(What’s Left of) Our Economy: A Healthcare Jobs Milestone and Real-er U.S. Private Sector Hiring

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CCP Virus, coronavirus, COVID 19, Employment, healthcare services, Jobs, private sector, subsidized private sector, Wuhan virus, {What's Left of) Our Economy

Here’s the latest example of how completely weird the CCP Virus has made the U.S. economy, and it’s been confirmed by the latest official monthly jobs report (for September): The pandemic and its various knock-on effects have put a real crimp in hiring in the nation’s healthcare sector, which has been an American employment creation superstar literally for decades.

This period has also seen a reversal in the rise of what I’ve called the subsidized private sector (which is dominated employment-wise by the healthcare services industry, and whose employment levels depend largely on politicians’ decisions, not market forces) in the national employment picture at the expense of the remaining “real” private sector. This shift to date has been small but it’s genuinely historic given how quickly it’s emerged, and given the duration and power of the prior subsidized private sector (SPS) surge.

Regarding recent weakness in hiring in healthcare services and its fellow SPS industries (social services and the for-profit educational institutions), the September jobs report was startling enough. Payrolls in this entire complex fell on-month by 7,000 and in healthcare, the dropoff was 17,500.

Want to know how often that happens? Data are available for the whole SPS sector going back to 1939, and the answer is 45 times leaving out the World War II years. And since then, through September, 936 non-World War II months have passed. So we’re talking 4.81 percent of the time.

Not surprisingly, sequential SPS hiring decreases have been even less frequent since government got into civilian healthcare provision in 1966 with the beginning of Medicare and Medicaid coverage. Since then, 657 months have come and gone, and SPS jobs have declined in 26, or 3.96 percent of them.

But here’s the kicker. Of those 26, five have taken place during the pandemic period (in March, April, and December, 2020, and in this January and September – whose results so far are preliminary).

For healthcare employment alone, the official numbers begin only in 1990, but the picture they draw is even starker. Since then, 369 months have passed, and employment in this sector has fallen on month in eight of them – or 2.17 percent of the time. And five of those eight occasions have occurred during the CCP Virus period (March and April, 2020, and this January, June, and September.

Moreover, as indicated above, the pandemic has produced a major change in the role played by the SPS in U.S. job creation. Between the mid-2009 beginning of the economic recovery from the Great Recession that followed the global financial crisis and the last pre-pandemic data month (February, 2020), the SPS’ share of all U.S. jobs rose from 14.97 percent to 16.37 percent, and the SPS’ share of real private sector employment climbed from 22.08 percent to 23.84 percent.

But since then, through September, the SPS share of all U.S. jobs retreated to 16.04 percent, and of “real” private sector jobs to 23.22 percent.

What’s it all mean for the economy? It’s complicated. The downside is that so many of the subsidized private sector jobs, especially in healthcare services, are urgently needed for the nation’s overall well-being and particularly given how its population keeps aging. And it can’t be good news that employment in this industry is still down 3.18 percent since February, 2020, whether because lots of healthcare workers have become burned out from the pandemic, or because they’re leaving the field because of vaccine mandates.

The possible upside of this recent trend is that real private sector jobs in general are more productive than government jobs or SPS jobs (because the latter are more responsive to changes in economic fundamentals rather than government spending levels). Consequently, if their comparative momentum is growing, then so are the nation’s chances for solidly based prosperity, rather than the bubble-ized kind that’s been too abundant lately.

Indeed, just this kind of momentum shift is clear from the data, too. During the pandemic months, SPS employment is off by considerably more (5.21 percent) than real private sector employment (2.69 percent). During the full post-financial crisis recovery, the former jumped by 27.28 percent versus 19.60 percent for the real private sector.

As with all economic forecasts these days, though, it’s impossible to tell whether any of these trends will hold once the pandemic dust settles. What is clear, though, is that more U.S. labor market history is being made nowadays than generally recognized, and it’s by no means entirely devoid of promising potential.   

(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: Will Government Keep (Indirectly) Driving U.S. Job Creation?

