(What’s Left of) Our Economy: U.S. Manufacturing Output Keeps its Head Above Water

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Yesterday’s figures from the Federal Reserve showed that U.S.-based manufacturing is still growing – by the barest of margins.

The data, covering August, revealed that domestic industry expanded in inflation-adjusted terms by just 0.09 pecent. Revisions were slightly negative.

As a result, after adjusting for prices, U.S. manufacturing output is 3.49 percent higher than in February, 2020 – just before the CCP Virus and assorted mandated and voluntary behavioral curbs sparked a short but scary downturn and touched off waves of distortion that persist to this day. As of last month’s Fed report, industry’s inflation-adjusted production had risen by 3.69 percent during the pandemic period.

Among the broadest manufacturing sub-sectors tracked by the Fed, the biggest August winners were:

>petroleum and coal products, whose 3.54 percent constant dollar monthly output surge was its best since the 11.49 percent jump of March, 2021, when the industry was bouncing back from the damage inflicted by that winter’s Texas blizzards. Revisions were mixed. July’s originally reported after-inflation drop of 0.94 percent upgraded to one of 0.25 percent. June’s preliminary figure, revised up last month from a real decrease of 1.92 to one of 1.50 percent revised back down to a 2.80 percent decline. But May’s initially reported 2.33 percent constant dollar sequential monthly shrinkage of 2.61 pcerent now standing as a fall of 1.30 percent.

Since immediately pre-pandemic-y February, 2020, inflation-adjusted production by these companies is up by 1.45 percent, versus the 1.27 decrease calculable last month;

>aerospace and miscellaneous transportation equipment, which rose month-to-month by 2.08 percent in real terms for its best such performance since February’s 2.52 percent. Revisions were slightly positive. June’s initially reported 1.54 percent improvement is now pegged at 1.55 percent. June had advanced from a fractional increase to a 0.14 percent dip to a 0.20 percent increase. But May’s results have deteriorated here, too – from an initially reported 0.85 percent decrease to a 1.25 percent drop.

In price-adjusted terms, this cluster is now 24.07 percent larger than in February, 2020, versus the 21.30 percent calculable last month;

>miscellaneous durable goods, a diverse sector containing the personal protective equipment and other medical gear used to widely to fight the CCP Virus saw inflation-adjusted production grow by 1.71 on month in August, its best such performace since last December’s 1.85 percent. Revisions, however, were negative. July’s initially reported 1.23 percent increase was revised down to one of 0.89 percent. June’s results have been downgraded from an advance of 2.25 percent to one of 0.87 percent to the 0.67 percent reported yesterday. And May’s improvement, first estimated at 1.17 percent, is now just to have been 0.63 percent.

Consequently, real production in miscellaneous durable goods has now increased by 13.92 percent since February, 2020, just before the pandemic’s arrival in force, versus the 13.38 percent calculable last month; and

>computer and electronics products, where constant dollar output climbed by 1.27 sequentially for their best month since May, 2021 (2.44 percent). Revisions were slightly negative, July’s results were downgraded from a decrease of 0.65 percent to one of 0.68 percent. June’s initially reported 0.21 percent was upgraded to a 0.67 percent gain before dropping back to one of 0.46 percent. And the initially reported May monthly rise of 0.50 percent is now recorded as a decrease of 0.11 percent.

After-inflation growth in this broad sector is now reported at 6.11 percent since that last CCP Virus data month of February, 2020 versus the 5.93 percent calculable last month.

Not so coincidentally, August’s two worst manufacturing production losers among the biggest manufacturing sub-sectors were closely related to the nation’s hard-pressed housing sector:

>furniture and related products, which suffered it sixth straight monthly price-adjusted production decrease. Moreover, the 2.13 percent shrinkage was the worst since February, 2021’s 2.77 percent. Moreover, revisions were overall negative. July’s initially reported retreat of 1.57 percent was revised up to one of 0.80. percent. But the June losses have been downgraded from one of 0.55 percent to one of 1.33 percent and then to one of 1.87 percent. And May’s initially reported 0.94 percent increase is now judged to have been a 0.96 percent decrease.

The furniture cluster is now 7.30 percent smaller after accounting for inflation since February, 2020, versus the 5.56 percent calculable last month’

>wood products, whose inflation-adjusted production slip of 1.70 percent was its second month-to-month decrease in a row and its worst since April’s 1.89 percent. Revisions were mixed. July’s initially reported 0.72 percent increase is now pegged as a -0.03 decline. June’s initially reported 0.73 percent rise has been revised down to one of 0.42 percent and yesterday to a 0.62 loss. But May’s results have been upgraded from a 2.64 plunge to a decrease of just 0.28 percent.

Whereas last month’s Fed release showed this sector to be 6.79 percent bigger since just before the pandemic began roiling and distorting the economy, this month’s estimates this increase to have been just 2.67 percent;

>automotive, whose roller-coaster ride continued with real output sinking by 1.44 percent in August. Worse, July’s initially reported 6.60 percent monthly production burst was cut by more than half – to an increase of 3.24 percent. June’s initially reported 1.49 percent decrease was first upgraded to one of 1.27 percent but now stands at 1.31 percent. And May’s initially reported 0.06 percent on month real output dip is now judged to have been a decrease of 1.96 percent.

As of last month’s Fed report, inflation-adjusted vehicle and parts production was recorded as being up by 4.73 percent since February, 2020. Now it’s pegged as being off by 0.20 percent; and

>electrical equipment, appliances (also related to housing), and components, whose inflation-adjusted production contraction (1.01 percent) was its second straight. Revisions, though, were overall positive. July’s initially reported 1.41 percent fall-off is now estimated as one of 1.44 percent., but June’s results have been upgraded a second consecutive time – from an advance of 1.34 percent to one of 1.42 percent to yesterday’s 1.45 percent. And although May remained an output loser, the decrease has been upgraded from an initially reported 1.83 percent to one of 1.68 percent (which was still its worst results since December’s 2.48 percent slump).

All told, though, this cluster’s price-adjusted shrinkage since that last pre-pandemic data month of February, 2020 fell to just 4.53 percent, versus the 4.83 percent fall-off calculable last month; and

>fabricated metal products, another volatile industry. After-inflation production was off by 0.95 percent sequentially in August, after improving by a figure of 1.79 percent that was revised down from an initially reported 2.05 percent but was still the best such result since February’s 2.49 percent jump. Other revisions were mixed, with June’s initially reported decrease of 0.83 percent revised down first to one of 1.40 percent and now to one of 1.59 percent, and May’s initially reported drop of 1.16 percent now pegged at just 0.98 percent.

As of last month’s Fed report, fabricated metals products’ constant dollar output had closed to within 0.14 percent of its immediate pre-CCP virus level. Now it’s off by 1.42 percent.

Better news came from the big and diverse machinery sector, which is a bellwether for both the rest of manufacturing and the rest of the entire economy, since so many industries use its products. It grew in real terms sequentially in August by 0.91 percent – its best such result since April’s 1.97 percent. Revisions were mixed. July’s initially reported 0.50 percent increase is now estimated to have been 0.68 percent. June’s results, first downgraded from a 1.14 percent decrease to one of 2.16 percent were revised back up to one of 1.75 percent. And May’s initially reported drop-off of 2.55 percent is now recorded as one of 3.20 percent – the worst since the 18.64 percent nosedive of April, 2020, during the height of the pandemic’s first wave.

Machinery has now grown by 5.07 percent during the pandemic period, versus the 2.82 percent calculable last month.

Interestingly, except for the still-shortage-plagued semiconductor industry, August was a banner output month for the sectors that consistently have made headlines during the pandemic.

Real output of microchips and related products did decrease by 0.57 percent, but the decline was the first in three months. Revisions were negative, though. July’s initially reported 1.16 percent rise has been downgraded to one of 0.77 percent and following a major upward revision from 0.18 percent growth to 2.09 percent, June’s real output now stands at 0.88 percent. But after a massive downgrade from 0.52 growth to 2.24 percent shrinkage, May’s performance is now recorded as a just a 0.72 percent loss.

After-inflation semiconductor production is now up 17.46 percent since pre-pandemic-y February, 2020, versus the 21.98 percent calculable last month.

Aircraft and parts surged by 3.11 percent sequentially in August after inflation, these industries’ strongest such performance since the 8.61 percent burst in January, 2021. Revisions were mixed, as July’s initially reported 1.02 percent real monthly output rise to one of 1.52 percent, but June’s initially reported 0.26 percent advance revised down to one of 0.18 percent and then back up to just 0.24 percent, and May’s initially reported 0.33 percent advance now judged to be have been a 0.47 percent retreat.

Even so, constant dollar aircraft and parts output is up by 30.60 percent since February, 2020, versus the 26.67 percent calculable last month.

In pharmaceuticals and medicines, real production was up month-to-month in August by 1.62 percent, these sectors’ best such performance since last August’s 1.96 percent. Revisions here, too, were mixed. July’s initially reported 0.29 percent increase was bumped up to growth of 0.30 percent. June’s results stayed at a 0.32 percent increase after being downgraded from 0.39 percent. But May’s initial growth figure of 0.35 percent now stands at 1.20 percent after some ups and downs.

