(What’s Left of) Our Economy: New Ups & Downs for Manufacturing Production, but Recovery Still Incomplete

Tags

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

Domestic manufacturing has entered a period of output volatility, today’s new Federal Reserve figures indicate. Inflation-adjusted production in May – the latest data – fell sequentially (by 0.39 percent) for the second time in three months, following a six-month streak of sequential improvements. But April’s big rise was upgraded from one percent to 1.16 percent – the strongest such showing since May, 2010’s 1.49 percent, early in the current recovery. At the same time, March’s already downgraded 0.41 percent real monthly output decrease was lowered again, to a 0.75 percent slide. That was the worst such retreat since winter-affected January, 2014’s 1.09 percent.

Automotive revisions figured prominently in these upgrades and downgrades, with April’s initially reported five percent constant dollar monthly production surge now judged to be 4.12 percent. In May, after-inflation output for the sector, which has led generally led manufacturing’s rebound from the Great Recession, tumbled 2.02 percent on month.  

Durable goods – manufacturing’s biggest super-sector – was most seriously affected by the auto volatility.  Its April monthly real output was boosted to an upwardly revised 1.20 percent – the fastest such pace since February, 2014’s winter-affected 1.80 percent.  But its May after-inflation on-month production was dragged down to a 0.84 percent fall – the worst since the 0.99 percent decrease resulting partly from January, 2014’s similarly cold weather.    

Non-durables’ production performance has been steadier, with May’s 0.10 percent on-month real gain its fourth such improvement in five months. Moreover, April’s sequential inflation-adjusted production growth was upgraded from an already strong 0.98 percent to 1.10 percent – it best such performance since October, 2008’s 2.15 percent. And non-durables’ annual real output increase of 1.53 percent was its best year-on-year rise since February, 2016’s 1.55 percent.

All the same, the new figures and volatility left domestic manufacturing’s price-adjusted output 3.99 percent less than at its pre-recession peak, more than nine years ago.

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

>U.S. real manufacturing output fell in May sequentially for the second time in three months. But the 0.39 percent decline – which followed six straight months of sequential growth – was modest compared with many of the March and April revisions, which could be starting a period of new volatility.

>April’s strong initially reported inflation-adjusted output rise of one percent was revised up to 1.16 percent. That was the best such performance since May, 2010’s 1.49 percent, when the manufacturing recovery from the Great Recession was still gathering steam.

>But March’s already downgraded 0.41 percent monthly real production decline was cut further, to 0.75 percent. That was domestic manufacturing’s worst such growth showing since the 1.09 percent fall-off in January 2014, which was affected by harsh winter weather.

>February’s last (downwardly revised) 0.27 percent monthly after-inflation output increase was revised back up to 0.38 percent.

>Some these swings can be traced to the automotive sector, which has led manufacturing’s real growth for most of the current economic recovery.

>April on-month price-adjusted auto production was initially reported to have advanced by five percent – its best growth since July, 2015’s 7.84 percent. Leading the way was a reported 8.04 percent surge in real vehicle output, also the best since July, 2015 (12.38 percent).

>The new April numbers: 4.12 percent and 6.76 percent, respectively. And in May, constant-dollar production fell by 2.02 percent.

>Automotive’s ups and downs most profoundly affected production of durable goods – manufacturing’s largest super-sector.

>The poor May automotive performance contributed to the 0.84 percent sequential durable goods real production shrinkage that month – the worst such decline since winter-affected January, 2014’s 0.99 percent.

>But the initially reported 1.01 April monthly durables production advance is now estimated at 1.20 percent – the super-sector’s fastest growth since the winter-affected 1.80 percent in February, 2014. Combined with the lower automotive results, this development indicated some relative strength outside automotive.  

>And thanks to the strong and upwardly revised April monthly figures, durable goods year-on-year after-inflation production gain that month was upgraded from 2.03 percent to 2.22 percent – still the best such increase since January, 2015’s 3.15 percent, which was also affected by harsh winter weather.

>In April, however, the annual durable goods real output improvement sank to 1.66 percent.

