(What’s Left of) Our Economy: May Sees First Manufacturing Jobs Drop in Six Months, but Wages Ride a Roller-Coaster

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Bureau of Labor Statistics, Employment, inflation-adjusted wages, Jobs, manufacturing, recession, recovery, wages, {What's Left of) Our Economy

May’s monthly manufacturing employment drop of 1,000 ended the sector’s five-month string of sequential employment gains – its best such stretch since a near two year-long span between 2013 and 2015. Industry’s wages, though, roller-coastered for the second consecutive month, with May’s 0.45 percent pre-inflation drop (the worst) since last November’s 0.48 percent) following an upwardly revised jump of 0.76 percent in April (the best since October, 2008’s 0.81 percent, when the Great Recession was beginning).

Although manufacturing payrolls shrank in May, they still registered their biggest annual increase (63,000) since February, 2016 (69,000), and reversed the slight (2,000) decline between the previous two Mays. Yet these performances couldn’t change manufacturing’s status as a longer-term job-creation and wages laggard. Indeed, not only did its current dollar wages fall on month, but their annual increase was the slowest (1.86 percent) since July, 2014’s 1.57 percent. Further, the gap between the pre-inflation growth of industry’s paychecks and those of the private sector generally has been widening. March and April manufacturing employment revisions produced a net employment gain of 3,000.

Here’s my analysis of the latest monthly (May) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>May brought an end to manufacturing’s best (five-month) sequential job gains string since 2013-2015, as payrolls dipped 1,000 below April’s levels.

>At the same time, industry’s pre-inflation wages seemed to climb aboard a roller-coaster. May’s 0.45 decline was the biggest since November, 2008’s 0.48 percent decrease. Bt it followed an upwardly revised April 0.76 percent jump – the biggest since October, 2008’s 0.81 percent – which was aided by many companies that perceived the start of the last recession cutting labor costs by laying off mainly less experienced, lower-paid workers.

>Even with May’s monthly employment drop, manufacturing’s year-on-year job gain of 63,000 was still the largest such number since February, 2016’s 69,000. More impressive, between the previous two Mays, manufacturing lost 2,000 jobs on net.

>Nonetheless, over the longer term, manufacturing has continued to lag the private sector overall on the payroll and paycheck fronts.

>During the current economic recovery, which began in mid-2009, manufacturing employment has grown by only 5.73 percent. For the private sector as a whole during the expansion, it’s up by 13.74 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.21 percent of those lost jobs (a total of 945,000). The private sector as a whole has boosted employment by 16.574 million.

>As a result, total private sector employment is now 6.72 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.81 percent lower.

>Similar trends have played out in terms of both pre-inflation and after-inflation wages.

>Manufacturing’s 0.45 percent May monthly current dollar wage decline was considerably worse than the private sector’s 0.15 percent improvement.

>Year-on-year, manufacturing pre-inflation wages rose only 1.85 percent – not only much more sluggishly than the 3.46 percent increase between May, 2015 and May, 2016, but the weakest such rate since July, 2014 (1.57 percent).

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, and the gap is widening. As of May, private sector pre-inflation wages were up by 18.43 percent during the expansion, versus a 14.99 percent increase for manufacturing wages. As a result, private sector wages had risen by 22.95 percent more over these nearly eight years than manufacturing wages.

>As of last May, however, recovery-era private sector wages were up by 15.58 percent, and manufacturing wages were up by 12.90 percent – resulting in a smaller, 20.76 percent, difference between the two.

>Adjusting wages for inflation produces a somewhat brighter picture for manufacturing. The latest figures are from April, and the sector’s after-inflation pay has been revised up from a 0.46 percent monthly gain to 0.55 percent – the best since August, 2015′ 0.66 percent. Real private sector wages in May, by contrast, has been revised down from a 0.09 monthly gain to flat.

>Year-on-year, real manufacturing wages have outperformed their private sector counterpart, too, advancing by 0.55 percent (much less, though, than the previous year’s 1.79 percent) versus 0.28 percent for the overall private sector (also much less than the previous annual increase of 1.42 percent).

>But during the current recovery, real manufacturing wages are up only 1.59 percent in toto. That’s less than half as fast as the overall private sector increase of 3.98 percent.

>Manufacturing’s March monthly job gain, which had been revised up from 11,000 to 13,000, has now been downgraded back down to 11,000. April’s previously reported 6,000 sequential employment increase has been revised up – also to 11,000.