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Employment, healthcare, Jobs, Labor Department, Occupational Outlook Handbook, private sector, social assistance, subsidized private sector, {What's Left of) Our Economy

Predicting almost anything about the economy ten years or so out is a pretty risky business – which is why I rarely make such forecasts and don’t obsessively follow those made by others. But for many years, I’ve been tracking the growth of what I call the subsidized private sector in the U.S. employment picture. And the U.S. government just came out with a study taking the story out to 2030. So my curiosity was piqued, and because the ever greater importance of such employment speaks volumes about the strengths and weaknesses of the American economy, its workers, and their prospects, I hope yours will be, too.

The big takeaway? According to the U.S. Labor Department’s new Occupational Outlook Handbook, jobs in the healthcare and social assistance sectors will keep rising through the end of the decade as a share of all U.S. jobs – and this shouldn’t be seen as good news.

As I’ve pointed out repeatedly (e.g., here), this isn’t to say that healthcare or social assistance aren’t important for any number of reasons that should be obvious. Economically speaking, however, they’re problematic for two related reasons. First, although they’re technically classified as private sector jobs, their employment levels are largely determined by decisions made by politicians to provide funding, not market forces.

And that funding – or subsidization – is massive. A think tank called the Tax Policy Center pegged federal spending on healthcare alone (by far the biggest industry in the subsidized private sector) at $1.2 trillion in fiscal year 2019. A related research organization, the Urban Institute, reported that state and local governments poured $301 billion into health and hospitals during the previous fiscal year. (That’s the latest such data I could find.) If the state and local figure stayed the same in 2019, this public spending would have added up to just over seven percent of the entire U.S. economy and more than 40 percent of all government outlays that year.

The second reason to be concerned about outsized job growth in this subsidized private sector is that typically, the real private sector is the economy’s main source of innovation and productivity growth, which in turn area major foundations of sustainable prosperity – and therefore of the ability to pay for government in a financially responsible way, as opposed to more and more borrowing. A subsidized private sector punching above its job-creation weight is a sign that the real private sector’s economic role is shrinking in relative terms.

And the Occupational Outlook Handbook says that these trends will continue through 2030. Specifically, whereas other Labor Department data show that subsidized private sector jobs accounted for 16.11 percent of all U.S. non-farm jobs (the Labor Department’s definition of the American employment universe, which includes government jobs at all levels as such) in February, 2020 (just before the CCP Virus pandemic arrived in force), the Handbook‘s figures indicate that this figure will rise to 16.86 percent by the end of the decade.

In addition, subsidized private sector jobs will have climbed from 18.94 percent of all real private sector jobs in February, 2020 to 19.80 percent in 2030.

For some perspective, in June, 2009 (the end of the Great Recession that followed the global financial crisis), the subsidized private sector represented only 14.97 percent of jobs in the non-farm sector and 18.09 percent of those in the real private sector.

Conseqently, it should be no surprise that the Handbook‘s projections indicate that real private sector jobs will have fallen from 68.92 percent of all non-farm jobs in February, 2020 to 68.29 percent.

These shifts may look like small beans. But economies and workforces as massive as America’s don’t change much overnight (unless they’re hit by an outside shock like the pandemic). Also, the Labor Department could be wrong, even if the next few years are relatively tranquil. Yet its predictions track well with recent (pre-CCP Virus) trends.

So even though I haven’t been monitoring subsidized private employment developments during the virus period (because like pretty much all other economic statistics, they’ve been so distorted), I’ll resume checking them periodically again and hoping the trend lines start moving in different directions.

(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: The New U.S. Inflation Figures Still Look Pretty Transitory to Me

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hotels, inflation adjusted wages, labor shortage, leisure and hospitality, non-supervisory workers, private sector, production workers, real wages, restaurants, wages, {What's Left of) Our Economy

Today’s official U.S. inflation figures made it somewhat more difficult to argue that the recent strong price increases recorded in the American economy are “transitory,” as the Federal Reserve and many observers (like me) have been claiming. But they don’t make these contentions that much harder, and that goes at least double for warnings about rampant wage inflation – which today’s related real wage figures debunk in an especially powerful way.