>The new Fed figures show that real output in non-durable goods has been steadier than in durables, but April was a standout nonetheless. Their robust sequential output growth of 0.98 percent was revised up to 1.10 percent – which produced the best monthly result since the 2.15 percent recorded in October, 2008 – even before the Great Recession broke out.

>And non-durables followed up by eaking out 0.10 percent monthly inflation-adjusted production growth in May – their fourth such advance in the last five months.

>Further, the 1.53 percent May non-durables annual constant dollar output increase was its best yearly result since February, 2016’s 1.55 percent.

>Yet not even this recent volatility could turn domestic manufacturing into a recovery-era economic winner. The overall sector is still 3.99 percent smaller in real terms than at its pre-recession peak – more than nine years ago, in December, 2007.

>Durable goods real output is up – but by only 0.13 percent – during this time, while non-durables real output is down 9.08 percent from its pre-recession peak, hit in July, 2007.

(What’s Left of) Our Economy: Rising Fed Rates Amid Slowing Real Wages?

Tags

Federal Open Market Committee, Federal Reserve, inflation-adjusted wages, interest rates, Labor Department, manufacturing, private sector, recovery, wages, {What's Left of) Our Economy

Although it’s usually hard to muster much sympathy for the governors of the Federal Reserve, today might be an exception.

On the one hand, this afternoon their Open Market Committee is scheduled to announce its latest decision on interest rates, and it’s given many indications that it’s going to again make the cost of borrowing a little more expensive. That probably means, all else equal, that economic activity in the United States (including growth and hiring) will slow down, at least in the short term.

On the other hand, the U.S. government reported a slew of economic data this morning indicating that the economy is getting weaker – which would make at least the timing of even a modest rate hike awkward. Among them were inflation-adjusted wage figures (for May) that once more reveal a significant slowdown in American workers’ real take-home pay.

For the private sector overall (the Labor Department, which calculates these figures, doesn’t report inflation-adjusted wages for public sector workers, because their government-set pay tells us little about the state of the economy), the news wasn’t bad at all on a month-to-month basis. Constant-dollar wages rose 0.28 percent from their April levels – after having gone exactly nowhere the month before.

But the year-on-year results – which smooth out inevitable random-ish monthly fluctuations – were again nothing less than discouraging. From last May until this May, this price-adjusted pay increased by just 0.56 percent. That was indeed their strongest annual improvement since last December’s 0.75 percent. But it was much less than half the after-inflation pay advance between the previous Mays (1.42 percent), much less that of May, 2014-May, 2015 (2.33 percent).

So largely as a result, during the current economic recovery – which is nearly eight years old – real private sector wages are up only 4.26 percent.

But according to the Labor Department, private workers overall have been enjoying salad days compared with manufacturing workers. The latter’s real wages fell on month in May by 0.28 percent. It’s true that this decline followed an upwardly revised 0.55 percent sequential April increase that was the sector’s best since August, 2015’s 0.66 percent. But the May monthly decline was the sector’s worst since last November’s 0.64 percent slide.

Manufacturing’s year-on-year real wage results are scarcely better. In May, they flat-lined — their worst such performance since September, 2014’s 0.29 percent annual dip. The two previous May annual real wage increases”? Between 2015 and 2016, 2.45 percent, and between 2014 and 2015, 1.53 percent.

And during the nearly eight years since the economy began growing once again, real manufacturing wages are up 1.31 percent.

These glum wage data notwithstanding, there still could be good reasons for the Fed to announce another rate hike today. As RealityChek readers know, it’s entirely possible that recent years of stimulus from the central bank has mainly stolen potential growth from the future by promoting artificial growth. Similarly, as the Fed itself has acknowledged lately, monetary policies that have made credit so cheap – and indeed, practically free for blue-chip borrowers – for so long can encourage the kind of crackpot investing and financial instability that could trigger another global crisis.

If the Fed emphasizes these concerns in its (usually brief) statement accompanying the interest rate announcement, or in the more detailed Open Market Committee meeting minutes it publishes later, it will deserve the nation’s gratitude for straight talk – however overdue it might be. If, however, the central bank insists that it’s raising rates mainly because the economy is looking encouraging, it will be increasingly deserve the label of mindless cheerleader.  