Since just before the CCP Virus’ arrival in force, pharmaceuticals and medicines output (including vaccines) is now up 16.56 percent in real terms, versus the 14.69 percent calculable last month.

And medical equipment and supplies firms (including those that make anti-CCP Virus products) boosted their price-adjusted production in August by three percent in constant dollar terms – their best such performance since January’s 3.15 percent. Revisions were negative on net. July’s initially reported inflation-adjusted improvement of 1.90 percent was downgraded to an increase of 1.58 percent. June’s original 3.12 percent real growth figure has now been revised down twice – to 1.01 and 0.67 percent. May’s initial estimate of 1.44 percent real growth is now pegged at 1.36 percent.

Yet real production in this sector is now 17.81 percent higher than in immediately pre-pandemic-y February, 2020, versus the 16.15 percent calculable last month.

At this point, it’s easy to make the case that the headwinds facing domestic manufacturing are stronger than the tailwinds. There’s not only continued tighter inflation-fighting and growth-slowing monetary policies being pursued by the Fed along with mounting evidence that America’s overall economic growth will remain slow at best. There’s the end of the mammoth government deficit spending that’s also supported that growth for so long, and especially during the CCP Virus emergency. And don’t forget the continually darkening outlook for the global economy – and for the export markets on which U.S.-based industry relies significantly (nearly 18 percent of its gross output in 2021 by my calculations).

U.S.-based industry has been resilient since the pandemic arrived, but it wasn’t able to escape the undertow of the domestic and overseas economic downturns it generated. That seems like as good a forecast as any for domestic manufacturing output over the next few months, too.   

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(What’s Left of) Our Economy: A Second Straight Month of Production Shrinkage for U.S. Manufacturing

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Yesterday’s after-inflation U.S. manufacturing production report (for June) marked a second straight decline in real output for domestic industry, adding to the evidence that this so far resilient sector is finally suffering the effects of the entire economy’s recent slowdown.

Another possible implication of the new downbeat results: The record and surging trade deficits being run in manufacturing lately may finally be starting undermine U.S.-based manufacturing’s growth. (See here for how and why.)

Also important to note: This release from the Federal Reserve incorporated the results of both typical monthly revisions but also its annual “benchmark” revision, which reexamined its data going back several years (in this case, to 2020), and updated the figures in light of any new findings.

And the combination has revealed some big surprises – notably that the domestic semiconductor industry, which along with its foreign competition has been struggling to keep up with recently booming worldwide demand, has turned out fully 36 percent less worth of microchips on a price-adjusted basis since the CCP Virus struck than was calculable from the (pre-revisions) May report.

In real terms, U.S.-based manufacturing shrank by 0.54 percent on month in June – the worst such result since last September’s 0.78 percent drop. Moreover, May’s originally reported 0.07 sequential percent dip is now judged to be a decrease of 0.52 percent.

The April results remained good, but were downgraded a second time, from 0.75 percent monthly growth in after inflation to 0.66 percent, while the March numbers told a similar story, with a third consecutive modest downward revision still leaving that month’s inflation-adjusted expansion at 0.76 percent.

Especially discouraging, though – the June report plus the two revisions left constant dollar U.S. manufacturing output just 2.98 percent greater than just before the pandemic struck the economy in full force and began distorting it, in February, 2020. The pre-benchmark revision May release pegged its virus-era real growth at a much higher 4.94 percent, and the first post-benchmark number was 4.12 percent.

May’s biggest manufacturing growth winners among the broadest manufacturing categories tracked by the Fed were:

>the very small apparel and leather goods industry. Its price-adjusted output surged by 2.54 percent month-to-month in June – its best such perfomance since May, 2021’s 2.63 percent. May’s initially reported 0.88 percent gain was revised down to a 0.34 percent loss, though. April’s upgraded 0.30 percent rise is now judged to be a 0.33 percent decrease, and March’s figures were revised down after two upgrades – from 1.54 to a still solid 1.30 percent. But whereas last month’s Fed release showed inflation-adjusted production in this sector up 4.59 percent during the pandemic era, this growth is now pegged at just 0.56 percent; 

>the miscellaneous durable goods sector, which contains the medical products like personal protective equipment looked to as major CCP Virus fighters. It’s June sequential output jump of 2.25 percent was its biggest since March, 2021’s 2.61 percent, and revisions were overall positive. May’s initially reported 0.96 percent monthly price-adjusted production gain was downgraded to 0.49 percent, but the April figure was revised up for a second time – to 0.71 percent – and March’s results were upgraded a third straight time, to 0.51 percent.

These industries are now 14.11 percent bigger in constant dollar terms than in February, 2020, versus the 11.41 percent gain calculable last month; and

>the electrical equipment, appliances, and components cluster, where price-adjusted production climbed 1.34 percent on a monthly basis in June, the strongest such showing since February’s 2.29 percent.. Revisions were positive on net, with May’s originally reported 1.83 percent monthly falloff downgraded to one of 2.35 percent, but April’s initially estimated -0.60 percent decrease upgraded a second time,to a 0.49 percent gain, and March’s three revisions resulting in an originally judged 1.03 percent increase now pegged at 1.23 percent. These results pushed these companies’ real production 5.59 percent higher than in immediately pre-pandemic-y February, 2020, not the 2.19 percent calculable last month;

The list of biggest manufacturing inflation-adjusted output losers for June was considerably longer, starting with

>printing and related support activities, where the monthly inflation-adjusted production loss of 2.16 percent was the worst such showing since February, 2021’s 2.26 percent. Revisions were actually net positive, with May’s initially reported dip of 0.35 percent upgraded to one of 0.15 percent; April’s results downgraded from a one percent advance to one of 0.33 percent after being revised up from an initially reported 0.49 percent; and March’s totals rising cumulatively from an initially reported 1.10 percent decrease to a decline of just 0.05 percent. All the same, the printing cluster is now judged to be 11.37 percent smaller in real terms than in February, 2020, not the 1.89 percent calculable last month;

>petroleum and coal products, whose June sequential production decrease of 1.92 percent was its biggest since January’s 2.96 percent. Revisions here were mixed, too, with May’s figure revised up from a 2.53 percent improvement to one of 2.61 percent; April’s totals downgraded a second time, from a 0.13 rise to one of 0.04 percent to a decrease of 1.91 percent; and March’s results increasing from an initial estimate of 0.72 percent to one of 1.03 percent. But whereas last month’s Fed release showed petroleum and coal products’ after-inflation output 1.21 percent above its last pre-pandemic level, this month’s reports that it’s 0.27 percent below.

>textiles and products, where price-adjusted output sank on month by 1.80 percent for its worst month since March’s 2.45 percent shrinkage. Revisions were negative, with May’s initially reported 0.02 percent real production decline downgraded to one of 0.35 percent, April’s upgraded 0.45 percent increase now pegged as a 0.05 percent decrease, and March’s initially reported 1.55 percent falloff now judged to be one of 2.45 percent. As a result, the sector is now 5.35 percent smaller in terms of constant dollar output, rather than down 3.80 percent as calculable last month; and

>primary metals, whose inflation-adjusted production sagged by 1.60 percent on month – its poorest performance since March’s 1.42 retreat. Revisions were overall positive here, with May’s initially reported 0.77 percent real output rise downgraded to one of 0.66 percent, April’s initially downgraded 1.22 percent increase revised up to 1.46 percent, and March’s initially reported 1.69 percent drop now judged to be that aforementioned 1.42 percent. Even so, primary metals price-adjusted production is now estimated as having inched up only 0.50 percent since the pandemic arrived, not the 4.45 percent increase calculable last month.

In addition, an unusually high three other major industry sectors suffered constant dollar output declines of more than one percent on month in June. On top of plastics and rubber products (1.25 percent), the were two that RealityChek has followed especially closely during the pandemic period – machinery and automotive.

As known by RealityChek regulars, the machinery industry is a bellwether for both the rest of manufacturing and the entire economy, since use of its products is so widespread. But in June, its real production was off by 1.14 percent on month, and May’s initially reported 2.14 percent decrease is now estimated at-3.14 percent – its worst figure since the 18.64 collapse recorded in pandemic-y April, 2020. And although this April’s numbers have been revised up twice, to have reached 2.20 percen, March’s initially reported 0.78 percent inflation-adjusted increase is now estimated to have been a 0.89 decrease. Consequently, in price-adjusted terms, the machinery sector is now estimated to be 4.70 percent larger than in February, 2020, not the 6.29 percent calculable last month.

As for motor vehicles and parts makers, dogged for months by that aforementioned semiconductor shortage, their real output was off by 1.49 percent on month in June, and May’s initially reported rise of 0.70 percent is now estimated as a1.86 percent decline. Following a slight downgrade, April’s output is now pegged as growing by 3.85 percent rather than 3.34 percent, and March’s initially reported 7.80 percent advance is now pegged at 9.08 percent – the best such total since last October’s 10.34 percent. Nonetheless, after-inflation automotive output is now reported to be 1.07 percent lower than just before the pandemic arrive in force, not the 1.17 percent higher calculable last month.

Notably, other industries that consistently have made headlines during the pandemic outperformed the rest of manufacturing in June.

