to the July manufacturing jobs increase (all the way from 27,000 to 52,000 – the best such performance since last August’s 55,000) entailed much more than the vehicles and parts sectors (where the hiring advance was judged to be 10,500 instead of merely 800).

For example, July’s machinery jobs gains were upgraded from 6,800 to 9,100 (its strongest monthly result since last September’s 12,200); those for electrical equipment and appliances was estimated at 1,500 instead of 200; and employment in the plastics and rubber sectors was pegged at 2,300, not 300.

Despite its last excellent two months, U.S.-based manufacturing remained a job-creation laggard during the pandemic period as of August. But it became less of a laggard. Since the deep CCP Virus- and lockdowns-induced downturn of March and April, 2020, when manufacturers shed 1.385 million jobs, these companies have boosted employment by 1.007 million – erasing 72.71 percent of those losses. That share of regained jobs is up from the 68.74 percent level it reached in July.

That’s faster improvement than registered by the private sector, whose regained job percentage rose from 76.96 to 78.72, and by the total non-farm economy, where the advance rose from 74.50 percent to 76.60 percent.

Moreover, it’s important to remember that during the economy’s spring, 2020 woes, manufacturing employment suffered less than payrolls in the rest of the economy. Its job levels fell by 10.82 percent, compared with 16.46 percent for the private sector and 14.66 for the entire non-farm economy.

As with the July revisions, the list of significant manufacturing employment winners in August was hardly confined to the automotive industry. Among the major industry categories used by the U.S. government, fabricated metal products payrolls increased by 6,600 on month (the highest sequential boost since March’s 10,100); plastics and rubber products by 3,100 (its best such performance since February’s 4,500); and food manufacturing (1.600).

The biggest July jobs losers were electrical equipment and appliances (down 3,100, for its worst hiring month since January, when its payrolls fell by 3,400) and miscellaneous durable goods (a category containing personal protective equipment – PPE – and other medical supplies crucial for fighting the CCP Virus), whose 1,800 jobs lost were the worst such total since the entire economy’s spring, 2020 meltdown.

Also somewhat discouraging – job creation in the machinery sector, whose products are used elsewhere in manufacturing and throughout the rest of the economy, flatlined in August following its big 9,100 July spike.

The most detailed employment data for pandemic-related industries is one month behind those in the broader categories, but their July job-creation performance was decidedly mixed. In surgical appliances and supplies (the sector containing PPE and similar goods), May’s previously reported payroll decline of 900 is now judged to be a drop of 1,900, but June’s 500 jobs increase remained intact and was followed by an identical improvement in July. As a result, employment in this crucial national health security sector is now 9.22 percent above immediate pre-pandemic levels.

The overall pharmaceuticals and medicines industry saw hiring slow down notably in July – from a downwardly revised 2,300 in June to 400. May’s downwardly revised loss of 300 jobs stayed intact. These changes left payrolls in the sector 4.72 percent above February, 2020’s immediate pre-pandemic levels.

The story was little better in the pharmaceuticals subsector containing.vaccines. Its May and June employment gains are still judged to be 1,000 each, and no jobs at all were added in July. But its workforce is still 10.21 percent higher than just before the pandemic.

The July results showed that aircraft industry employment is still on a roller coaster, since Boeing is still struggling to overcome the manufacturing and safety issues it’s faced in recent years, along with the CCP Virus-related slump in business and leisure travel. May’s 5,500 monthly plunge in employment was unrevised in this morning’s figures, June’s 4,500 increase was upgraded to 4,700, but payrolls retreated again in July – by 1,500. Due to all these fluctuations, aircraft employment fell to 8.08 percent below its levels just before the pandemic arrived in force in the United States.

The aircraft engines and parts industries added 200 employees on month in July, but June’s previously reported increase of 500 was downgraded to 400. As a result, payrolls are down fully 14.80 percent since immediate pre-pandemic February, 2020.