At the same time, the price surges that have taken place deserve to be emphasized in another, generaly neglected sense: However temporary, they represent another cost of the unprecedentedly powerful and not-surprisingly chaotic, bottleneck-ridden U.S. economic reopening – and one that’s followed unprecedentedly sudden CCP Virus-related lockdowns that in retrospect look to have been needlessly sweeping because the pandemic’s worst health effects were so highly concentrated among vulnerable groups like the elderly.

The most troubling development revealed in the new inflation report was the May-June acceleration in price increases overall – from 0.74 percent to 0.88 percent. That was indeed the largest monthly rise in absolute terms since June, 2008 (1.05 percent). But that May figure represented a deceleration from April’s 0.92 percent. So it looks way too early to claim that we’re seeing even the start of one of the most dangerous threats posed by inflation – a pickup in its momentum created by cost rises in various parts of the economy fueling efforts in other sectors to compensate with price increases in a process that eventually ripples widely, and with lasting effects, as in the 1970s.

(As with previous posts, I’m not too concerned with the year-on-year comparisons, since pricing trends in lockdown-y 2020 were so – artificially – weak.)

More evidence for the transitory faction: Leading the price increase charge in June were products and services like used cars and trucks (up 10.5 percent month-to-month), vehicle rentals (up 5.2 percent), and hotel and motel rates (up 7.9 percent). The first is a clear result of the stop-start nature of the economy during the pandemic period (see here for a cogent explanation), and the second and third just as obviously spring from the cabin fever-spurred burst of vacation travel in which Americans are engaged with the arrival of summer and the waning of the virus.  

Even in sectors like these, moreover, signs of weakening inflation can be seen. For example, the monthly rate of hotel and motel inflation was much higher than May’s 0.4 percent. But it was lower than April’s 8.8 percent. As for airline fares, their monthly price increases have fallen from 10.2 percent in April to seven percent in May to 2.7 percent in June.

As for wages – they keep falling in real terms in most of the economy. That is, they’re rising more slowly than inflation for goods and services. According to this morning’s data (which also cover June), after-inflation wages both for all private sector workers and for private sector production and other non-supervisory employees fell sequentially for the sixth straight month. And for both groups, the monthly June declines (0.53 percent for the former, 0.62 percent for the latter), were the biggest in roughly a year (June for the former, July for the latter).

(As known by RealityChek regulars, the U.S. government doesn’t track real or pre-inflation wages in the public sector because pay levels there are determined largely by politicians’ decisions, and therefore say relatively little about the status of the labor market.)

These new June wage figures are even more striking because the declines last year stemmed largely from businesses letting go less of experienced and usually therefore lower-paid staff as the economic outlook remained highly uncertain, and pushing up the average pay levels of remaining employees even though actual raises were rarely handed out.

It’s true that real wage increases continued in June in the leisure and hospitality super-category – whose eating and drinking establishments and hotels and motels and resorts were hit so hard during the peak pandemic months. But the June sequential increase for all employees in this sector inched up at the lowest rate (just under 0.15 percent) since January (just over 0.15 percent).

Leisure and hospitality production and non-supervisory workers fared better last month – their constant dollar wages rose by 1.16 percent, a big speed up from May’s 0.50 percent. But the April (1.87 percent) and February (1.21 percent) hourly inflation-adjusted pay hikes were stronger still. So again, it seems awfully premature to talk about raging wage inflation even here.

Moreover, there’s an important difference within leisure and hospitality between real wages in the restaurants etc sector and those in the hotels etc sector. Specifically, the latter have been growing faster for production and non-supervisory employees – and especially for June alone (0.94 percent versus 0.52 percent).  

The January-June results are even more striking for these service workers as a whole, since during this period, real wages for their counterparts in the overall private sector are actually down 1.83 percent.

Good luck to you if you believe these numbers describe a crisis-level national labor shortage, or even close.  And as I see it, it’s nearly as much of a stretch to argue on the basis of these hot June numbers that comparably hot inflation is here to stay.   

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: Wage Inflation? Seriously?

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CCP Virus, construction, coronavirus, COVID 19, housing, inflation, inflation-adjusted wages, labor shortages, leisure and hospitality, private sector, real wages, recession, recovery, wage inflation, wages, Wuhan virus, {What's Left of) Our Economy

Reports keep abounding that U.S. businesses can’t find enough workers to match their needs amid an ongoing rapid reopening of the economy from its lockdowns-induced slump, and that companies are therefore being forced to attract employees with ever higher – and even alarmingly higher – pay offers.