Constant dollar output by aircraft- and aircraft parts-makers was up 0.26 percent month-to-month in June, but revisions were mixed. May’s initially reported 0.33 percent rise has now been downgraded to a 0.23 percent decline – snapping a four-month winning streak. April’s results were upgraded a second straight time – from a hugely upgraded 2.90 percent to an excellent 3.13 percent (the best such performance since January, 2021’s 8.60 percent burst). But the March figures have been substantially downgraded from an initially reported 2.31 percent to a gain of just 0.53 percent. After all this volatility, though, real aircaft and parts production is now 25.58 percent greater than in February, 2020, much better than the 19.08 percent calculable last month.

The big pharmaceuticals and medicines industry grew its real putput by another 0.39 percent in June, but revisions were generally negative. May’s initially reported 0.42 percent improvement, however, is now judged to be just an infinitesimal 0.01 percent. April’s upgraded 0.15 percent rise is now pegged as a 0.04 percent loss, and March’s results have been downgraded all the way from an initially reported 1.17 percent increase to one of just 0.49 percent. Price-adjusted output in these sectors, therefore, is now estimated at 12.98 percent higher than in February, 2020, versus the 14.64 percent calculable last month.

Medical equipment and supplies firms boosted their inflation-adjusted output for a sixth straight month in June, and by a stellar 3.12 percent – their best such performance since January’s 3.15 percent. May’s growth was downgraded from 1.44 percent to 1.01 percent, but April’s estimate rose again, from 0.51 percent to 1.01 percent, and March’s initially reported 1.81 percent improvement has been slightly downgraded to 1.67 percent. This progress pushed these companies’ real pandemic era output growth from the 11.51 percent calculable last month to 17.27 percent.

The news was significantly worse, though, in that shortage-plagued semiconductor industry. Real production rose by 0.18 percent sequentially in June, but May’s initially reported 0.52 percent advance is now judged to have been a 2.24 percent drop. Meanwhile, April’s already dreary initially reported 1.85 percent slump has now been downgraded again to one of 2.71 percent (the sector’s worst such performance since the 11.26 percent plunge in December, 2008 – in the middle of the Great Recession that followed the global financial crisis). Even March’s initially reported impressive 1.99 percent monthly price-adjusted production increase has been revised all the way down to 0.52 percent.

The bottom line: The pandemic-era semiconductor real production increase that was estimated at 23.82 percent last month is now judged to have been just 15.22 percent.

It’s not as if the recent official manufacturing data has been all disappointing. Employment, notably, rose respectably on month in June. And the pace of capital spending has actually sped up some (at least through May) – which, like employment is a sign of continued optimism among manufacturers about their future outlook.

But at this point, the headwinds look stronger – including continued credit tightening by the Federal Reserve (not to mention a drawdown in the massive bond purchases that also have significantly propped up the entire economy); the resulting downshifting in domestic economic growth at which the Fed is aiming in order to bring down raging inflation; an even worse slump in economies overseas, which have been important markets for U.S.-based industry; the strongest dollar in about two decades, which puts Made in America products at a price disadvantage the world over; and the ongoing supply chain snags resulting from the Ukraine-Russia War and China’s lockdowns-happy Zero Covid policy.

And don’t forget those stratospheric and still-rising manufacturing trade deficits, which could well mean that, once the unprecedented pandemic fiscal and monetary stimulus/virus relief that have helped create so much business for domestic industry starts fading significantly, U.S.-based manufacturers could might themselves further behind the eight-ball than ever.  

(What’s Left of) Our Economy: Will Inflation and a Hawkish Fed Finally Undermine U.S. Manufacturing?

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aerospace, aircraft, aircraft parts, appliances, automotive, capital spending, CCP Virus, coronavirus, COVID 19, electrical components, electrical equipment, Federal Reserve, furniture, inflation, inflation-adjusted output, machinery, manufacturing, medical devices, medicines, non-metallic mineral products, petroleum and coal products, pharmaceuticals, real growth, semiconductor shortage, semiconductors, wood products, {What's Left of) Our Economy

The new (May) U.S. manufacturing production report from the Federal Reserve doesn’t mainly indicate that industry may be facing a crossroads because the sector’s inflation-adjusted output dropped on month for the first time since January.

Instead, it signals that a significant slowdown may lie ahead for U.S.-based manufacturers because its downbeat results dovetail with the latest humdrum manufacturing jobs report (also for May), with results of some of the latest sentiment surveys conducted by regional branches of the Fed (e.g., here), and with evidence of a rollover in spending on machinery and equipment by the entire economy (which fuels much manufacturing output and typically reflects optimism about future business prospects).

Domestic industry shrank slightly (by 0.07 percent) in real output terms month-to-month in May. On the bright side, the strong results of recent months stayed basically unrevised, and April’s very good advance was upgraded from 0.75 percent to 0.77 percent.

Still, the May results mean that real U.S. manufacturing production is now up 4.94 percent since just before the CCP Virus began roiling and distorting the American economy (February, 2020), rather than the 5.07 percent calculable from last month’s report.

May’s biggest manufacturing growth winners were:

>Petroleum and coal products, where after-inflation jumped by 2.53 percent sequentially in May. The improvement was the fourth straight, and the increase the best since February’s 2.68 percent. As a result, constant dollar production in these sectors is now 1.21 percent higher than in immediately pre-pandemic-y February, 2020;

>Non-metallic mineral products, whose 1.78 percent sequential growth in May followed an April fall-off that was revised way down from -0.67 percent to -1.72 percent. March’s 0.76 percent decrease was downgraded to a 1.29 percent retreat, but February’s sequential pop was revised down just slightly to a still outstanding 4.37 percent surge. All told, the sector has grown by 2.58 percent after inflation since February, 2020 – exactly the same result calculable from last month’s Fed release; and

>Furniture and related products, whose 1.23 percent May inflation-adjusted output rise was its first such increase since February’s, and its best since that month’s 4.96 percent surge. Moreover, the May advance comes off an April performance that was revised up from a -0.60 percent sequential dip to one of -0.12. In all, these results were enough to move real furniture production above its Februay, 2020 level – by 0.08 percent.

May’s biggest manufacturing production losers were:

>wood products, whose 2.56 percent real monthly output decline was its first decrease since January and its worst since February. 2021’s 3.65 percent. Moreover, April’s previously reported 1.13 percent advance is now estimated to have been just 0.97 percent – all of which means that constant dollar production by these companies is now 5.24 percent higher than just before the pandemic arrived, not the 7.85 percent calculable last month;

>machinery, whose May inflation-adjusted output sank by 2.14 percent – the biggest such setback since February, 2021’s 2.59 percent. As known by RealityChek readers, machinery production is one of those aforementioned indicators of capital spending because it’s sold to customers not just in manufacturing but throughout the economy.

It’s true that machinery’s revisions were mixed. April’s after-inflation production increase was upgraded all the way fom 0.85 percent to 1.69 percent – its best such performance since last July’s 2.85 percent. But March’s performance was revised down from 0.36 percent to one percent shrinkage, and February’s increase was revised up again, but only from 1.17 percent to 1.22 percent. Consequently, whereas as of last month, machinery production was 8.31 percent higher in real terms than in February, 2020, this growth is now down to 6.29 percent.

>electrical equipment, appliances and components, where real output sagged for the second consecutive month, and by a 1.83 percent that was its worst such monthly performance since February, 2021’s 2.34 percent decrease. Revisions were modest and mixed, with April’s previously reported 0.60 percent sequential drop upgraded to -0.42 percent, March’s downgraded 0.04 percent dip upgraded to a 0.19 percent gain, and February’s real output revised up again – from 2.03 percent to 2.08 percent. These moves put real growth in the sector post-February, 2020 at 2.19 percent, less than half the 5.55 percent calculable last month.

By contrast, industries that consistently have made headlines during the pandemic delivered solid May performances.

Aircraft- and aircraft parts-makers pushed their real production up 0.33 percent on month in May, achieving their fifth straight month of growth. Moreover, April’s excellent 1.67 percent sequential production increase was upgraded to 2.90 percent (the sector’s best such result since last July’s 3.44 percent), March’s estimate inched up from a hugely downgraded 0.47 percent to 0.50 percent, and the February results were upgraded again – from 1.34 percent to 1.49 percent. This good production news boosted these companies’ real output gain since immediately pre-pandemic-y 16.37 percent to 19.08 percent.

The big pharmaceuticals and medicines industry performed well in May, too, as after-inflation production increased by 0.42 percent. Revisions were overall negative but small. April’s initially reported 0.20 percent real output slip is now judged to be a0.15 percent gain, but March’s upwardly revised 1.23 percent increase is now pegged at only 0.32 percent, and February’s downwardly revised 0.96 percent constant dollar output drop revised up to -0.86 percent. All told, inflation-adjusted growth in the pharmaceuticals and medicines sector is now up 14.78 percent since February, 2020, as opposed to the 14.64 percent increase calculable last month.