(What’s Left of) Our Economy: JOLTS of Confusing News About the U.S. Jobs Market

Tags

government jobs, job openings, JOLTS, Labor Department, labor shortage, living standards, manufacturing, private sector, productivity, recovery, retail, wages, {What's Left of) Our Economy

Since the U.S. economy has settled at its current level of near-full employment (at least by the official figures), the monthly JOLTS reports issued by the Labor Department have been attracting much less attention – including from me! After all, with so many Americans working, it’s been less important (though not totally unimportant) to learn about one of the key findings in each such survey of labor market turnover – how many new job opportunities business and government say they’ve been creating. 

So it’s not surprising that today’s JOLTS report (for April) hasn’t had much impact on the financial markets this morning. But it still contained more than its share of noteworthy results that reinforce what we think we already know about the economy’s current biggest problems, and that raise major questions about other portions of the conventional wisdom.

The overall job openings number, for example, was quite the stunner: At 6.044 million, it was an all-time high in absolute terms. (The JOLTS series dates from December, 2000.) And the 4.48 percent increase over May’s 5.785 million level represented the biggest monthly jump since last July’s 7.91 percent.

Openings in the private sector hit a new record in April, too (5.464 million). And that 4.20 percent monthly rise was the great sequential increase since last July (8.46 percent).

But as RealityChek regulars know, the economy’s growth has been sluggish even by the meager standards of the current economic recovery. In the first quarter of this year, real growth came in at a paltry 1.15 percent annual rate. So the JOLTS figures indicate that employers feel they need record numbers of new employees even though as a group their output is historically lousy.

That adds up to more evidence that American business boosting its productivity only sluggishly at best – which is awful news given that productivity growth is the nation’s best hope for improving living standards in a sustainable, not bubble-ized, way. And as I’ll be reporting on shortly, the latest government labor productivity numbers once more confirm that the economy is stuck in a productivity crisis.

Yet these JOLTS results carry more complicated implications for another broadly accepted feature of the American economy. They support the idea that U.S. businesses are struggling to overcome almost unprecedented labor shortages. How else to explain the enormous number of reported job openings? But companies that desperate to find workers should be raising wages at rapid and indeed accelerating rates. Everything that we know about hourly pay, though, tells us that nothing of the kind is happening. If anything, wage growth, which has underwhelmed throughout the current recovery, is showing signs of slowing.

One other new record revealed by today’s JOLTS report – total government job openings (540,000) have never been higher except in April, 2010, when the call went out for temporary Census workers. Even more interesting, most of the openings were in state and local governments outside the schools.

Also somewhat surprising: The “retail-pocalypse” so commonly bemoaned or hailed (depending on your viewpoint) is nowhere to be seen in this JOLTS report. Sure, retail job openings fell between March and April from 593,000 to 577,000. Moreover, that’s the lowest level since December, 2015, and the numbers now are generally, though unevenly, trending down. But for the first more than seven years of this nearly eight-year old recovery, they were trending solidly up. With overall economic growth down and consumers still cautious, the reported retail openings numbers are far from screaming “disaster!” – or even “serious trouble!”

Finally, although manufacturing output has been modestly recovering lately from its most recent recession, its job openings fell from 404,000 in March (the second highest record and best since January, 2001’a 496,000) to 359,000 in April. Still, the decline followed a major increase in March (from 364,000), and the manufacturing numbers have been pretty volatile for more than two years.

Maybe the safest conclusion to draw from the JOLTS numbers is that, for now, the economy is heading for more of the same. Whether that’s the safest result for incumbent American politicians is another matter entirely.