(What’s Left of) Our Economy: U.S. Manufacturing Growth Regained Momentum in April

Tags

automotive, durable goods, Federal Reserve, industrial production, inflation-adjusted growth, manufacturing, non-durable goods, recession, {What's Left of) Our Economy

Today’s new Federal Reserve figures showed that real U.S. manufacturing production rebounded in April after a March decline with its best monthly gain (one percent) since winter-affected February, 2014’s 1.11 percent. April’s annual increase (1.91 percent), moreover, was the strongest since January, 2015’s 2.58 percent – which was also impacted by harsh weather. Leading the April industrial comeback was the automotive sector, which saw its constant dollar output jump five percent – the biggest monthly improvement since July, 2015’s 7.84 percent. Vehicles were the standout within automotive, as after inflation production soared by 8.02 percent on-month in April, their best month since a 12.38 percent increase also registered in July, 2015.

Thanks largely to the automotive sector, price-adjusted output in the durable goods super-sector increased by 1.01 percent. That rise was its best since March, 2014 (1.03 percent). Largely as a result, the yearly inflation-adjusted durables output increase of 2.03 percent was its best such performance since January, 2015’s 3.15 percent – which was weather-related as well. But manufacturing’s solid April improvement was broad-based, as indicated by the 0.98 percent monthly gain in non-durable goods production – its best since November, 2014 (1.03 percent). Moreover, the annual inflation-adjusted non-durables production improvement of 1.73 percent was its best such improvement since October, 2015 (1.81 percent).

Revisions to March and February manufacturing output numbers were slightly negative, however, and the sector’s after-inflation output is still down by 3.58 percent since the onset of the last recession – more than nine years ago.

Here are the manufacturing highlights of the Federal Reserve’s new release on April industrial production:

>U.S. real manufacturing output regained its momentum in April following a March drop, with real output growing sequentially (by one percent) for the seventh time in the last eight months.

>The gain was industry’s best since the 1.11 percent on-month increase in February, 2014 – when the sector was recovering from a harsh winter.

>Largely as a result, after-inflation manufacturing production in April also recorded its best annual increase (1.91 percent) since January, 2015’s 2.58 percent – which also partly stemmed from a recovery from a slowdown due to unusually cold weather.

>Leading manufacturing’s April surge was the biggest (five percent) sequential increase in automotive production since July, 2015 (7.84 percent). And leading automotive was the vehicles sector, where constant dollar production jumped on-month by 8.02 percent – also the biggest such advance since July, 2015 (12.38 percent).

>Thanks largely to automotive’s performance, the durable goods super-sector saw its monthly price-adjusted production grow by 1.01 percent – the fastest pace registered since March, 2014’s 1.03 percent.

>In addition, durable goods’ annual April real advance of 2.03 percent was its best such performance since the weather-affected 3.15 percent improvement in January, 2015.

>But April’s sequential manufacturing advance extended far beyond the durables super-sector, as its non-durables counterpart boosted its monthly real production last month by 0.98 percent. That growth rate was its best since November, 2014’s 1.03 percent.

>Non-durables’ real annual output gain of 1.77 percent was its fastest since October, 2015’s 1.i1 percent.

>The only blemishes in these April Fed manufacturing data were the revisions. March’s previously reported 0.38 percent monthly real production decline was downgraded to a 0.41 percent falloff and February’s already downwardly revised 0.35 percent sequential growth is now reported as a 0.27 percent rise. The downwardly revised January on-month growth figure of 0.39 percent was upgraded to 0.40 percent.

>Despite April’s strong monthly results, American domestic manufacturing is still 3.58 percent smaller in real terms than at the beginning of the last recession – more than nine years ago, at the end of 2007.

(What’s Left of) Our Economy: Has Subsidized Private Sector Hiring Peaked (Relatively Speaking)?

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CNN.com, Employment, healthcare services, Jobs, Labor Department, non-farm jobs, private sector, real private sector, recession, recovery, subsidized private sector, The New York Times, {What's Left of) Our Economy

The Snob’s Manual tells us (often correctly) that you know when the stock market’s peaked when the retail investor rushes in, and that you know when a fad is passe when the mainstream media report it. Could the same maxim be on target for economic trends, like the outsized role played by the U.S. subsidized private sector in job creation during the recovery? I’m not sure yet, but the last few sets of monthly American employment data (including last Friday’s April figures) are certainly food for thought.

As RealityChek regulars know, I’ve been spotlighting this trend since well before RealityChek was born. And it was great to see the theme picked up last month by a major reporter who covers the healthcare sector (the core of that part of the economy dubbed private sector but in fact heavily dependent on government spending). Since then, healthcare hiring’s unusual recent robustness has been covered by The New York Times and CNN.com.

Here’s the rub: So far this year, subsidized private sector job creation has become less important in the overall employment picture, not more. The March and April statistics are still preliminary, but since January, the pace of subsidized private sector hiring has ranged between 7.87 percent of total monthly job creation (in January) to 29.31 percent (in February). The April figure was right in the middle: 19.43 percent.