Medical equipment and supplies firms fared even better, as their 1.44 percent monthly real output growth in May (their fifth straight advance) was their best such result since February, 2021’s 1.53 percent. Revisions were positive, too. April’s previously recorded 0.06 percent dip is now estimated as a 0.51 percent increase, March’s downgraded 1.28 percent figure was upgraded to 1.41 percent, and February’s 1.46 percent improvement now stands at 1.53 percent. These sectors are now 11.51 percent bigger in terms of constant dollar output than they were just before the CCP Virus arrived in force – a nice improvement from the 8.92 percent figure calculable last month.

May also saw a production bounceback in the shortage-plagued semiconductor industry. Its inflation-adjusted production climbed 0.52 percent on month, but April’s previously reported 1.85 percent drop – its worst such performance since last June’s 1.62 percent – is now judged to be a 2.25 percent decline. At least the March and February results received small upgrades – the former’s improving from a previously downgraded 1.83 percent rise to 1.92 percent, and February’s upgraded growth of 2.91 percent now estimated at 2.96 percent. The post-February, 2020 bottom line: After-inflation semiconductor production is now 23.82 percent higher, not the 23.38 pecent increase calculable last month.

And since the automotive industry’s ups and downs have been so crucial to domestic manufacturing’s ups and downs during the pandemic era, it’s worth noting its 0.70 percent monthly price-adjusted output growth in May.

Revisions overall were negative. April’s previously reported 3.92 percent constant dollar production growth was revised down to 3.34 percent, March’s 8.28 percent burst was upgraded to 8.99 percent (the best such result since last October’s 10.64 percent jump), and February’s previously upgraded 3.86 percent inflation-adjusted production decrease was downgraded to a 4.24 percent plunge.

But given that motor vehicle- and parts-makers are still dealing with the aforementioned semiconductor shortage, these numbers look impressive, and real automotive output is now 1.17 percent greater than in pre-pandemic-y February, 2020, as opposed to the 0.77 percent increase calculable last month.

Domestic manufacturing has overcome so many obstacles since the CCP Virus’ arrival that counting it out in growth terms could still be premature. But an obstacle that it hasn’t faced since the pandemic-induced downturn have s looming again — a major economy-wide slowdown and possible recession that could result from monetary tightening announced by the Federal Reserve to fight torrid inflation.  And with the world economy likely to stay sluggish as well and limit export opportunities (see, e.g., here), the possibility that industry’s winning streak finally ends can’t be dismissed out of hand.  

(What’s Left of) Our Economy: The New Official U.S. Manufacturing Data Look Anything but Recession-y

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aerospace, aircaft, aircraft parts, appliances, automotive, electrical equipment, electronic components, Federal Reserve, furniture, industrial production, inflation, machinery, manufacturing, medical devices, medicines, metals, non-metallic mineral products, pharmaceuticals, plastics and rubber products, semiconductor shortage, semiconductors, supply chains, transportation equipment, Ukraine, wood products, {What's Left of) Our Economy

Today’s Federal Reserve industrial production report (for April) is making clearer than ever that if the U.S. economy is headed for a recession or a major growth slowdown, domestic manufacturing won’t deserve significant blame unless it takes a major nosedive before too long.

The report showed that despite the Ukraine war, despite ongoing supply chain snags, despite torrid inflation, and despite Federal Reserve plans to cool these price rises with interest rate hikes that will almost have to moderate growth if they work, U.S.-based industry increased output for the seventh straight month – and by a thoroughly respectable 0.75 percent.

Moreover, modest and mixed revisions left those strong recently results entirely intact. As a result, since February, 2020 – the last full data month before the CCP Virus’ arrival in force began upending the economy – domestic manufacturing has grown in real terms by 5.07 percent, up from the 4.42 percent calculable from last month’s release. In addition, in constant dollars, these sectors’ production is now within 2.29 percent of its all-time high – reached in December, 2007, just as the Great Recession triggered by the global financial crisis was beginning.

The list of April’s main manufacturing growth leaders was headed by the volatile automotive sector, but many of the biggest industry sub-sectors tracked by the Fed enjoyed healthy expansions last month.

Especially encouraging about the combined performance of vehicle and parts makers – which continue to be plagued by the global semiconductor shortage – was the follow-through. Their vigorous April sequential 3.92 percent after-inflation output increase followed a March gain upgraded from 7.80 percent to 8.28 percent, and that represented the biggest monthly advance since last October’s 10.64 percent. And that result followed a September tumble of 6.32 percent. Moreover, February’s big monthly dropoff was upgraded again, to a 3.86 percent loss.

All told, price-adjusted automotive output in April moved above its February, 2020 immediate pre-pandemic level (by 0.77 percent) for the first time since July, 2020.

A banner April also was registered by aerospace and miscellaneous transportation equipment companies. They boosted inflation-adjusted production by a sequential 2.15 percent. But March’s initially reported 1.90 percent after-inflation increase – previously the best monthly performance since last July’s 4.21 percent jump – is now judged to be a negligible 0.08 percent rise, February’s downgraded 1.64 percent real production improvement, however, was revised up to 1.82 percent, leaving these businesses 17.28 percent larger than in February, 2020 – as opposed to the 16.43 percent growth calculable from last month’s Fed report.

Inflation-adjusted primary metals production rose on month by 1.36 percent in April, and March’s initially reported 1.69 percent sequential drop – the biggest since January’s 2.53 percent plunge – is now judged to be just 0.75 percent. And February’s already upwardly revised constant dollar production surge was upgraded again – to a 2.94 percent figure that’s still the best since last April’s 3.48 percent. After-inflation production of these metals is now 4.01 percent greater than in February, 2020, compared with the 1.16 percent calculable last month;

Wood products output expanded nicely in real terms, too – by 1.13 percent sequentially in April. This improvement pushed this industry’s price-adjusted production to 7.85 percent above its immediate pre-pandemic level.

And consistent with manufacturing’s overall output winning streak, machinery production continued in April continued to excel as well – although more unevenly. Real output in this bellwether sector – whose products are used so widely throughout the economy – climbed by 0.85 percent sequentially in April. And although March’s results were revised way down from 0.78 percent growth to 0.36 percent contraction, February’s previously reported and downgraded 0.54 percent improvement was revised way up to 1.17 percent. As a result, the sector is now 8.31 percent bigger after inflation than in immediately pre-pandemic February, 2020.

The biggest April manufacturing growth losers were:

>plastics and rubber products, where a March real output increase of a sharply downgraded 0.58 percent was followed by a 0.79 percent decrease that was the biggest monthly decline since December’s 0.94 percent. February, moreover, saw another discouraging revision – from a 3.14 percent constant dollar monthly advance to 2.80 percent. At least that result still was the best since August, 2020’s 3.85 percent. Consequently, this sector is now just 1.05 percent bigger in real output terms than in February, 2020 – as opposed to the 3.56 percent calculable last month;

>non-metallic mineral products, where inflation-adjusted production dipped for a second straight month – this time by 0.67 percent. March’s drop, however, is now pegged at only 0.76 percent instead of 1.15 percent, and February’s upgraded real output burst of 3.94 percent is now estimated at 4.42 percent, its best such performance since the 9.19 percent increase in May, 2020, early during the rapid recovery from the steep recession caused by the CCP Virus’ first wave and associated economic and behavioral curbs. But whereas as of last month’s industrial production report, these sectors had grown by an inflation-adjusted 3.28 percent since February, 2020, this figure is now down to 2.58 percent.

>electrical equipment, appliances, and components, where real output fell for a second straight month. The April sequential decrease was 0.60 percent and followed a 0.04 percent March drop that was first reported as a 1.03 percent increase. Fortunately, February’s results were upgraded a second time, to a 2.03 percent advance that’s still the sector’s best since last July’s 3.24 percent. But the net result is a group of industries that’s now only 3.55 percent larger in real output terms than in February, 2020, as opposed to the 5.55 percent calculable last month; and

>furniture and related products, whose price-adjusted output decreased in April for the second straight month. The 0.60 percent monthly retreat means that these sectors have shrunk by an inflation-adjusted 1.56 percent since February, 2020.

Growth, however, generally tailed off in April in industries that consistently have made headlines during the pandemic.

The aircraft and aircraft parts sectors were the out-performers. Their real output rose on month in April by a strong 1.67 percent. But even here, March’s initially reported even better 2.31 percent increase is now pegged at just 0.47 percent. The February estimate, however, bounced back from a downgraded 1.13 percent gain to an improvement of 1.34 percent, helping the sector to register 16.37 percent real production growth since February, 2020, compared with the 15.86 percent calculable last month.

Inflation-adjusted output in the big pharmaceuticals and medicines industry dropped sequentially in April for the third time in the last four months. More encouragingly, that 0.20 percent decline followed March growth that was revised up from 1.17 percent to 1.23 percent. But February’s 1.15 percent decrease is now estimated at a still dreary 0.96 percent retreat, and January’s previously upgraded 0.45 percent increase is now thought to be a contraction of 0.26 percent. So where as of last month, real pharmaceuticals and medicines output was reported as 14.75 percent higher than in immediately pre-pandemic-y February, 2020, that growth is now down to 14.64 percent.