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

Tags

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: Modest Trade Improvement Helps Lift U.S. Growth a Bit

Tags

exports, GDP, Great Recession, gross domestic product, imports, Made in Washington trade deficit, real GDP, real trade deficit, recovery, Trade, trade deficit, {What's Left of) Our Economy

The government’s first revision of first quarter gross domestic product (GDP) figures showed that the inflation-adjusted trade deficit shrank slightly more than originally reported on a sequential basis, and therefore boosted growth by fractionally more (0.13 percentage points rather than 0.07 percentage points). Nonetheless, the quarter-to-quarter positive swing in trade’s growth role (1.95 percentage points) now matches the biggest such change since the fourth quarter of 2010. The $599.9 billion quarterly real trade still represented 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.

The new GDP figures show all of the major categories of after-inflation exports and imports still at new quarterly records, with the former generally fractionally higher and the latter generally fractionally lower. (Services exports were the exception.) The cumulative growth drag created by the real trade deficit’s increase during the current, historically feeble economic recovery shrank from 9.70 percent in the advance first quarter GDP read to 9.32 percent. Separate Census data show that the Made in Washington trade drag declined in the first quarter as well, but at 21.26 percent still represented nearly $533 billion in foregone real output.

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

>The government’s second look at first quarter U.S. gross domestic product (GDP) showed that a slightly smaller real trade deficit than previously reported made a slightly larger contribution to inflation-adjusted growth.

>The new $599.99 billion annualized trade deficit number (down from the previously reported $605 billion) means that the shortfall shrank sequentially by 0.84 percent. As a result, trade’s absolute boost to growth (0.13 percentage points) was larger than the 0.07 percentage point figure reported last month.

>Moreover, the quarterly positive swing in the trade’s growth role from the fourth quarter of last year (when it subtracted 1.82 percentage points) grew to 1.95 percentage points – matching the biggest such total since the fourth quarter of 2010.

>At the same time, this quarterly trade gap was still the second largest since the $623.7 billion deficit registered in the first quarter of 2008, as the economy was just starting to succumb to the Great Recession.

>All categories of exports and imports tracked in the real GDP figures remained at new quarterly records in the first quarter, with all export totals except for services exports rising modestly, and all import totals falling modestly.

>Combined annualized goods and services exports in the first quarter were upgraded from $2.1675 trillion to $2.168 trillion – 1.43 percent higher than the fourth quarter’s level. The previous quarterly all-time high had been $2.1620 trillion annualized, set in the third quarter of last year.

>The goods export total was revised up from $1.4828 trillion to 1.4832 trillion – an increase of 2.04 percent over the fourth quarter. The previous record of $1.4792 trillion was also set in third quarter, 2016.

>Services exports remained unchanged at $685.8 billion annualized – and still topped the previous record of $684 billion record set in the first quarter of 2015.

>Total annualized first quarter imports were pegged at $2.7679 trillion – a bit lower than the previously reported $2.7703 trillion level, and 0.93 percent higher than the fourth quarter total. The new first quarter level still bested the previous $2.7424 billion record of that fourth quarter.

>Goods imports also were revised down fractionally, from $2.2797 trillion to $2.2782 trillion. That still represented a 1.03 percent increase over the fourth quarter level of $2.2549 trillion – the previous record.

>Services imports were reported last month at their eighth straight quarterly record., and they remained so in today’ report. But the previous $488.3 billion figure was revised down to $487.4 billion – a 0.47 percent sequential increase.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery was smaller in the first quarter than previously estimated. The 9.70 percent figure was revised down to 9.32 percent – somewhat lower than the fourth quarter’s 9.71 percent. The new data mean that the economy has grown by $233.6 billion less in real terms during the recovery due to the increase in the real trade deficit.

>The trade drag created by the Made in Washington deficit is still more than twice as great, according to the GDP data and separate figures compiled by the Census Bureau. But it, too, has been slightly downgraded.

>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 21.26 percent.

>That’s down from the 21.67 percent growth loss that could be calculated from the previous GDP report, but it will means that the growth of this policy-influenced trade deficit has cost the U.S. economy $532.9 billion in cumulative inflation-adjusted production during this recovery.