It’s still possible that the Delta, or some other, CCP Virus variant will lower the boom on domestic manufacturing employment going forward – both because economic activity and therefore demand for manufactured goods will stagnate or drop not only in the United States, but in industry’s important foreign markets. Supply chain snags are no sure bet to clear up any time soon, either.

Nonetheless, U.S.-based manufacturing is still clearly benefiting from the Trump tariffs continued by President Biden that are pricing huge amounts of metals and Chinese-made goods out of the domestic market. Vast amounts of economic stimulus are still pouring into the American and foreign economies. And there remains tremendous pent-up demand among U.S. consumers and businesses alike, due to the lofty heights that household savings have reached and to clogged logistics systems. (A “hard” infrastructure bill will help U.S.-based manufacturers, too. But despite efforts to speed up the permitting process, regulations that can long delay the launch of new projects still may mean that the much of the new work will take months and even years before they’re “shovel ready.”)

And as I keep pointing out, those with the most skin in this game – domestic manufacturers themselves – keep professing optimism. (See, e.g., here and here.) That last consideration still tilts the balance toward manufacturing bullishness for me.

(What’s Left of) Our Economy: No Delta Effect on U.S. Manufacturing Growth In Sight. Yet.

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aerospace, aircraft, aircraft parts, appliances, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Delta variant, electrical components, electrical equipment, fabricated metal products, Fed, Federal Reserve, inflation-adjusted growth, inflation-adjusted output, machinery, manufacturing, medical supplies, medicines, personal protective equipment, petroleum and coal products, pharmaceuticals, plastics, PPE, real growth, recovery, reopening, rubber, textiles, vaccines, {What's Left of) Our Economy

The after-inflation U.S. manufacturing production data reported today by the Federal Reserve revealed plenty of newsy developments. But my choice for biggest is the finding that, in price-adjusted terms, domestic manufacturers’ output finally nosed back above its last pre-CCP Virus (February, 2020) level.

The new number isn’t an all-time high – that came in December, 2007, just as the financial crisis was about to plunge the entire U.S. economy into its worst non-pandemic-related downturn since the Great Depression of the 1930s. As of this July, real manufacturing production is still 5.94 percent below that peak.

Measured in constant dollars, however, such output is now 1.15 percent greater than just before the virus arrived in the United States in force. Not much, and of course any Delta variant-prompted curbs on economic activity or extra caution in consumer behavior could wipe out this progress. But you know what they say about a journey of a thousand miles.

Had this milestone not been reached, I’d have led off this post by noting that although some really unusual seasonal factors in the volatile automotive sector definitely juiced the excellent July sequential output gain, U.S.-based industry outside automotive performed impressively during the month as well.

Specifically, as the Fed’s press release noted, the whopping 11.24 percent jump in the price-adjusted output of vehicles and parts contributed about half of overall manufacturing’s 1.39 percent growth. That automotive figure was the best monthly improvement since the 29.39 percent rocket ride the sector generated in July, 2020 – when the whole economy was staging its rebound from that spring’s deep but brief virus-induced recession. And that overall real on-month production advance was the best for manufacturing in general since the 3.39 percent achieved in March – earlier in the initial post-pandemic recovery.

But in July, the rest of domestic industry still expanded by a strong 0.70 percent after inflation – its best inflation-adjusted growth since the 3.31 percent also recorded in March.

The revisions in this morning’s Fed data for the entire manufacturing sector were mixed. June’s initially reported 0.05 percent decline is now judged to be a 0.10 percent increase, and April’s previously reported 0.39 percent drop now stands as a 0.21 percent decrease. But May’s last reported increase – upgraded slightly to a strong 0.92 percent – is now estimated at just 0.65 percent.

Looking at broad industry categories, the big real output July winners in domestic manufacturing’s ranks aside from automotive were electrical equipment, appliances, and components (up 2.31 percent); plastics and rubber products (up 2.02 percent); machinery (1.91 percent); the broad aerospace and miscellaneous transportation sector (think “Boeing”), which rose by 1.90 percent; textiles (up 1.67 percent); and miscellaneous durable goods, which includes but is hardly confined to many pandemic-related medical supplies (up 1.55 percent).