As for medical equipment and supplies, these sectors suffered their first monthly production decline (0.06 percent) since December’s 0.68 percent. In addition, March’s previously reported 1.81 percent rise was revised down to 1.28 percent, February’s previously upgraded 1.73 percent increase was cut back to 1.46 percent, and January’s upwardly revised gains were trimmed from 3.28 percent to 2.94 percent. As a result, these industries’ post-February, 2020 real production increase is now estimated at 8.92 percent, down from the 10.28 percent improvement calculable last month.

Even semiconductor output took a hit in April. The shortage-plagued sector saw real production sink by 1.85 percent sequentially last month – its worst such performance since last June’s 1.62 percent. Revisions were mixed, with March’s initially reported 1.99 percent constant dollar advance reduced to 1.83 percent; February’s big jump upgraded again to 2.91 percent; and January’s fractional 0.05 percent increase revised up to 0.06 percent. These results still left price-adjusted semiconductor production up 23.38 percent since February, 2020, but that figure is down from the 25.99 percent calculable last month.

An entirely new hurdle to domestic manufacturing output could appear in late June. That’s when the Fed’s data gatherers tell us they’ll issue their next annual benchmark revision – which could reveal that U.S.-based industry’s performance has been weaker in recent years than they’d thought. At the same time, it could turn out to be stronger.  Given how domestic manufacturing has overcome so many other headwinds recently, that would be an upside surprise that I at least wouldn’t find completely surprising.   

(What’s Left of) Our Economy: U.S. Manufacturing Job Creation Gains More Momentum

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aircraft, aircraft engines, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, Employment, Federal Reserve, furniture, inflation, Jobs, machinery, manufacturing, miscellaneous durable goods, non-farm payrolls, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, recession, semiconductor shortage, semiconductors, supply chains, transportation equipment, Ukraine-Russia war, vaccines, {What's Left of) Our Economy

Today’s official April U.S. jobs report featured such a strong showing by U.S.-based manufacturers that, by one measure, they reclaimed title of America’s best job-creating sector during the CCP Virus era (and its aftermath?).

Domestic industry boosted its payrolls sequentially last month by 55,000 workers, its best such performance since July’s 62,000 gain. In addition, revisions were excellent. March’s initially reported 38,000 increase is now pegged at 43,000, and February’s upgraded 38,000 rise is now judged to have been 50,000.

As a result, manufacturing’s share of U.S. non-farm employment (the federal government’s definition of the American jobs universe), has improved from 8.38 percent in February, 2020 – the last full data month before the virus began roiling the national economy – to 8.41 percent as of last month.

And during this period, manufacturing’s share of America’s private sector jobs is up from 9.83 percent to 9.86 percent.

Domestic industry has recovered a slightly smaller share of the jobs it lost during the sharp pandemic-induced downturn of spring, 2020 (95.89 percent) than the private sector (97.62 percent). But it also shed fewer jobs proportionately than the rest of the private sector during that terrible March and April. (For the record, because of a drag created by public sector hiring, the share of all non-farm jobs regaine d now stands at 94.59 percent.

In all, U.S.-based manufacturing employment is now down a mere 0.44 percent from immediate pre-pandemic-y February, 2020.

April’s manufacturing jobs winners were broad-based, but the biggest among the major sectors tracked by the Labor Department were:

>transportation equipment, whose 13,700 employment improvement was its best such performance since last October’s 28,200. (Last month I erroneously reported that the sector’s best recent monthly performance was last August’s 19,000.) Unfortunately, March’s initially reported employment advance of 10,800 was revised down to 8,800, and February’s previously estimated 19,800 jobs plunge (the worst monthly performance since April, 2021’s automotive shutdown-produced nosedive of 48,100) is now judged to be 19,900. Bottom line: This sector’s employment levels are still 3.38 percent below those of that last full pre-pandemic data month of February, 2020;

>machinery, where 7,400 jobs were added on month – an especially encouraging result since its products are so widely used throughout the rest of manufacturing and the entire economy. Even better, March’s initially reported 1,700 employment increase was revised all the way up to 6,700, and February’s perfomance – which had been revised down from an 8,300 rise to one of 6,600, recovered a bit to 6,700. As a result, machinery employment is off just 1.55 percent from its February, 2020 levels;

>automotive, which boosted headcounts by 6,400 – its best monthly gain since last October’s 34,200 plant reopening-driven burst. But March’s initially reported 6,400 jobs rise was downgraded to 3,600, and even though February’s major job losses were revised for the better again, they’re still pegged at 14,000 – the worst since the 49,100 employees shed during the shutdowns last April. These gyrations have left the combined vehicles and parts workforce 0.78 pecent smaller than in February, 2020;

>plastics and rubber products, which upped employmment by 5,700 sequentially in April, the best such performance since last August’s 7,800. Job-wise, these sectors are now 3.38 percent larger than in February, 2020.

The only significant jobs losers in April were furniture and related products and miscellaneous durable goods. The former lost 1,100 positions in April, but employment has still inched up by 0.57 percent since pre-pandemic-y February, 2020. The latter – which includes much of the protective gear needed to fight and contain the CCP Virus – reduced employment by 1,400 sequentially last month. But this decrease was the first since last August’s 600 loss, and followed a strong 3,100 jobs gain in March. This catch-all category’s employment is now 1.54 percent higher than in February, 2020.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and as with the rest of domestic industry for March, their employment picture showed improvement overall.

The semiconductor and related devices sector is still struggling to meet demand, but hiring continued its slow-but-steady pandemic-era increase in March with job gains of 700. February’s initially reported 100 employment loss now stands at a 100 employment gain, and January’s numbers stayed at plus-300 – the best monthly performance since last October’s 1,000. This sector now employs 1.34 percent more workers than in February, 2020 – impressive since during the sharp spring, 2020 economic downturn, it kept adding jobs.

The latest employment results were mixed for surgical appliances and supplies makers – a category within the aforementioned miscellaneous durable goods sector, and one in which personal protective equipment and similar medical goods abound. In March, the industry added 1,100 workers, but revisions completely wiped out February’s initially reported 800 jobs gain. The January hiring increase stayed at a downwardly revised 1,300. Even so, since just beforet the pandemic’s arrival in force in the United States, these companies have increased payrolls by 4.07 percent.

The very big pharmaceuticals and medicines industry continued to be a moderate employment winner in March. It hired an additional 900 workers on month, and though its February improvement was downgraded (from 1,300 to 1,000), the number was solid. Moreover, January’s hugely upgraded 1,100 employment rise stayed intact. Since February, 2020, this sector’s headcount is up fully 9.23 percent.

March jobs gains were more subdued in the medicines subsector containing vaccines, but they still totaled 400. February’s initially reported employment increase of 800 is estimated at just 500 now, and January’s identical increase stayed the same. But over time, this industry’s jobs growth has been impressive – 23.15 percent since the last pre-pandemic data month of February, 2020.

Good job gains continued in March in the aviation cluster as well. Aircraft manufacturers (including still-troubled industry giant Boeing) rose by 1,100 sequentially – the best monthly gain since last June’s 4,400. February’s increase was upgraded from 500 to 600, but January’s sequential job loss stayed unrevised at 800. This net increase brought aircraft employment to within 11.08 percent of its February, 2020 level.

The aircraft engines and engine parts industry followed February’s unrevised 900 hiring increase by adding 500 more workers in March. January’s results, however, stayed at a slightly downgraded 900 loss. And these companies’ still employ 12.65 percent fewer workers than in February, 2020.

The deep jobs depression in the non-engine aircraft parts and equipment sector remained deep in March, but a little less so. Jobs gains for the month totaled 700, February’s initially reported 200 increase was unrevised, and January’s way upwardly revised job rise was downgraded only from 1,500 to 1,400. But since just before the pandemic, the non-engine aircraft parts and equipment sector has still shrunk by 15.74 percent.

Having recently navigated its way skillfully through a once-in-a-century pandemic, a virtual shutdown of the entire U.S. economy, continuing supply chain disruption, multi-decade high inflation, a major war in Europe (so far), former export champ Boeing’s woes, and sluggish-at-best growth in much of the foreign markets it relies on heavily, it’s tempting to say that U.S-based manufacturing will have finally met its match if the Federal Reserve’s inflation-fighting campaign dramatically slows growth domestically — or worse.  But since the pandemic began, the next time the manufacturing pessimists are right will be the first.       

 

(What’s Left of) Our Economy: U.S. Manufacturing Employment Powers Through Ukraine Jitters, Too

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aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, CCP Virus, chemicals, China, coronavirus, COVID 19, electrical equipment, Employment, Federal Reserve, inflation, interest rates, Jobs, lockdowns, machinery, medicines, metals, monetary policy, non-farm employment, non-farm jobs, personal protective equipment, pharmaceuticals, PPE, recession, Russia, semiconductor shortage, semiconductors, supply chains, surgical equipment, tariffs, transportation equipment, Ukraine-Russia war, vaccines, Wuhan virus, {What's Left of) Our Economy

The Ukraine war looks like the latest disastrous development that’s failed to stop the impressive growth in U.S. domestic manufacturing employment – just as has been the case recently with the Omicron variant of the CCP Virus and surging inflation. And let’s not forget that the Federal Reserve has begun raising interest rates and signaled that steeper hikes are on the way – steps of course designed to cool off the economy, including the demand for manufactured goods.