The subsidized private sector’s waning momentum – at least relatively speaking – comes through more clearly when the first four months of this year are compared with their last few counterparts. From January through April, 2017, subsidized private sector net new job creation (which also includes social assistance agencies and the for-profit education sector) represented 18.43 percent of the non-farm total (the Labor Department’s definition of the American employment universe.

That share is considerably higher than the figure for the first two months of 2013 and 2014 (14.56 percent and 12.53 percent, respectively). But it’s also considerably lower than the 27.68 percent for 2015 and the 23.87 percent for the same time span in 2016. In addition, these numbers show that the subsidized private sector’s importance has not fallen for two straight years.

That’s not to say that the subsidized private sector isn’t still punching above its weight. Its 19.43 percent of net new job creation was still greater than its share of total employment on a standstill basis (15.75 percent). It’s also still higher than the share at the mid-2009 onset of the current recovery (14.97 percent). And it’s much higher than the share at the start of the last recession at the end of 2007 (13.22 percent). But there’s no doubt that this year it’s not punching quite as hard.

The flip side of the equation tells a similar, but not identical, story. The “real private sector” – where job creation is determined largely by market forces, not government decisions – stood at 68.95 percent of total non-farm jobs last month. That’s actually a little higher than its share at the start of the recovery (67.80 percent). But it’s also still a little lower than its share at the start of the last recession – more than nine years ago (70.62 percent).

There’s still a long way to go in figuring out whether these early 2017 results will hold up even through the end of this year, much less whether they represent hiring that’s peaking (again, relatively speaking) in the subsidized private sector. And of course a huge question mark is hanging over this entire chunk of the economy in the form of the healthcare debate. But the real implications are unchanged. Although subsidized private sector jobs serve many valuable purposes, the more the economy leans on them to generate employment and incomes, the less dynamic and productive the nation is bound to be.

(What’s Left of) Our Economy: Best Stretch of U.S. Manufacturing Jobs Gains in Nearly Two Years Continues but Wages Outlook is Cloudy

Tags

Bureau of Labor Statistics, inflation-adjusted wages, Jobs, manufacturing, manufacturing jobs, private sector, recession, recovery, wages, {What's Left of) Our Economy

U.S. monthly manufacturing employment grew for the fifth straight month in April for its best such performance since a nearly two-year stretch of sequential gains from 2013 to 2015. As a result, the sector continued to edge out of its latest jobs recession. But the monthly pace of employment increases (6,000 in April) fell for the third consecutive month.

In addition, manufacturing’s share of total non-farm payrolls fell to its latest record low – 8.46 percent. Revisions were negative by 2,000. Year-on-year manufacturing employment growth sped up again in April (to 40,000) – its best annual improvement since February, 2016 (69,000).

Pre-inflation manufacturing wages in April recorded their best monthly improvement (0.68 percent) since last October (0.73 percent). And for the first time in four months, these manufacturing wage advances exceeded that of the overall private sector (0.27 percent.) Year-on-year current dollar manufacturing wage momentum seemed to stall out, registering its slowest such advance (2.71 percent) since last August (2.68 percent). But the strong monthly gain resulted in industry’s annual wages gains resuming their recent pattern of topping those of the private sector (2.55 percent).

Manufacturing remained a recovery-era jobs and wages laggard, but the gap in pay at least narrowed between March and April from a 22.81 percent difference between the recovery-era increase in cumulative private sector and manufacturing wage increases to an 18.61 percent difference. Yet the latest (March) real wage data kept showing manufacturing pay falling further behind.

Here’s my analysis of the latest monthly (April) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>Manufacturing employment grew sequentially for the fifth straight month in April, enabling the sector to keep edging out of its latest jobs recession and record its best stretch of monthly employment improvement since the August, 2013 to July, 2015 period.

>But April’s monthly gain of 6,000 represented the third straight month of slowing advances, and helped drag industry’s share of total nonfarm payrolls (the government’s definition of the U.S. employment universe) to it’s latest all-time now – 8.46 percent.

>So did slightly negative revisions, with March’s originally reported 11,000 monthly jobs gain revised up to 13,000, but February’s already downgraded 26,000 increase reduced again to 22,000.

>On the brighter side, the April figures were good enough to produce a year-on-year manufacturing jobs improvement of 40,000 – the best such advance since February, 2016’s 69,000. The April annual advance also bettered that between the previous Aprils (35,000).

>Manufacturing wages presented a mixed picture, too. In April, industry pay before inflation enjoyed its best monthly increase (0.68 percent) since last October (0.73 percent). The spurt was especially welcome, since the sector’s monthly March wage change was revised down from 0.04 percent to zero.

>Moreover, for the first time since December, such manufacturing wage rises resumed outpacing increases in the private sector overall (0.27 percent).

>The year-on-year April manufacturing pre-inflation wage increase of 2.71 percent, however, was its slowest since last August (2.68 percent). It was lower, too, than that of April, 2015 to April, 2016 (2.99 percent). At the same time, the new April result also bested that of the private sector overall (2.55 percent), continuing a streak of out-performance that began in March, 2016.