Im-Politic: More Evidence that Trump-ers Were Mainly Voting Their Pocketbooks

Tags

Commerce Department, Great Recession, Hillary Clinton, Im-Politic, inflation-adjusted growth, manufacturing, recovery, states, Trump

One of my favorite statistical reports just came out a week ago – the Commerce Department’s survey of economic growth last year in each of the 50 states plus the District of Columbia. I like the report so much mainly because it’s accompanied by the release of figures that show how much manufacturing production changed in real terms on an annual basis – and therefore gives us another indication as to whether or not the sector really has recovered from the Great Recession completely. (Spoiler alert: It hasn’t. But more on that later.)

This year, the new state numbers provide some new insights into why last year’s presidential election turned out as it did. Specifically, it shows a strong relationship between a state’s economic performance and its award of electoral votes to President Trump or his Democratic rival, former Secretary of State Hillary Clinton.

To begin, here’s a list of the “Top Ten” states that enjoyed the fastest inflation-adjusted growth between 2015 and 2016. (Because of ties, there are actually 21 of them). Their real percentage growth in 2016 is next to their names, then comes their rank (in parentheses) and then their presidential choice:

Washington 3.7 (1) Clinton

Oregon 3.3 (2) Clinton

Utah 3.0 (3) Trump

NH 3.0 (3) Clinton

Fla. 3.0 (3) Trump

Georgia 3.0 (3) Trump

Utah 3.0 (3) Trump

Calif. 2.9 (4) Clinton

Nevada 2.4 (5) Clinton

DC 2.4 (5) Clinton

Arizona 2.1 (6) Trump

So. Carolina 2.1 (6) Trump

Hawaii 2.1 (6) Clinton

Tenn. 2.0 (7) Trump

Colorado 2.0 (7) Clinton

Mass. 2.0 (7) Clinton

Idaho 1.8 (8) Trump

Michigan 1.8 (8) Trump

Ohio 1.7 (9) Trump

So. Dakota 1.7 (9) Trump

No. Carolina 1.6 (10) Trump

At first glance, the election seems like a toss-up in terms of the economic winner states, with Mr. Trump winning twelve and Clinton nine. But in terms of one of the main questions posed about the president’s supporters – whether they were motivated mainly by economic concerns or by other hopes or fears (ranging from racism and xenophobia to mistrust of Clinton) – this list looks like it points to the latter.

But here’s where some context needs to be considered. After all, the president won 32 (or 62.75 percent) of the states (including D.C.) up for grabs. Clinton won only 19. But the Trump share of the economic winners was somewhat lower – 12 of 21, or 57.4 percent. So maybe economic issues were fairly prominent among the Trump-ers.

More convincing evidence comes from the list of the worst performing states in 2016. Here they are in the same format used for the first list. (These states total eleven due to a tie):

No. Dakota -6.5 (1) Trump

Alaska -5.0 (2) Trump

Wyoming -3.6 (3) Trump

Oklahoma -2.3 (4) Trump

West Va. -0.9 (5) Trump

Louisiana -0.6 (6) Trump

New Mex. -0.5 (7) Clinton

Kansas 0.2 (8) Trump

Montana 0.2 (8) Trump

Texas 0.4 (9) Trump

Delaware 0.3 (10) Clinton

In fact, this evidence couldn’t be clearer. President Trump won nine of these eleven slowest-growing states.

These results don’t finally resolve the debate over Trump voters by a long shot – if only because the nation’s population is so unevenly distributed among states, and because of the winner-take-all nature of the Electoral College (except in Maine and Nebraska). Moreover, there’s not always such a bright line between economic and non-economic concerns, and many voters base their choices on several considerations.

Finally, it would be important to examine the economic growth trends over a longer period of time. That way, we could see whether various states’ expansion or contraction last year was consistent with longer-term trends or whether they were outliers. (Those distinctions presumably would have some influence over voters’ views of their own fortunes and the appeal of incumbents – or representatives of incumbent administrations – and challengers.)

But the news that nine of the 19 states won by Clinton were among the nation’s fastest growers, and only two were among the slowest, lends more support to the view that pocketbook issues created a big divide in the electorate last year.