All of that makes perfect sense except for one critical detail: The official U.S. wage figures show precious few signs of soaring wages whatever. In fact, when you adjust for the inflation that has been recorded in Washington’s statistics, you see that workers’ hourly pay generally keeps falling behind, not racing ahead, of rising prices in the economy.

First let’s look at the pre-inflation figures for the entire economy (except for government, where pay levels mainly reflect politicians’ choices, not economic fundamentals).

When it comes to the entire private sector, hourly earnings in April (the latest figures available, which are still preliminary) grew by 0.33 percent year-on-year. That result, though, is somewhat misleading, since the previous April’s level was artificially high. That month, remember, was the depth of the CCP Virus-induced recession, and companies were largely laying off their least experienced (and cheapest) staffers. So the wage number for retained workers rose (and strongly) simply because their pay levels remained relatively lofty, and they accounted for a much bigger percentage of employment. Therefore, perhaps that misleadingly high April, 2020 figure was the main reason that the 2020-2021 improvement is misleadingly low?

Unfortunately, the data shoot down that hypothesis, too. For example, between “normal” April, 2018 and 2019, economy-wide pre-inflation wages jumped by 3.30 percent. That’s ten times the 2020-2021 increase. And in fact, the April, 2019 to 2020 pay hike was by far the smallest since 2006 (when this particular data series began).

But maybe the biggest wage inflation only began this calendar year – when overall inflationary pressures have arguably become visible?  Between January and April, current dollar hourly wages for the entire U.S. private sector did climb by 0.84 percent, and that advance was more than twice as fast as the April year-on-year change. Moreover, this 2021 wage growth was faster than that for “normal” January-April, 2019 (0.76 percent). Indeed, it was the fastest since 2008, another recessionary year when layoffs heavily concentrated among the least experienced, lowest-paid employees rendered the 0.90 percent result artificially high.

But aside from 2008, the January-April increase wasn’t that much higher than that seen in many recent years. For example, the January-April result for “normal” 2019 was 0.76 percent. For 2018, it was 0.71 percent. Just as important – does anyone think that those years, or any time lately, has been a golden age of wage increases?

There’s another possibility to consider: that strong wage inflation has taken place only among the production and other non-management workers, who both tend to be the lowest-paid and who in principle therefore are likeliest to be kept out of the job market by unusually generous unemployment benefits.

Average hourly earnings before inflation for this group have actually risen much more strongly year-on-year in April than for the overall workforce – by 1.15 percent versus 0.33 percent. And this 2020-2021 result, as with wages for the entire workforce, does seem to have been artificially depressed by the equally artificially high (7.84 percent!) figure for 2019-2020.

But historically, the 2020-21 wage increase not only looks anything but exceptional. It’s positively pitiful – by far the weakest April-April rise on record. Just to compare, from April to April in “normal” 2019 and 2018, current dollar wages for these “blue collar” workers were up 3.46 percent and 2.83 percent, respectively. .

Are the trends much different for January-April periods – which in principle should reveal whether wage inflation has waited till this calendar year to take off? For 2020 so far, pre-inflation blue collar hourly pay has improved by 1.23 percent – more than the 0.84 percent increase for all private sector workers.

That’s much slower than the comparable 5.36 percent jump last year, but we agree that last year was weird. The 2021 results are faster than those of normal 2019 (0.91 percent), but the gap doesn’t seem gargantuan to me. At the same time, current dollar January-April pay increases of one percent or greater for blue collar workers have been experienced five times since 1998, and before then, you need to go back to the late-1980s for a period when they were routine.

So describing the January-April, 2021 results as wage inflation-y could be justified. But that’s a far cry from reasonably concluding that this inflation will have much in the way of legs, since the economy, as widely noted, has never seen this kind of sudden stop-start transition in peacetime.

There’s another set of numbers, though, that needs to be examined to put the wage inflation issue in full perspective – recent wage changes after taking into account inflation across the entire economy. And in these real terms, hourly pay has actually been going down lately.

That’s true for all private sector workers between last April and this past April (down 3.66 percent).