As I keep noting, good machinery growth is especially encouraging, since its goods are used both throughout manufacturing and the economy as a whole, and strong demand signals optimism among manufacturers about their future prospects – which tends to feed on itself and impart continued momentum to industry.

The list of significant losers was much shorter, with real fabricated metal products output 0.42 percent lower than June levels and petroleum and coal products shrinking by 0.60 percent.

Turning to narrower manufacturing categories that remain in the news, despite Boeing’s still serious manufacturing and safety problems, and ongoing CCP Virus-created weakness in air transport, inflation-adjusted production of aircraft and parts continued its strong recent run. June’s initially reported 5.24 percent monthly output surge was revised down to 3.57 percent. But that’s still excellent by any measure. And July saw production climb another 2.78 percent. As a result, real output in this sector is now 9.95 percent higher than it was just before the pandemic’s arrival in the United States in February, 2020.

Real output in the pharmaceuticals and medicines sector (which includes vaccines) grew by 0.77 percent sequentially in July, and its real output is now 11.35 percent greater than just before the pandemic. But those revisions!

June’s initially reported 0.89 percent increase is now judged to be a 0.34 percent decrease, and May’s previously downgraded 0.15 percent rise has now been upgraded all the way to 1.54 percent.

An even better July was registered by the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. Monthly growth came in at 1.71 percent. But revisions here were puzzling, too.

June’s initially reported 0.99 percent sequential real production improvement is now seen as a major 1.54 percent falloff. And May’s monthly constant dollar growth, already upgraded from 0.19 percent to 1.18 percent, is now pegged at 1.86 percent.

I’m still optimistic about domestic manufacturing’s outlook, and that’s still based on domestic manufacturers’ own continued optimism – which as shown by the two major private sector monthly manufacturing surveys remained strong in July. (See here and here.)

But I also continue to view U.S. public health authorities’ judgment as suspect when it comes to the balance that needs to be struck between fighting the virus and keeping the economy satisfactorily open. So as long as new virus variants pose the threat of higher infection rates (though not at all necessarily of greater damage to Americans’ health), my own optimism has become more tempered.

(What’s Left of) Our Economy: The Revisions Outshone the New U.S. Manufacturing Jobs Gains

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aircraft, aircraft engines, aircraft parts, appliances, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Delta variant, electrical equipment, Employment, fabricated metals products, Jobs, Labor Department, machinery, manufacturing, medicines, metals, miscellaneous durable goods, NFP, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, recovery, tariffs, Trade, vaccines, Wuhan virus, {What's Left of) Our Economy

Although U.S. manufacturers grew their payrolls by a solid net 27,000 in July, according to the Labor Department’s new jobs report for the month, the big story for industry lies in the June revisions. As often the case during the CCP Virus era, moreover, these were dominated by the automotive sector.

Specifically, June’s initially reported monthly 15,000 manufacturing jobs increase was boosted all the way up to 39,000. And the automotive numbers for June executed a stunning turnabout – from an estimated loss of 12,300 to a gain of 2,700. By contrast, net hiring in the vehicles and parts sectors for July was a quiet 800.

The May manufacturing employment revisions were less dramatic – from an increase 39,000 to one of 36,000. But that month had already witnessed its own huge revision – from an initially reported 23,000 to that 39,000.

Outside automotive, the June revisions were widespread through manufacturing, led by electrical equipment and appliances, whose employment increase that month was upgraded from 1,700 to 3,600. (Its July net job creation was a mere 200.)

Even with the strong revisions, though, manufacturing’s recent status as a U.S. recovery employment laggard continued. As of July, domestic industry had regained 952,000 (68.74 percent) of the 1.385 million net jobs lost in March and April of 2020. The numbers for the private sector overall are 76.96 percent of the 21.353 million lost jobs that have been recovered, and for the total non-farm economy (the definition of the American employment universe used by the U.S. government, which includes government jobs) 74.50 percent of the 22.362 million jobs lost.