And about that manufacturing news: The industry data released along with the new states growth shows that American domestic manufacturing’s output fell by 0.15 percent in constant dollar terms. That’s not much, but recall that it’s only a tenth as fast as even the negligible growth registered by the economy as a whole after inflation – 1.54 percent.

And thanks largely to this down year, from the last quarter of 2007 (when the Great Recession began) until the last quarter of last year (the latest quarterly data available), real manufacturing production shrank by 2.37 percent. As RealityChek readers know, there are several measures of manufacturing output used by the government – but they also know that most, like these latest data, show that the claim that America’s manufacturers have never turned out more product in this country than ever in the nation’s history are just peddling fakeonomics.

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

Tags

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: Slight March Trade Deficit Dip Conceals Numerous Milestones, Major Asia Deterioration

Tags

Asia, Canada, Census Bureau, China, European Union, exports, free trade agreements, high tech goods, imports, Japan, KORUS, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, Pacific Rim, recovery, services, South Korea, Trade, trade deficit, {What's Left of) Our Economy

Note:  So many new records and multi-year highs were revealed by the March trade figures released this morning by the Census Bureau that I’m posting this abbreviated, just calculated, write-up — containing all the main highlights — rather than the usual lengthier, more comprehensive version.

America’s goods and services trade deficit slipped by 0.12 percent on month in March, to $43.71 billion, but the decline was more than offset by a noteworthy 0.47 percent upward revision to the originally reported February figure – to $43.76 billion. This modest movement, moreover, masked major deterioration in America’s trade balances with Pacific Rim countries, many of whose surpluses with the United States had been depressed by winter or spring holidays. 

Whereas in February, the American goods deficit with that region plunged sequentially by 30.76 percent, it rebounded in March by 25.39 percent, to $33.55 billion – the biggest such jump since last March 2015’s 52.63 percent. The greatest (15.53 percent) monthly merchandise import increase since then was largely responsible. Although the China goods deficit remained high – mainly because U.S. merchandise exports in March fell for the fifth straight month – the biggest trade swings were recorded with Japan and South Korea. Significantly, March marked the fifth anniversary of the implementation of the bilateral U.S.-Korea free trade agreement (KORUS) 

The March merchandise deficit with Japan soared by nearly 55 percent, to its highest level ($7.42 billion) since April, 2008 ($7.61 billion). And American goods imports from Japan rose by 32.12 percent to $13.04 billion – their highest total since March, 2007 ($13.47 billion). 

U.S. merchandise exports to South Korea hit a new monthly all-time high in March ($4.36 billion), imports rose to their second highest level ever ($6.61 billion), and the large sequential gains left the goods deficit at $2.25 billion. That was 73.50 percent higher than a February figure that itself had fallen by nearly 50 percent.  

Since KORUS’ implementation, in March, 2012, the U.S. merchandise deficit with South Korea has more than quadrupled (from $561.4 million) on a monthly basis.  By that same measure, U.S. goods exports to South Korea are up by 3.99 percent, and goods imports are 38.08 percent higher. 

The huge and chronic U.S. goods deficit with China rose by 7.03 percent sequentially in March, to $24.58 billion, but remained well below record levels. Nonetheless, American merchandise exports to China’s still strongly growing economy fell for the fifth straight month, to $9.63 billion. That was their lowest level since last September ($9.56 billion). 

Asia events also clearly influenced the big on month rebounds in the March trade deficits for manufacturing (up 15.23 percent, to $69.76 billion, after dropping by 19.88 percent) and high tech goods (up 33.87 percent, to $6.07 billion, after plummeting by 46.39 percent).

New records and multi-year highs were set in U.S. trade on other fronts, too. American goods exports to the European Union hit $25.69 billion – a new all-time best. Goods imports from NAFTA partner, Mexico, however, hit a new record as well ($21.02 billion), and helped boost the bilateral merchandise to its highest level ($7.03 billion) since November, 2007 ($7.23 billion) – just before the Great Recession officially began. The United States fared better with its other NAFTA partner, Canada. Its merchandise deficit sank by 35.49 percent, to $1.37 billion, as exports of $24.92 billion represented the best such total since March, 2015 ($25.50 billion), and imports of $26.29 billion represented their highest level since June, 2015 ($27.34 billion).