It’s true for these workers between January and April of this year (down 0.88 percent).

It’s true for private sector blue collar workers between last April and this past April (down 3.37 percent).

And it’s true for these workers between January and April of this year (-0.71 percent).

Moreover, the “2020 effect” caused by that year’s artificially high baseline doesn’t seem to account fully for this wage deterioration. It’s definitely been apparent for all private workers (for whom average real wages soared by 7.81 percent between 2019 and 2020), and for private sector blue collar workers (whose inflation-adjusted average hourly pay surged by 7.68 percent).

In addition, since 2006, (when real wages for the whole private sector workforce began to be tracked), these wages have fallen on an April-April basis five other times. But they’ve never fallen by remotely as much as in 2021. And this year, employers are supposed to be desperate for workers. Much the same holds for private sector blue collar workers during this period.

Looking at the January-April periods, the 2021 decrease of 0.88 percent for all private sector workers is the second biggest since 2006 (trailing only 2011’s 0.97 percent). Further, this four-month stretch has only seen one other instance of constant dollar wage decrease (2019’s 0.37 percent). And the 2021 result is all the more strange given the strangely strong and sudden nature of the recovery.

When it comes to their blue collar counterparts, 2021’s 0.71 percent drop in after-inflation wages between January and April is also the second biggest since 2006 (trailing only the 1.24 percent fall-off suffered, again, in 2011). Pay declines during this period for these workers has been more frequent than for the private sector overall. (They’ve occurred five times all told before 2021.) Again, however, 2021’s has been puzzlingly steep given the economy’s unusually fast recovery this year and all the labor shortage claims that have resulted.

More convincing signs of out-of-the-ordinary wage inflation can be seen in sectors like construction and leisure and hospitality, especially during the first four months of this year. In the former, which has enjoyed strength in residential housing throughout the pandemic period, pre-inflation wages have increased by 1.24 percent. That’s the most since 2006 (again, the earliest data available) – though not outlandishly so. But after accounting for inflation, real construction wages have dropped by 0.49 percent between January and April of this year.

For blue collar construction workers, pre-inflation wages have improved by 1.75 percent during the first four months of 2021 – another post-2006 high. But even though their real wages have dipped during this period by only 0.17 percent, that’s still a dip.

The leisure and hospitality industries are of course coming out of a disastrous pandemic period, and with Americans now flocking to restaurants and bars and resuming travel, it’s not surprising that January-April current dollar hourly pay has risen by 3.71 percent – far and away a post-2006 record. The post-inflation number is up nicely, too (1.98 percent), and also a performance that’s smashed previous records. So this sector so far is telling a stronger wage inflation story.

Non-supervisory blue collar leisure and hospitality workers have fared even better, with pre-inflation wages zooming up by 5.87 percent between January and April of this year, and real hourly pay better by 3.98 percent.

Will these healthy pay hikes continue? That’s a big question for these parts of the economy. But even though wage figures don’t capture the entire compensation picture (in particular, they leave out non-wage benefits and all the signing bonuses employers are reportedly offering to lure workers off the sidelines), with wage and salary income representing more than 80 percent of total employee compensation throughout the economy (including in the public sector), they capture lots of the picture. And the overall message is that, like a famous economist once said about computers being everywhere but in the productivity statistics, wage inflation worth worrying about, and related worker shortage claims, to date are everywhere but in the wage statistics.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: U.S. Manufacturing Hiring Climbs Back on Track

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aerospace, automotive, Biden, Boeing, CCP Virus, China, coronavirus, COVID 19, Donald Trump, gloves, healthcare goods, Jobs, macinery, manufacturing, masks, non-farm jobs, pharmaceuticals, PPE, private sector, semiconductor shortage, semiconductors, tariffs, transportation equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

As this morning’s February official U.S. jobs report was dominated by a reopening-fueled surge in leiure and hospitality payrolls (which accounted for 355,000 of the month’s total 379,000 sequential improvement), American domestic manufacturing’s employment performance resumed chugging along.

U.S.-based industry gained 21,000 jobs on net last month, recovering from its drop off in January (which was revised down from a decline of 10,000 to one of 14,000). December’s initially reported advance, though, was upgraded from 31,000 to 34,000.