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, but the gap narrowed between March and April. The revised figures for the former month show that private sector wages had risen by 17.98 percent since the current expansio began in mid-2009 – 22.81 percent faster than manufacturing wages (14.64 percent).

>As of April, however, private sector wages during the recovery were up by 18.29 percent while manufacturing wages had improved by 15.42 percent – a gap of only 18.61 percent. ,since the expansion began in mid-2009.

>Yet when wages are adjusting for inflation, manufacturing’s performance looks worse than ever. The latest figures only cover March, but show that industry’s 0.37 percent price-adjusted monthly pay improvement fell short of the overall private sector’s 0.47 percent advance.

>Year-on-year, manufacturing wages were up only 0.19 percent – also worse than the (also meager) 0.28 percent rise for the private sector.

>As a result, real manufacturing wages have increased by only 0.93 percent during the current, nearly eight-year old economic recovery. Overall private sector wages are up 3.97 percent.

>In April, manufacturing retained its status as an employment laggard, too. During the recovery, its payrolls are up by only 5.71 percent. The total for employment in the private sector as a whole? 14.09 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.43 percent of those lost jobs (a total of 943,000). The private sector as a whole has boosted employment by 16.436 million.

>As a result, total private sector employment is now 6.62 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.82 percent lower.

(What’s Left of) Our Economy: New U.S. GDP Report Shows Slight Trade Deficit Drop but Heavy Growth Drag

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economic growth, exports, GDP, goods, gross domestic product, imports, inflation-adjusted growth, real trade deficii, recession, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s initial figures for first quarter gross domestic product (GDP) revealed that a slight sequential dip in the U.S. real trade deficit boosted inflation-adjusted growth only fractionally in early 2017. Yet the decline also resulted in the biggest positive sequential swing in trade’s contribution to quarterly growth first quarter (1.89 percentage points) since the fourth quarter of 2010 (1.95 percentage points). Nonetheless, the first quarter’s constant dollar trade deficit ($602.7 billion) was still the second biggest quarterly total since the $623.7 billion run up in the first quarter of 2008, just after the last recession officially began.

These advance first quarter figures show that all of the major categories of after-inflation exports and imports reached new quarterly records, including total goods and services exports ($2.1675 trillion), goods exports ($1.482.8 trillion), services exports ($685.8 billion), total goods and services imports ($2.7703 trillion), goods imports ($2.2797 trillion), and services imports ($488.3 billion). The cumulative growth drag created by the real trade deficit’s increase during the current, historically feeble economic recovery totaled 9.70 percent in the first quarter – down slightly from the 9.71 percent hit in the fourth quarter of 2016. This translates into $239.4 billion in lost real economic expansion. The Made in Washington trade drag – calculated from separate Census figures that isolate trade flows heavily influenced by trade policy – has been much greater. The latest data, which run through the fourth quarter of 2016, reveal it as having reached 21.67 percent, or $532.56 billion in lost growth.

Here are the trade highlights from yesterday morning’s GDP report:

>The government’s first look at first quarter U.S. gross domestic product (GDP) showed that a slight (0.38 percent) sequential dip in the inflation-adjusted trade deficit boosted the period’s modest (0.69 percent annualized) economic growth by a scant 0.07 percentage points.

>At the same time, this marginal lift resulted in the biggest positive quarterly swing in trade’s impact on economic growth (from a 1.82 percentage point reduction to that 0.07 percentage point increase, or a 1.89 percentage point shift) since the last quarter of 2010 – when trade flipped from subtracting 0.83 percentage points from real expansion to adding 1.12 percentage points (a 1.95 percentage point shift).

>The sequential decrease in the real trade deficit, from $605 billion annualized in the fourth quarter to $602.7 billion annualized in the first still left the shortfall at its second highest quarterly level since the first three months of 2008. At that time, just after the last recession officially broke out, the gap hit $623.7 billion.

>All categories of exports and imports tracked in the real GDP figures hit new quarterly records in the first quarter.

>Combined goods and services exports rose on-quarter by 1.41 percent, to $2.1675 trillion annualized. That broke the previous record of $2.1620 trillion annualized, set in the third quarter of last year.

>Goods exports alone increased by 2.01 percent, to $1.4828 trillion annualized – marginally better than the previous record of $1.4792 trillion, also set in third quarter, 2016.

>Services exports inched up by a mere 0.29 percent, to $685.8 billion annualized. That performance bested the old $684 billion record set in the first quarter of 2015.

>Total imports climbed by 1.01 percent, to $2.7703 trillion annualized – their second straight all-time high.

>Goods imports also set a second straight quarterly record, with the first quarter’s $2.2797 billion total annualized besting the fourth quarter’s by 1.10 percent.