U.S.-based industry added a strong 38,000 net new jobs on month in March, according to this morning’s monthly employment report from the Labor Department, and revisions were positive. February’s initially reported 36,000 sequential improvement was upgraded to 38,000, and January’s already upwardly revised 16,000 advance is now judged to have been 26,000.

In fact, domestic industry slightly outperformed the rest of the non-farm economy (the Labor Department’s definition of the U.S. jobs universe) job-wise in March, with its share of non-farm employment inching up from 8.38 percent to 8.39 percent. These results, moreover, show that manufacturing jobs have grown a bit faster than the overall economy’s throughout the pandemic period. In February, 2020, the last data month before the virus and related lockdowns and behavioral curbs began roiling and distorting the economy, manufacturing accounted for 8.38 percent of total non-farm jobs.

The comparison with the private sector isn’t quite as impressive, but satisfactory all the same. Manufacturing’s share of those jobs as of March was 9.83 percent – exactly the same as it was in February, 2020. And some context is essential here: U.S. manufacturing payrolls have held their own and then some even though the massive, sweeping Trump tariffs on imports from China – which were supposed to cripple domestic industry – are still almost entirely in place, as are many of the former president’s tariffs and other trade curbs on metals.

From another vantage point, manufacturing has now replaced 1.244 million (90.60 percent) of the 1.362 million jobs it shed in March and April, 2020 – the peak of the CCP Virus’ first wave.

That trails the 92.82 percent of non-farm workers and 95.46 percent of private sector workers hired back during this period. But the gap isn’t big at all, and manufacturers shrunk their headcounts proportionately less than the rest of the economy during that horrendous spring of 2020. So they didn’t have as much ground to make up.

February’s biggest manufacturing jobs winners among the major sectors tracked by the Labor Department were:

>transport equipment, where payrolls in March advances by 10,800 – their best such performance since last August’s 19,000. At the same time, this increase followed a 19,800 February jobs plunge that was the sector’s worst such performance since the automotive sub-sector’s semiconductor shortage woes led to a nosedive of 48,100 in April, 2021. All this volatility left this sector’s employment levels 4.05 percent below those in that final pre-pandemic data month of Februay, 2020 – versus the one percent decrease since then by manufacturing overall;

>chemicals, whose 7,200 monthly jobs jump was its best ever (or at least since figures began being tracked in 1990). The previous all-time high was the 6,600 gain of January, 2021. This huge industry’s headcount is now up 4.49 percent since February, 2020;

>electrical equipment and appliances, where employment rose sequentially by 3,800 for its strongest increase since March, 2021’s 4,200. Jobs-wise, these industries are now 2.82 percent larger than in Febuary, 2020;

>and automotive. This industry, a sub-sector of transportation equipment, boosted employment by 6,400 in March, the most in a month since last October’s 34,200 burst. But underscoring the volatility among vehicle and parts makers, This March increase followed a 16,000 drop-off in February that was the biggest decrease since the 49,100 jobs lost in April, 2021. These ups and downs still have left automotive employment 1.32 percent their February, 2020 levels.

Machinery’s 1,700 monthly jobs gain in March wasn’t exceptional by the above standards. But RealityChek regulars know it’s of special importance because its products are so widely used throughout manufacturing and the rest of the economy. And in a somewhat discouraging development, this sector’s initially reported 8,300 jobs growth was revised down to 6,600. And its payrolls are still 2.89 percent smaller than in February, 2020.

The only significant jobs loser in March was non-metallic mineral products, where employment sank by 4,500 on month. That was the sector’s worst such perforance since last May’s 5,300 decline, but the March downturn snapped a string of good gains for these companies, and their workforces are 2.81 percent above their February, 2020 levels.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and as with the rest of domestic industry for February, their employment picture showed improvement overall.

In that shortages-plagued semiconductor and related devices sector, employment dipped by 100 on month, but January’s initially reported 200 increase was revised up to 300– its best such performance since October’s 1,000 advance. Since February, 2020, its headcount has climbed by only 0.86 percent, but these companies actually added jobs during the very steep CCP Virus-induced recession of spring, 2020.

Surgical appliances and supplies makers – whose products include personal protective equipment and similar medical goods – boosted employment by 800 in February. January’s initially reported 1,700 jobs increase was downgraded to 1,300, and December’s results were unrevised at 1,100. These health security-related companies have expanded their workforces by 3.79 percent since February, 2020.

The employment news was particularly good in the very big pharmaceuticals and medicines industry. Its February monthly employment increase of 1,300 was the best since September’s 1,600, and January’s initially reported dip of 100 now stands as an increase of 1,100. December’s downwardly revised 900 jobs gain remained the same, and these companies have now increased their employee numbers by 9.04 percent since February, 2020.

The medicines subsector containing vaccines didn’t perform nearly as robustly in February, but still grew jobs by 800. January’s initially reported 500 employment increase and December’s downwardly revised 2,000 expansion remained the same. The vaccine industry workforce is now 23.05 percent larger than in February, 2020.

The aviation cluster enjoyed a good hiring month in February, too. Jobs in the aircaft industry, dominated by Boeing and companies in its supply chain, rose by 500 – the best since the identical total in November. January’s initially reported downturn of 800 and December’s decrease of 400 remained unrevised. Aircraft employment is still off by 11.57 percent since February, 2020.

Makers of aircraft engines and engine parts expanded their workforces by 900 during February, and although January’s initially reported hiring figures were downgraded, the estimate went only from 1,000 to 900. December’s upwardly revised employment increase of 700 was unrevised, all of which helped these companies bring their payrolls to within 13.20 percent of their February, 2020 levels.

Jobs prospects in the deeply depressed non-engine aircraft parts and equipment sector keep looking up, too. Employment improved by 200 in February, and January’s initially reported job growth of 500 was revised all the way up to 1,500. December’s jobs losses stayed at 900, and although these industries’ headcounts are still 16.35 percent below February, 2020’s, that’s better than the 17.30 percent shortfall calculable last month.

Continuing headwinds are still imaginable for domestic manufacturing – like a dramatic escalation of the fighting in Ukraine (which could greatly heat up inflationary pressures and foster even greater Federal Reserve efforts to slow economic growth); a new CCP Virus variant that’s not only more infectious but more deadly; and more big China lockdowns that could further screw up global supply chains. But given the recent actual record, it’s even easier to imagine manufacturing employment continuing to improve.

(What’s Left of) Our Economy: At Least Pre-Ukraine, U.S. Manufacturing’s Solid Growth Continued

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aerospace, aircraft, aircraft parts, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Federal Reserve, interest rates, lockdowns, mandates, manufacturing, manufacturing production, medical devices, monetary policy, pharmaceuticals, real output, semiconductor shortage, semiconductors, Ukraine, Ukraine invasion, Ukraine-Russia war, {What's Left of) Our Economy

This morning’s Federal Reserve report on U.S. domestic manufacturing production (for February) was especially interesting for three reasons. First, it showed that the output of America-based factories rose month-on-month in inflation-adjusted terms by 1.20 percent. That was the best such performance since October’s 1.71 percent, and although it covers the period just before whatever Ukraine war-related disruption is going to hit the U.S. economy, it also contrasts with most (sluggish) estimates of overall American growth for the first quarter of this year. Manufacturing production revisions, moreover, were only slightly negative.

Second, since February, 2020 was the final data month before the CCP Virus and related lockdowns and voluntary behavioral changes started roiling and distorting the economy, it’s noteworthy that exactly two data years later, manufacturing output has grown by a real 3.37 percent. (As of last month’s Fed release, this figure was 2.49 percent.)

Third, these results hardly mean that domestic industry is in top shape, at least not historically speaking. For in inflation-adjusted production terms, it’s still 3.88 percent smaller than at its all-time peak – reached in December, 2007, just before the economy plunged into the Great Recession prompted by the global financial crisis.

February’s biggest monthly manufacturing production winners were:

>non-metallic mineral products, whose 3.46 percent monthly real expansion was its best since the 4.34 percent achieved in June, 2020 – during the rapid economy-wide recovery from the first wave of the virus and resulting activity curbs and dropoffs. This latest sequential increase brought output in the sector to 4.36 above its February, 2020 levels;

>the broad aerospace and miscellaneous transportation equipment industry, which increased after-inflation output in February by 3.22 percent. That rise was its best since July, 2021’s 4.21 percent, and the sector is now fully 16.90 percent bigger production-wise than in February. 2020;

>the small apparel and leather goods industries, which improved its constant dollar output on month by 2.96 percent, for its best sequential gain since January, 2021’s 3.31 percent. This industry’s production – which shrank greatly for decades due to low-cost foreign competition – is now up by just 1.85 percent since February. 2020; and

>wood products, where price-adjusted output expanded sequentially by 2.58 percent – the most since March, 2021’s 4.05 percent. In real terms, wood products production is now 6.28 percent greater than in February, 2020.