The February results mean that manufacturing has now regained 60.45 percent (824,000) of the 1.363 million jobs lost during the peak CCP Virus lockdowns period of last March and April. Consequently, they show that industry’s reemployment pace has continued to reverse its previous performance as the economy’s pandemic recovery leader.

That status now belongs to the overall private sector, which since last April has regenerated 62.61 percent (13.267 million) of the 21.191 million jobs it shed last spring.

Nonetheless, since public sector net hiring remains very weak, manufacturing’s job-creation performance remains well ahead of that of the economy as a whole – which is viewed by the Labor Department, which compiles and releases these statistics, as the “non-farm sector.” Since April, employment in this combined public and private sector is back up by 12.887 million – representing just 57.63 percent of the 22.362 million jobs they lost together in March and April.

Manufacturing’s biggest February jobs winner by far was transportation equipment (up 9,700 – more than 46 percent of industry’s total employment advance). Since payrolls in the very big automotive sector inched up by just 1,000, it’s likely that much of the rest of the increase came in an aerospace sector whose employment troubles are being healed by Boeing’s comeback from safety woes. But because the aerospace (and other non-automotive transportation) jobs figures are reported one month late, we’ll need to wait until the March report to know for sure.

Other major February manufacturing jobs gainers were miscellaneous non-durable goods (up 4,100), machinery (3,800), plastics and rubber products (3,000) and miscellaneous durable goods (2,800). The increases in miscellaneous non-durables and machinery were especially encouraging, as the former category (as detailed below) includes many of the medical goods vital to the anti-virus fight, and the latter’s products are used throughout not only the manufacturing sector, but other big parts of the economy like construction and agriculture.

The biggest February manufacturing jobs losers were food manufacturing (where payrolls fell by a net 3,100), non-metallic mineral products (2,400), and printing and related support activities (1,700).

Given the continuing struggle against the pandemic, the continuing shortages of many vital products like protective gear, and the surge in vaccine production, the jobs performance of healthcare goods once again underwhelmed – though keep in mind that, as with the non-automotive transportation goods categories, the data here are one month behind, too.

In the broad pharmaceuticals sector, employment actually fell by 700 in January. December’s initially reported 2,200 jobs rise has now been upgraded to 2,300, but this big industry’s payrolls are up just 1.89 percent since last Febuary – the last full pre-pandemic data month.

Hiring was stronger in the pharmaceuticals subsector containing vaccines. January employment rose by just 100 sequentially, but the initially reported December 1,100 payrolls increase was revised up to 1,600. As a result, the subsector’s workforce is now 4.55 percent bigger than last February.

The manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns has grown employment most impressively of all these healthcare sectors. But it lost 800 net new jobs in February, a drop that failed to offset the upward revisions of 600 for December. These shifts left employment in this sector 7.98 percent higher than the final pre-pandemic monthly figure.

Notwithstanding January’s workmanlike result, all the pieces still seem to be in place for an accelerating manufacturing jobs rebound: the return of normal economic conditions generally (however choppily), Boeing’s brightening prospects, the continuing need for much more in the way of vaccines and other medical goods, the Biden administration’s stated determination to boost domestic output of CCP Virus-related products, and last – but surely not least – the sweeping tariffs placed by the Trump administration on imports from China that for the near future President Biden apparently will keep.

No one should forget, though, that one strong new headwind has appeared – a global shortage of semiconductors that is already depressing production across manufacturing. Yet even this disruptive event at bottom seems largely due to the unexpected speed of the U.S. economic bounceback, especially in sectors shut down almost entirely, like automotive manufacturing. So whatever the short-term difficulties it causes, the microchip shortage looks like it stems from the kinds of problems, to borrow from an old sports adage, that manufacturing and its workers ultimately would like to have.        

(What’s Left of) Our Economy: More Manufacturing Jobs Strength – & Vindication of Trump Tariffs

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737 Max, aerospace, automotive, Boeing, CCP Virus, China, coronavirus, COVID 19, Employment, Jobs, machinery, manufacturing, manufacturing jobs, non-farm payrolls, pharmaceuticals, PPE, private sector, tariffs, Trade, trade war, Trump, vaccines, Wuhan virus, {What's Left of) Our Economy

This morning’s official U.S. jobs report, for December, shows that, to paraphrase that unforgettable battery ad slogan, domestic manufacturing just keeps hiring and hiring and….