>Services imports set their eighth straight quarterly record. The first quarter’s $488.3 billion annualized level was up 0.66 percent from the fourth quarter’s total.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery fell slightly on a sequential basis – from 9.71 percent to 9.70 percent. That is, increase in the real trade deficit during the current expansion has reduced its cumulative growth by 239.4 billion.

>Yet the trade drag created by the Made in Washington deficit is now more than twice as great, according to the GDP data and separate figures compiled by the Census Bureau.

>This deficit strips out U.S. trade in oil (which is rarely the subject of trade deals or related policy decisions) and services (where liberalization has made relatively little progress). The growth of the remaining real non-oil goods deficit during the current recovery has slowed cumulative inflation adjusted growth by fully 21.67 percent, or $536.52 billion.

(What’s Left of) Our Economy: So U.S. Manufacturing’s Never Produced More, Huh?

Tags

Commerce Department, Federal Reserve, gross output, industrial production, inflation-adjusted output, manufacturing, real gross output, real value-added, recession, recovery, value added, {What's Left of) Our Economy

Even though (thankfully) few claims have been heard lately that American domestic manufacturing is either enjoying a renaissance or on the verge of one, it’s still commonplace to insist that the sector’s output is at an all-time high. Invariably, the purpose is to argue that U.S. industry is in perfectly acceptable shape, and that anyone believing the contrary is mistakenly obsessing about the industry’s long years of job losses – which are attributed to its ever faster adoption of labor-saving technologies that are encouragingly boosting productivity.

Let’s (charitably) leave aside the reality that manufacturing’s productivity performance lately has been historically feeble. Instead, let’s express thanks to the Commerce Department, which has just published its latest reminder of how complicated – and uninspiring – manufacturing output has been lately.

As known by RealityChek regulars, the Federal Reserve’s monthly industrial production numbers have made sadly clear that, when adjusted for inflation, American manufacturing output is anything but at an all-time high. Indeed, its peak came at the very end of 2007, just as the Great Recession was beginning according to the quasi-official scorekeepers at the National Bureau of Economic Research. Since then, real manufacturing production has shrunk by 4.43 percent.

But as the Commerce Department’s new quarterly report on gross domestic product (GDP) by industry once again describe in detail, the U.S. government measures manufacturing output in several different ways. Unfortunately, however, none of them tell a story especially flattering to the sector.

Commerce gives pride of place to a gauge called real value-added – which tries to eliminate the double-counting that often marks the simpler production numbers mentioned above. In other words, real value-added (along with value-added that’s not adjusted for inflation) tries to ensure that the government isn’t counting an auto part once when it comes out of a parts factory and again when it comes out of a vehicle factory as one piece of a finished good.

The real value-added data certainly make manufacturing’s recent production growth look better than the real output figures. But that’s not to say they make this performance look good, for they show that from its 2007 peak through the end of last year, domestic manufacturing has shrunk by 0.81 percent.

It’s only when you don’t adjust for inflation that you start getting genuinely encouraging manufacturing output numbers. According to the pre-inflation value-added data, American manufacturing production was indeed at an all-time high as of the end of 2016. In fact, it’s 17.31 percent higher than the 2007 level.

Don’t get too excited by this number, however. If we switch time-frames and just look at the current economic recovery, we see that from the time the economy resumed growing in 2009 (and unfortunately, this data set doesn’t contain quarterly figures, so we have to use full years) through the end of 2016, current dollar manufacturing value-added advanced by 25.97 percent. That’s only a little faster than manufacturing’s 25.42 percent value-added growth during the previous (2001-2007) expansion – which was a year shorter. Moreover, no one ever considered those years a manufacturing golden age – or even close.

Yet another version of the manufacturing story is told by the gross output numbers compiled by the Commerce Department. They show that manufacturing production rose after the last recession began – by 12.94 percent. But that growth ended in 2014. Over the next two years, it dropped back – by 4.41 percent. So record manufacturing output came – and then went.

Adjusting gross output for inflation serves up a less volatile picture of manufacturing production, but it’s not much of an improvement. According to this measure, output peaked in 2007, and since then has dipped by 0.27 percent. That’s not much. But it doesn’t mark 2016 as an all-time high, either.

To me, a reasonable bottom line is this: The U.S. government uses five different measures of manufacturing output. Both its timeliest (the Fed industrial production figures) and arguably the one it likes best (real value-added) show that real manufacturing production is off its recent records. So do two other measures. The only data set that tells a reasonably good story is one that’s doesn’t take inflation into account. That’s a pretty flimsy reed on which to base claims that domestic manufacturing output has never been stronger.