RealityChek regulars know that the broad machinery sector is a key barometer of national economic health generally speaking, since its products are used by so many manufacturing and non-manufacturing industries. So it’s good news that its sequential inflation-adjusted output advanced by a solid 0.78 percent in February, and even better news that January’s results were revised up from 1.08 percent to 1.83 percent – its best such perfomance since July. The machinery industry’s real output is now a strong 7.62 percent greater than in Febuary, 2020.

Of all the biggest manufacturing sub-sectors tracked by the Fed, only two suffered after-inflation monthly downturns in February:

>The automotive industry continued suffering from the global semiconductor shortage, with its constant dollar output sinking by 3.55 percent sequentially in February – its worst monthly performance since September, 2021’s 6.32 percent plunge. Price-adjusted production of vehicles and parts is now fully 10.68 below Febuary, 2020’s levels; and

>miscellaneous non-durable goods. Its real month-on-month output dipped by 0.36 percent in February, but since February, 2020, it’s off by 16.00 percent.

Industries that consistently have made headlines during the pandemic generally enjoyed February’s at least as strong as manufacturing overall.

Likely stemming from the widening flow of long overdue news from industry giant Boeing (see, e.g., here), aircraft- and parts-makers grew their after-inflation output in Febuary by 2.52 percent over Jauuary’s figure – their strongest such showing since August’s 3.44 percent. That January figure was revised down from 1.37 percent sequential growth to a still impressive 1.21 percent, and December’s upgraded 0.38 percent monthly dip is now judged to be a 0.62 percent decline. But after-inflation output for these companies is now up 16.35 percent since February, 2020 – up from the 13.14 percent calculable from last month’s Fed report.

The combination of a solid February and negative revisions also marked the big pharmaceuticals and medicines sector. February’s 1.08 percent price-adjusted monthly output gain was the industry’s best since August’s 2.39 percent. But January’s initially reported 0.27 percent sequential uptick is now pegged as a 0.14 percent decrease, and December’s upwardly revised 0.81 percent rise is now judged to be a 0.10 percent drop. Even so, total real pharmaceutical and medicines production is 14.91 percent higher than in February, 2020 – up from the 13.42 percent calculable last month.

Much better February results were turned in by the medical equipment and supplies sector. Monthly production improved by 1.39 percent – the best such result since the 10.78 percent reported in July, 2020, early during the recovery from the first pandemic wave.

And revisions were positively eye-popping. January’s initially reported 2.50 percent monthly real output rise is now judged to have been 3.26 percent, and December’s first estimate of a 2.75 percent after-inflation fall-off is now estimated at just a 0.37 percent decline. All told, this grouping is now 8.44 percent bigger real growth-wise than in February, 2020 – as opposed to the 4.43 percent increase calculable last month.

Those semiconductors in such short supply were more abundant after February’s price-adjusted sequential production increase of 1.96 percent that was the best such performance since May’s 2.61 percent growth. January’s previously reported fractional decline is now pegged at a 0.37 percent decrease, but December’s 0.52 percent rise is now estimated at 0.88 percent. Consequently, these industries’ real output is now up 21.97 percent since February, 2020, as opposed to the 20.66 percent calculable last month.

The economic fall-out of the Ukraine war won’t start being reflected in the Fed manufacturing production reports until next month, but it looks virtually certain that it will either keep inflation (and therefore manufacturers’ input costs) high or push it higher. A bigger wild card could be the Fed itself. The central bank yesterday did keep its quasi-promise to start increasing the federal funds rate, but the hike was only 0.25 percent. And though more increases supposedly are scheduled, they’re far from certain if overall growth weakens markedly (as the Fed itself has forecast). New, more dangerous CCP Virus variants can always emerge. But national rates of vaccination and natural immunity seem high enough – and the public fed up enough with restrictive mandates – to keep supporting growth all else equal for the foreseeable future.

So unless the fortunes of manufacturing and the broader economy diverge sharply, it looks like domestic industry’s steady-for-the-most-part expansion since the depths of spring, 2020 will remain on course.

(What’s Left of) Our Economy: Pre-Ukraine War, Anyway, U.S. Manufacturing Employment Regained Momentum

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aircraft, aircraft engines, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, fabricated metals products, food products, Jobs, Labor Department, machinery, manufacturing, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, semiconductor shortage, semiconductors, surgical equipment, Ukraine-Russia war, vaccines, Wuhan virus, {What's Left of) Our Economy

As strong as U.S.-based manufacturing’s jobs performance looked on the surface in February, a closer look at the numbers released by the Labor Department this morning reveals that it was even better. The big reason? The 36,000 jobs that domestic industry gained last month came despite an 18,000 falloff in the automotive sector, which remained troubled not only by a global semiconductor shortage that will clearly end one of these days, but by a Canadian truckers’ protest that closed a bridge that’s a key transit route for Canadian-made auto parts needed by U.S. auto plants.

Moreover, revisions of previous months’ data were excellent. January’s initially judged 13,000 sequential employment pickup is now pegged at 16,000 and December’s advance was increased from an already upwardly revised 32,000 to 41,000.

Manufacturers didn’t quite keep pace with the rest of the country’s non-farm businesses in February (the Labor Department’s definition of the American employers’ universe). But given the torrid rate of recent economy-wide net job creation, that performance is hardly shabby, and it’s held its own – literally – during the entire sharp recovery achieved by the economy since its April, 2020 pandemic low point.

Before the CCP Virus began seriously distorting the economy’s behavior (in February, 2020), manufacturing jobs accounted for 8.38 percent of total non-farm payrolls. Including the new revisions, this figure had hit 8.40 percent in January of this year, but the February report showed a dip back to 8.38 percent.

The private sector story has been remarkably similar. Manufacturing employment represented 9.83 percent of that sector’s total jobs in February, 2020. Including the new revisions, the share had risen to 9.86 percent in January of this year, but as of Februay, it had retreated back to 9.83 percent.

Put differently, the entire non-farm economy has now replaced 19.886 million (90.43 percent) of the 21.991 million jobs lost during the terrible months of March and April, 2020. The private sector has replaced fully 20.092 million (fully 95.60 percent) of the 21.016 million positions it shed that spring. Manufacturing has replaced 1.184 million (86.93 percent) of its 1.362 million employment drop. But industry’s share of total jobs has stayed stable because its jobs depression in 2020 was less severe than the entire economy’s or the larger private sector’s

February’s biggest manufacturing jobs winners among the major sectors tracked by the Labor Department were highly concentrated – and all were among January’s stellar performers. They were:

>Fabricated metals products added 10,500 jobs on month – though January’s previously reported 5,000 advance is now estimated at 3,700, and the industry’s employment is still 2.95 percent below its immediate pre-pandemic February, 2020 levels (versus 1.39 percent for all of manufacturing);

>Machinery, whose 8,300 increase is especially encouraging, because its products are used so widely throughout the entire economy. But it’s still 2.92 percent shy of its job level in February, 2020;

>and food products, whose payrolls climbed by 7,200, and whose January results were revised up from a 5,200 improvement to 5,800. This progress brought pushed food manufacturing employment levels to 1.01 percent above those in February, 2020.

Meanwhile, automotive was February’s only significant jobs loser. Its 18,000 monthly employment nosedive was its worst such performance since last April’s 49,100 plunge (also due to semiconductor woes). At least its previously reported 4,900 January sequential jobs drop has been revised up to a 3,500 loss. But automotive employment is still 2.55 percent below immediate pre-pandemic levels.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and their January employment picture showed improvement overall.

Payrolls in the semiconductor and related devices segment increased by 200 on month in January, consistent with their very slow growth over the last five years – including during the pandemic era. Interestingly, its companies actually hired more on net during the very sharp CCP Virus-induced recession of 2020 (by 0.59 percent). Since February, 2020, its payrolls are up by 0.86 percent.

Employment increases stayed strong in January in the surgical appliances and supplies sector, which contains personal protective equipment and similar goods. This industry added 1,700 jobs on net, December’s monthly advance remained at 1,100, and November’s results stayed at an upgraded 3,100 increase. Consequently, the surgical appliances and supplies workforce is now 3.41 percent bigger than in pre-pandemicky February, 2020.

January pharmaceuticals and medicines employment dipped by 100 sequentially, however, and December’s 2,400 hiring jump was downgraded to just 900. November’s 700 jobs growth figure was unrevised. Even so, employment in this sector is 8.23 percent higher than just before the major initial CCP Virus hit to the economy.

As for the medicines subsector containing vaccines, the January figures and revisions seem to reveal some lost hiring steam. January monthly job growth was just 500 – the weakest since July’s 100 – and December’s excellent initially reported 2,400 rise is now judged to have been 2,000. November’s own 2,000 increase was unrevised, though, and job growth in this sector since February, 2020 is still a robust 22.23 percent.

January was a much better month than December for the aviation cluster – except oddly for aircaft. That sector, dominated by Boeing, saw employment shrink by 800 sequentially – is worst such performance since July’s 900 drop. Yet December’s originally estimated 600 employment decrease was upgraded to a decline of 400, and November’s results remained at a downgraded 500 job gain. After these latest fluctuations, aircraft industry employment fell to 11.78 percent less than in February, 2020.