U.S. global services exports rose in March to a new record high as well ($64.70 billion), and helped push the surplus to its best level ($21.80 billion) since June, 2015 ($22.41 billion). As for overall goods and services exports and imports, they both fell sequentially in March (by 1.02 percent and 0.73 percent, respectively). 

The trade drag on the historically feeble American economic recovery declined as well, from 17.55 percent in the fourth quarter of last year to 17.44 percent of during the first quarter of this year, but still slowed the economy’s cumulative expansion by a staggering $433.76 billion after inflation.

(What’s Left of) Our Economy: New Evidence of a Crossroads for the U.S. Jobs Market

Tags

benefits, compensation, Employment Cost Index, Federal Reserve, inflation, Labor Department, labor market, labor unions, private sector, recovery, salaries, wages, {What's Left of) Our Economy

If you’re one of the American workers who’s been happy with the current economic recovery, you might have already seen peak pay gains. If you haven’t been satisfied, get ready for greater disappointment. And whatever category you fall into, you’d better hope that new U.S. government data on overall compensation paid by American employers is just a blip. Ditto that for the Federal Reserve, which is set to announce its latest decision on interest rates later today, and which seems convinced that the American labor market is healthy enough to withstand a series of hikes back toward historically normal levels.

Last week, the Labor Department issued its latest quarterly report on how much business shells out in terms of both wages, salaries, and benefits. The results in the main release looked pretty good, but they’re not adjusted for inflation – which means that they don’t tell the full story about whether or not compensation is keeping up with the cost of living. Luckily, Labor released the inflation-adjusted figures, too, and they make clear that whatever real compensation progress workers might have been recently been making could be in danger.

According to these constant-dollar Employment Cost Index (ECI) figures, real pay for all private sector workers was flat year-on-year for the quarter ending in March. (I don’t usually examine pay data that include government workers because their compensation is set overwhelmingly by political decisions, not market forces, and therefore don’t say much about the underlying strength of the labor market or the broader economy.)

That annual result was the worst since the quarter ending in June, 2014 – when after-inflation compensation also flatlined on an annual basis. By comparison, the real ECI between that first quarter of 2015 and the first quarter of 2016 rose by 0.97 percent.

Looked at quarter-to-quarter, the real ECI for private sector workers fell by 0.10 percent. The previous sequential change was a 0.29 percent improvement. Indeed, the latest numbers broke a two-quarter string of gains.

From a longer-range perspective, however, the current recovery still stacks up pretty well for private sector workers (although the data only go back to mid-2001). Since it began, in mid-2009, their total compensation is up by 3.60 percent. During the previous (shorter) expansion – which ran from late 2001 through late 2007, total inflation-adjusted compensation rose by only 2.36 percent.

The new real ECI results reveal similar trends for American manufacturing workers. The first quarter’s year-on-year 0.20 percent drop was the worst such result since an identical decrease in the final quarter of 2012. And the previous first quarter annual change was a 1.49 percent rise.

Sequentially, real manufacturing compensation also fell during the first quarter – by 0.29 percent. And as with overall private sector compensation, that was the first such decline in three quarters.

Interestingly, in terms of real total compensation, the current recovery has been a winner for manufacturing workers to an even greater extent than for all private sector workers. Combined constant dollar employer costs for wages, salaries, and benefits have risen by 4.72 percent – compared with a 1.99 percent advance during the previous recovery. (RealityChek regulars will note that these results contrast strikingly with those for wages alone, where manufacturing has been a major laggard. One reason is surely manufacturing’s relatively high unionization rate – which typically results in better benefits won and kept.)

If the Federal Reserve decides today to raise the federal funds rate it controls directly, or even if it simply stays determined to remains on a tightening path, it would signal its confidence that the American labor market remains on the mend following devastating losses during the last recession. Any doubts the central bank voices about its current strategy might indicate that it’s genuinely worried about the new ECI statistics – and that U.S. workers should be, too.