(What’s Left of) Our Economy: Automotive Plunge into Technical Recession Drags Down March US Manufacturing Output

Tags

automotive, durable goods, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, non-durable goods, recession, recovery, vehicles, {What's Left of) Our Economy

The Federal Reserve’s new industrial production report today showed that U.S. domestic manufacturing in March took its first monthly tumble (0.38 percent) since August and its biggest since winter-affected February, 2015 (0.49 percent). Revisions (which incorporate the latest annual revision results released last month) were negative, and undercut the strong preliminary readings reported for January and February.

March’s manufacturing output fall-off was led by the biggest sequential plunge in constant dollar automotive output (2.96 percent) since May’s 3.19 percent decrease. As a result, the combined vehicles and parts industry, which has led U.S. manufacturing’s comeback during most of the current recovery, fell into a technical recession. It’s real production is now down by 0.38 percent since last February. Vehicle output was especially weak in March, plummeting by 4.77 percent for its worst month since last May’s 4.94 percent shrinkage in real terms.

March’s poor numbers mean that real U.S. domestic manufacturing output is now down on net since January, 2006 (by 0.38 percent), and is 4.43 percent below its all-time high, hit in December, 2007. The weak March automotive numbers helped drive monthly durable goods output down by its greatest percentage (0.83 percent) since January, 2014’s winter-affected 0.99 percent sequential contraction.

Here are the manufacturing highlights of the Federal Reserve’s new release on March industrial production:

>U.S. real manufacturing output dropped in March on month for the first time since last August, and the 0.38 sequential fall-off of 0.38 percent was industry’s biggest since February, 2015’s 0.49 percent – which was affected by unusually cold weather.

>Just as discouraging, the revisions (which incorporated the latest annual industrial production revision released by the Fed in late March) weakened initially reported combined January and February growth estimates that were industry’s best two-month stretch since February and March, 2014.

>January’s 0.54 percent monthly gain – which was upgraded in last month’s industrial production report – was revised down to 0.39 percent. February’s initially reported 0.51 percent sequential growth was downgraded to 0.35 percent growth.

>The overall March manufacturing monthly production fall-off was led by the worst figures for the automotive sector since last May.

>Real output in vehicles and parts combined – which has led manufacturing’s comeback since the current economic recovery began in mid-2009 – sank by 2.96 percent on month in March, the biggest such drop since last May’s 3.19 percent.

>The results were bad enough to plunge the sector into a technical recession. After-inflation automotive output is off by 0.38 percent since February, 2016.

>Automotive’s poor March owed mainly to a huge 4.77 percent decrease in inflation-adjusted vehicles production – the worst such figure since last May’s 4.94 percent.

>Another consequence of the overall real manufacturing production decline in March – industry’s constant-dollar output is now down on net (by 0.38 percent) since January, 2006.

>And since its pre-recession (all-time) peak, reached in December, 2007, price-adjusted domestic manufacturing output has now fallen by 4.43 percent.

>Overall real U.S. manufacturing output was up 0.98 percent on year in March – faster than its 0.12 percent inflation-adjusted output increase between the previous Marches.

>Automotive’s poor March performance helped lead to an after-inflation 0.83 percent monthly drop in manufacturing’s durable goods super-sector. That decrease was its first since August, and its biggest such shrinkage since winter-affected January, 2014 (0.99 percent).

>Year-on-year, inflation-adjusted durable goods output was up 1.45 percent. Between March, 2015 and March, 2016, if fell by 0.98 percent.

>Since its pre-recession peak, hit in December, 2007, durable goods production after inflation is down by 0.25 percent.

>Real production in the non-durable goods super-sector edged up by 0.13 percent on month in March – its third straight sequential increase.

>Year-on-year, non-durables’ price-adjusted production inched up by only 0.45 percent in March – much slower than its 1.37 percent advance between the previous Marches.

>Since its pre-recession peak – in July, 2007 – output in the non-durables super-sector has shrunk by 9.59 percent.

(What’s Left of) Our Economy: Manufacturing Exits Jobs Recession; Payrolls Resilient but Wages Dreary

Tags

inflation-adjusted wages, Jobs, manufacturing, non-farm payrolls, recession, recovery, wages, {What's Left of) Our Economy

Although U.S. monthly manufacturing jobs growth slowed in March to 11,000 from a solid February figure that was revised slightly downward (to 26,000), net positive revisions helped pull industry out of its latest employment recession. Manufacturing payrolls have now increased on net (by 5,000) since January, 2016. March’s year-on-year manufacturing jobs improvement (37,000) was also the best such figure since last February’s 69,000. Manufacturing’s March monthly employment slowdown mirrored that of the rest of the economy, but its revisions were much better. As a result, manufacturing’s share of total non-farm employment inched up from its latest all-time low in February (8.49 percent) to 8.50 percent.