One reason, of course, is that manufacturing employment suffered less than payrolls in the rest of the economy in the early spring of 2020. Its job levels fell by 10.82 percent, compared with 16.46 percent for the private sector and 14.66 for the entire non-farm economy.

At the same time, U.S.-based industry is still benefiting from stiff tariffs on metals and goods from China, and like the entire economy, is being supported by massive government stimulus along with skyrocketing vaccine production. This puzzle may be explained by the bottlenecks and resulting shortages plaguing all industries, and by the introduction of labor-saving equipment and other restructuring to substitute for the workers so many manufacturers claim are so hard to find. But as I wrote in last month’s examination of the June jobs report, I’m not completely convinced yet by either explanation.

The biggest July manufacturing employment winners by far of the major industry categories used by the U.S. government were machinery (6,800), miscellaneous durable goods (5,500), and fabricated metals products (4,500).

The performance of the first two is especially encouraging, since machinery’s products are used so widely throughout the entire economy (and since robust hiring therefore signals widespread overall strength and healthy capital spending); and since miscellaneous durable goods includes the personal protective equipment (PPE) and other medical supplies whose importance has been underscored by the pandemic.

Indeed, as a result of their July jobs gains, machinery employment has risen to within 3.30 percent of its immediate pre-pandemic level (in February, 2020), and the comparable figure for miscellaneous durable goods is 1.09 percent higher. (More on the performance of its PPE-including category will be presented below.) Both figures are better than that for manufacturing overall, whose payrolls are still 3.38 percent lower than just before the CCP Virus began significantly affecting the economy.

The only July manufacturing jobs losers suffered overwhelmingly fractional sequential setbacks, led by transportation equipment overall (the category containing automotive, where employment sank by 1,500) and semiconductors and electronic components, where global shortages undoubtedly had much to do with its job loss of 800.

Returning to the pandemic-related industries, where the data are one month behind, the picture in surgical appliances and supplies (the sector containing PPE) is dominated by a big downgrade in the May numbers – from a gain of 1,700 to a loss of 900. And in June, 500 more positions were shed. As a result, employment in this crucial national health security sector has fallen to 7.60 percent above immediate pre-pandemic levels.

In the overall pharmaceuticals and medicines industry, a slightly upgrade of May’s originally reported 400 job loss (to a drop of 300) was followed by a June rise of 2,700 – the biggest monthly advance since September, 2019’s 3,500 (well before the CCP Virus arrived). Its employment levels have consequently climbed to 4.72 percent above their February, 2020 figure.

The pharmaceuticals subsector containing vaccines showed continued good job growth, with May’s unrevised 1,000 improvement followed by an identical June increase. This industry now employs 10.20 percent more workers than just before the pandemic.

Aircraft employment levels have fluctuated wildly recently, due surely to the constant barrage of news both good and bad about Boeing. May’s 5,500 job plunge – the worst such performance since June, 2020’s 5,800 shrinkage – was followed by a June gain of 4,500. That’s its best hiring month since the same number of workers was added in July, 2012. But aircraft employment is still 7.55 percent less than in February, 2020, when the pandemic’s spread globally decimated air travel worldwide. On a more positive note, however, Boeing seems to believe the worst is over.

Aircraft engines and parts employment has been much more stable than aircraft’s, and these industries added 500 workers in total in June. But their payrolls are 14.91 percent smaller than in February, 2020 – nearly twice as big a proportional drop as in aircraft.

What’s next for domestic manufacturing employment? Last month I saw plenty of sources of uncertainty, ranging from bottlenecks to the infrastructure legislation to China tariff policy. Now there’s the virus’ hyper-contagious (but so far less harmful) Delta variant to contend with, and all the resumed lockdowns and other economic activity restrictions it could portend – along with the related likelihood of continued strong and even greater vaccine demand (though the sector isn’t big enough to move the national manufacturing jobs needle much).

I’m still most impressed by how all the national and regional surveys keep showing that manufacturers themselves see a still-brightening future ahead. (See, e.g., here and here.) After all, they’re the ones with skin in the game. Let’s hope they’re right.