As a result, the December data also add to the already compelling case that domestic industry’s continued resilience – including an ongoing hiring out-performance – owes significantly to the Trump tariffs that have prevented imports from China from flooding U.S. markets and massively depriving Made in America products of customers as they had before his presidency.

The nation’s manufacturers boosted their payrolls by 38,000 on month in December, even as the private sector shed 95,000 jobs and government at all levels lost 45,000.

Moreover, in line with the strong overall employment revisions for October and November, industry’s previously reported 33,000 hiring improvement for the former (which had already been downgraded from 38,000) is now judged to be 43,000. And November’s figure has been upgraded from 27,000 to 35,000.

Although this performance pales compared with the 333,000 jobs added in manufacturing in June, the sector continues to punch above its employment weight, and in fact has now won back a status it apparently had lost in the fall.

As of December, U.S.-based industry had regained 60.16 percent (820,000) of the 1.363 million jobs it had lost during the worst (so far) of the pandemic-induced downturn in March and April.

That’s slightly ahead of the total private sector, which has recovered 59.91 percent (12.696 million) of its 21.191 million drop last spring.

And its considerably ahead of the overall economy’s record. Non-farm payrolls (the definition of the American employment universe used by the Labor Department, which issues these jobs reports) have risen by 12.321 million since April, a bounceback reprsenting only 55.60 percent of their 22.160 million plunge that month and in March.

The big reason is the slump in government jobs at all levels, and especially in states and localities. Public sector employment sank by 45,000 sequentially in December and by 81,000 the month before. And the outlook for public sector employment remains clouded by the brightening (due to the nearly final 2020 election results) but still uncertain prospects for a federal bailout of state and local governments, whose December monthly job losses totaled 49,000. (The federal government actually added positions.)

Manufacturing’s biggest monthly employment winners in December were plastics and rubber products (up 6,900), the automotive sector (6,700), non-metallic mineral products (6,100), food manufacturing (5,500), and apparel (4,000).

Especially encouraging were the 2,800 jobs created by domestic machinery makers, since the equipment they make is so widely used throughout the rest of manufacturing and elsewhere in the economy. November’s on-month machinery jobs gains were revised up from 1,900 to 2,500, but October’s totals were revised down for a second time, from 3,000 to 2,700.

December’s biggest manufacturing job losers were miscellaneous non-durable goods (down 11,200 sequentially) and primary metals (down 2,100).

Also on the encouraging side: Better progress has been made in job-creation for the CCP Virus-related medical manufacturing categories. These only go through November, but they show that the the broad pharmaceuticals and medicines sector added 1,000 new jobs that month, and its October figure was upgraded all the way from 100 to 1,100.

In addition, the sub-sector containing vaccines increased payrolls in December by 1,100, and its October performance was revised up from 600 to 1,100.

But in the manufacturing category containing PPE goods like face masks, gloves, and medical gowns, along with cotton swabs, the previously reported October employment increase stayed unreivsed at 400, and the November growth was only 500.

These results, however, still mean that the PPE category’s job gains since February have been much stronger (7.85 percent) than those of the vaccines category (a disappointing 2.82 percent) and of the broader pharmaceuticals industry (an even weaker 1.40 percent).

Finally, other than the prospect of a vaccine-related return to normal in the U.S. and global economies (for domestic manufacturing is a big exporters), the biggest reason for further manufacturing employment optimism concerns the aerospace sector. It’s been pummeled by both the pandemic-induced nosedive in air travel around the world, and by Boeing’s safety woes.

The U.S. aerospace giant isn’t out of the woods yet. Its troubled 737 Max model has now been recertified by the federal government as safe to return to flight, but new production-related problems have cropped up, too. Moreover, who can say with any confidence when “normal,” or enough of it to help, Boeing, returns?

Yet assuming some substantial Boeing recovery in the foreseeable future, a major restart of its own manufacturing could give a big boost to domestic industry as a whole, given its many and long domestic supply chains.