Less impressive was manufacturing’s March sequential wage growth (0.04 percent), which trailed the overall private sector improvement (0.19 percent) for the third straight month. These results also pushed manufacturing’s yearly current dollar wage growth (2.53 percent) below that of the private sector (2.67 percent) for the first time since last February (2.32 percent vs 2.38 percent). Consequently, the wage-increase gap between the overall private sector and the manufacturing sector during the recovery widened from 1.23:1 to 1.24:1. Manufacturing’s recovery-era job laggard status remained intact, too, in March, as its payrolls have increased by only 5.68 percent since mid-2009, versus the 13.92 percent rise for the overall private sector.

Here’s my analysis of the latest monthly (March) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>The job growth slowdown that struck the entire U.S. economy in March undercut manufacturing’s performance, too. But the latest 11,000 sequential gain, coupled with February’s solid but downwardly revised 26,000 and positive revisions helped the sector emerge from its latest employment recession.

>American manufacturing payrolls are now 5,000 higher than in January, 2016.

>The new figures also pushed March’s year-on-year manufacturing jobs gains to 37,000 – the best such improvement since last February’s 69,000. Even better, the new March annual rise also beat that between the previous Marches (35,000).

>Although the February manufacturing jobs gain was revised down slightly from 28,000, January’s figure rise was upgraded from 11,000 to 12,000, and December’s increase is now judged to be 18,000, not 11,000.

>Manufacturing’s share of total non-farm employment came in at a meager 8.50 percent in March. But that level at least beat February’s 8.49 percent – which represented an all-time low.

>Manufacturing wages performed less impressively in March than manufacturing employment. On a monthly basis, the second straight 0.04 rise in pre-inflation hourly pay in the sector trailed the overall private sector rise (0.19 percent) for the third straight month.

>More troubling, manufacturing’s March year-on-year pre-inflation wage growth (2.53 percent) trailed the overall private sector result (2.67 percent) for the first time since last February (when annual current dollar manufacturing wages increased by 2.32 percent and overall private sector wages advanced by 2.38 percent.

>The new manufacturing increase did beat March 2015-16’s 2.47 percent.

>Yet thanks to manufacturing’s recent relative wage weakness, it’s an even greater recovery-era laggard measured by its rate of wage increases than in February. As of that month, current dollar private sector wages had risen by 23 percent faster than hourly manufacturing pay since the expansion’s June, 2009 onset.

>In March, the gap had grown to 24 percent. Manufacturing wages had risen by 14.55 percent during that period, whereas private sector wages in toto were up 18.07 percent.

>Moreover, the latest available (February) data show that manufacturing’s wage lag is even worse – and also widening – in inflation-adjusted terms.

>February real manufacturing wages dipped month-on-month by 0.09 percent, while after-inflation private sector pay rose by 0.09 percent.

>Including these results, after-inflation manufacturing wages have risen by only 0.56 percent during the near-decade-long recovery. Real overall private sector wages have advanced by 3.49 percent. These results brought the private sector manufacturing-pr

>Adjusting for inflation, manufacturing’s wage performance looks much worse. The latest figures only cover January, but they show that real hourly pay in the sector is up only 0.65 percent since the recovery began in mid-2009 – more than seven years ago.

>As a result, the March real wage growth gap between the two 6.32:1 – considerably higher than February’s 5.22:1.

>The recovery-era story of manufacturing as a major job-creation laggard remained intact in March, too.

>Since America’s current expansion began, industry’s payrolls are up by a mere 5.68 percent. Employment in the private sector as a whole has risen by 13.92 percent during this period.

>The same trends can be seen since the last recession began, at the end of 2007. From that employment peak to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained only 40.87 percent of those lost jobs (a total of 939,000). the private sector as a whole, by has boosted employment by 16.283 million.

>This means that total private sector employment is now 6.47 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.85 percent lower.

(What’s Left of) Our Economy: New Fed Revisions Show Weaker U.S. Manufacturing Performance

Tags

durable goods, Federal Reserve, industrial production, inflation-adjusted growth, manufacturing, non-durable goods, recession, Trump, {What's Left of) Our Economy

Last Friday, the Federal Reserve came out with revised figures for industrial production going back to 2012, and the results show that President Trump faces a bigger challenge in making American manufacturing great again than even he might have thought.

According to the new data, inflation-adjusted U.S. domestic manufacturing output is further from having regained its pre-recession high than previously estimated. Before the revision was released, as of the latest available (February) figures, American industry was still 2.83 percent smaller in price-adjusted terms than at the recession’s December, 2007 onset. Now, the shortfall since that peak more than nine years ago is judged to be 3.78 percent.

As a result, U.S. after-inflation manufacturing production today is still slightly lower than it was in August, 2006 – more than ten years ago.

The Fed’s new numbers also yield new figures for domestic manufacturing’s annual performance in recent years. Here are the pre-revision Fed estimates of real manufacturing output changes in recent years:

2014: +2.30 percent

2015: +1.20 percent

2016: +0.40 percent

Here are the revised real manufacturing output changes:

2014: +1.80 percent

2015: -0.50 percent

2016: +0.50 percent

The new Fed data also present the performance of manufacturing’s durable goods and non-durable goods sectors in new lights.

According to the pre-revision figures, real durable goods output in February, 2017 had climbed to 2.72 percent higher than its pre-recession peak in December, 2007. Now that increase is pegged at only 0.63 percent. Non-durable goods real output was previously thought to be 9.40 percent below its pre-recession peak (reached in July, 2007). Now the shortfall is judged to be slightly smaller – 9.17 percent.

The best news in the new Fed data concerned upward revisions for this year’s constant-dollar U.S. manufacturing output. The January figure – already upwardly revised to 0.54 percent on month – is now estimated at 0.59 percent. February’s initially reported 0.51 percent seqential improvement was upgraded to 0.54 percent. These are still the best back-to-back monthly gains since February and March, 2014 – but those increases have been revised, too (from 0.70 percent to 1.11 percent, and from 1.07 percent to 0.80 percent, respectively).

Even better, those 2014 rises in part reflected a manufacturing bounceback from an unusually harsh winter.

(What’s Left of) Our Economy: Why the New Jobs Report May Really Matter

Tags

Bureau of Labor Statistics, Employment, healthcare services, Jobs, non-farm jobs, real private sector, recession, recovery, subsidized private sector, {What's Left of) Our Economy

I have no idea how much credit President Trump deserves for the February U.S. jobs figures released last Friday that nearly everyone hailed as a strong performance. I feel somewhat more confident in noting that the results provided some preliminary indications – regardless of who or what deserves credit – that one of the most troubling features of the current employment recovery may have peaked.

Specifically, the February numbers show a reversal of the economy’s burgeoning reliance on what I call the subsidized private sector to generate employment gains, and a revival of the role played by the real private sector. That’s great news if these developments continue.

To summarize, the subsidized private sector consists of those American industries classified officially as private sector industries, but where levels of demand – and therefore employment – depend heavily on government subsidies. Healthcare services is the leading example. The real private sector is hardly devoid of government influence. But its levels of demand and employment are largely shaped by free market forces.

And since the real private sector leads the economy in innovation and productivity, signs that it’s regaining its relative job-creation chops deserve cheers.

I called the encouraging signs preliminary because they only cover the first two data months of this year. But they reveal that, in January and February, the subsidized private sector created only 17.55 percent of the 473,000 total net new jobs created by the economy. (Both numbers will be revised several times more.) That’s a much smaller share than the subsidized industries generated last January and February: 24.79 percent of the 363,000 net gain in employment.

The same conclusions flow from another set of data. During the first two data months of this year, the subsidized private sector accounted for 18.53 percent of the total employment improvement of the private sector as it’s conventionally defined by the Bureau of Labor Statistics. During the first two months of last year, that figure was 27.19 percent.

At the same time, the subsidized industries clearly are still punching above their weight on the employment front. In 2013, their two-month share of all net new jobs was only 13.48 percent, and of conventionally defined private sector jobs, 13.59 percent.

Looking at the economy on a standstill basis also reveals the importance of subsidized private sector job-creation. When the last recession began, at the end of 2007, it represented 13.22 percent of all non-farm payrolls (the Bureau of Labor Statistics’ U.S. jobs universe). When the current recovery began, in the middle of 2009, the subsidized private sector share had grown to 14.97 percent. And as of last month, despite the developments noted above, this percentage was up to 15.74 percent.

And this subsidized private sector growth has come in part at the expense of the real private sector. It’s share of total U.S. employment as of last month (68.94 percent) is still higher than at the recovery’s onset (67.80 percent). But it’s lower than its level at the onset of the last recession (70.62 percent).

Viewed from another perspective, when the current recovery began, as mentioned above, the subsidized private sector represented 14.97 percent of total American jobs. But since that time, it’s been responsible for 22.60 percent of total employment growth. The real private sector at the beginning of the current recovery accounted for 67.80 percent of total American jobs. And it’s share of subsequent employment growth has been higher, too (79.10 percent). But the gap between its share of employment and its role in employment growth is much lower than that of the subsidized industries.

Finally, the new jobs report contained some good news for fans of former President Obama. It revealed that from the start of the recovery that began a few months into his first term in office, through the end of his administration, hiring was slightly less subsidized private sector-heavy than originally reported.

There’s no doubt that two months’ worth of data per se hardly signal the dawn of a new, brighter era in American employment. At the same time, most trends don’t last forever. So in the months ahead, these subsidized private sector job trends will deserve more attention than ever. Indeed, they’ll be at least as important a yardstick for judging the Trump administration’s economic performance as the overall jobs totals.