Aircraft engines and engine parts makers, however, hired 1,000 workers on net in January – theit best performance since May, 2020’s 4,700, which came early during the strong late-spring recovery from the virus-induced recession. December’s initially reported jobs gain of 500 was revised up to 700, but November’s loss of 300 stayed unrevised. So although employment in these companies in January was 14.07 percent less than in February, 2020, it’s been closing the gap lately.

A notable employment rebound came in non-engine aircraft parts and equipment, where payrolls rose by 500 in January sinking by an unrevised 900 in December. But November’s results were downgraded from no change to a decrease of 100. And the sector payrolls are still down 17.30 percent since Februay, 2020.

I’m holding off on my usual prognosis for U.S. manufacturing employment because of the Russian invasion of Ukraine and its likely non-trivial economic fallout for the United States, and its probably greater repercussions for the rest of the world (to which domestic manufacturers sell a great deal). U.S.-based industry’s resilience throughout the pandemic has been extraodinary, but big power conflict could create a new and much more formidable set of challenges entirely.

(What’s Left of) Our Economy: No Winter of Discontent for U.S. Manufacturing Production

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aerospace, aircraft, aircraft parts, automotive, CCP Virus, coronavirus, COVID 19, Federal Reserve, food products, inflation-adjusted output, machinery, manufacturing, medical equipment, Omicron variant, pharmaceuticals, real output, semiconductor shortage, semiconductors, supply chains, textiles, Wuhan virus, {What's Left of) Our Economy

Today’s Federal Reserve report on industrial production (for January) showed once again that if you’re looking for clickbait-y news about the economy, don’t look at U.S. manufacturing. The new figures showed not only that inflation-adjusted domestic manufacturing output grinded out another pretty good monthly gain (0.22 percent), but that whatever Omicron-related hit to industry’s growth was delivered in December was much smaller than first estimated (a decline of just -0.07 percent instead of -0.28 percent). And revisions overall for previous months were positive.

This performance left real manufacturing production 2.49 percent above the levels it hit in February. 2020 – the last full data month before the CCP Virus and its effects began impacting the economy (and everything else). December’s revision, moreover, pushed industry’s constant dollar expansion in 2021 up from 3.71 percent to 4.06 percent. That’s still the highest level since 2011’s 6.48 percent, but this strong growth also partly reflected one of those CCP Virus baseline effects – since between 2019 and 2020, domestic manufacturing shrank by 1.94 percent after inflation.

With January’s price-adjusted monthly production increases broad-based, the list of significant winners was longer than usual. For the major industry groupings tracked by the Fed, it includes (in descending order):

>the 1.43 percent monthly jump in textiles and products’ constant dollar production, which continued a strong recent run. All the same, these industries remain 1.61 percent smaller in real terms than in pre-pandemic-y February, 2020;

>an especially encouraging 1.37 percent real output rise in miscellaneous durable goods – a category that contains the personal protective equipment and respirators so crucial to the pandemic response. This advance did follow a big sequential production drop in these products in September, but at least it’s now judged to be 1.91 percent, rather than 2.68 percent. As a result, the miscellaneous durable goods industries put together are now 7.20 percent larger than in February, 2020;

>a 1.08 percent rise in inflation-adjusted machinery production that’s also encouraging because this sector’s products are used so widely throughout the rest of manufacturing and the non-manufacturing economy. This increase was the best since July’s 2.85 percent pop, and December’s good initially reported 0.68 percent improvement is now pegged at 0.87 percent;

>food products’ 0.90 percent after-inflation growth, which continues a long stretch of steady improvement. Inflation-adjusted output in this sector is only 1.25 percent higher than in February. 2020 – but it never suffered the huge downturn of spring 2020 that the rest of manufacturing and the economy experienced, So it’s never benefited much from any baseline effect;

>a 0.87 percent increase in the aerospace and miscellaneous transportation sector. January’s performance didn’t make up for the 0.97 percent December drop that was these industries’ worst since August’s 2.31 percent nosedive. But output in this cluster is still 13.08 percent greater after inflation than in February, 2020.

Manufacturing’s biggest January production losers included:

>petroleum and coal products, where a 1.47 percent monthly after-inflation slump was its second consecutive significant decrease (although December’s decrease is now judged to be 1.46 percent, not 1.58 percent). Price-adjusted production in this sector is now down by 5.92 percent since February, 2020, just before the pandemic rocked the economy;

>the 1.44 percent retreat registered by printing and related support activities. December’s initially reported 1.82 percent downturn is now estimated at just 1.02 percent, but real output in these sectors is still down 4.95 percent since Febuary, 2020;

>and a 0.89 percent constant dollar monthly production fall-off in automotive, which keeps struggling with the global semiconductor shortage. Both the December and November results received big upgrades (from a 1.29 percent decrease to a 0.38 percent slide in the former, and from a 1.69 percent drop to a 0.41 percent decline in the latter). But real output of vehicles and their parts is 6.25 percent short of their February, 2020 figure.

January’s generally good manufacturing output results carried over into industries that have been prominent in the news during the pandemic.

In aircraft and parts, price-adjusted monthly production rose 1.37 percent – the best rate since August’s 3.44 percent. Revisions were mixed, with December’s 0.38 percent decrease revised down to a 0.74 percent fall-off, and November’s once-upgraded 1.04 percent decrease pushed up again to a 0.69 percent dip. Even so, inflation-adjusted output in these industries is now 13.14 percent higher than in pre-pandemicky February, 2020, as opposed to the 10.71 percent growth calculable from last month’s Fed release.

Pharmaceuticals and medicines saw a January constant dollar output advance of 0.27 percent, and December’s previously reported 0.13 percent decrease was revised all the way up to a 0.81 percent gain. In real terms, therefore, these industries are 14.91 percent bigger than in February, 2020, as opposed to the 13.42 percent calculable last month.

In line with the pattern revealed in their miscellaneous durable goods super-sector, inflation-adjusted output of medical equipment and supplies rebounded in January, with its 2.50 percent increase representing the best monthly performance since July, 2020’s 10.78 percent burst. (In last month’s report, I mistakenly wrote that April, 2020 had seen the previous best.)

Moreover, the initially reported 2.75 percent after-inflation output swoon for December has been upwardly revised to a decrease of 1.97 percent. These developments were enough to leave real medical equipment and supplies production 4.43 percent above their levels of February, 2020. As of last month, they were 1.50 percent below.

Finally, let’s add semiconductors to the list of pandemic industries examined. In tandem with “other electronic components” (the joint category tracked by the Fed), their real output declined fractionally on month in January, which broke a streak of steady growth that resumed last June. Price-adjusted output in this group of industries is fully 20.66 percent above its immediate pre-pandemic level – and was never significantly depressed by the steep virus-induced recession of early spring, 2020.

Especially if the CCP Virus actually moves to the rear-view mirror in upcoming weeks and months (in the form of becoming endemic, not disappearing altogether), then the outlook seems bright for domestic manufacturing. Granted it’s benefited from gigantic stimulus from fiscal and monetary policy, and those spigots are being tightened and crimped. But historically speaking, they’re by no means tight or closed, and there’s no reason to believe that if smaller amounts of stimulus start slowing growth meaningfully, that Washington won’t open the floodgates again. In addition, consumers’ finances still seem healthy, and Americans’ determination to spend seems unchecked (which is in part why inflation has been so persistent).

A return to public health normality should further untangle supply chain snags, ease labor shortages, and open recovering foreign economies wider to U.S. exports (though U.S. imports can be expected to rise as well). Just as important, it will remove most of the unprecedented uncertainty manufacturers have faced for the last two years and counting.

And although inflation is still likely to be elevated (not least because of energy prices, which are a big major cost to many manufacturing industries), so far domestic industry has shown the ability to handle it. As they say on Wall Street, past performance is no guarantee of future returns. But it’s at the least impressive evidence for optimism.

(What’s Left of) Our Economy: No Great Reset Yet in the Makeup of U.S. Trade

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aerospace, Boeing, CCP Virus, computers, coronavirus, COVID 19, exports, facemasks, Great Reset, healthcare goods, imports, jewelry, masks, personal protective equipment, phamaceuticals, pharmaceuticals, PPE, semiconductor manufacturing equipment, semiconductor shortage, semiconductors, stay at home economy, Trade, trade deficit, trade surplus, vaccines, Wuhan virus, {What's Left of) Our Economy

Throughout the CCP Virus period, I’ve refrained from posting on detailed, industry-by-industry trade figures. My reasoning? Pandemic distortions rendered them all but meaningless in terms of what they revealed about the fundamentals of U.S. trade flows and in particular the competitiveness of domestic manufacturing.

Of course, now it looks reasonable to suggest that the pandemic is ending – or at least that the end might really be in sight this time. So I spent some of my weekend comparing the trade flow details from 2019 (the last full pre-pandemic year) with those of 2021 (the last full data year, and whose figures have just been released). And the results surpised the heck out of me. Because if you look at trade deficits and surpluses and how they’ve changed, the best description seems to be surprisingly little.

To start, let’s check out the twenty sectors of the economy that have racked up the biggest trade surpluses in 2019 and 2021. They’re presented below according to the categories created by the U.S. government’s North American Industry Classification System (NAICS), which has become official Washington’s main system for slicing and dicing the U.S. economy. To the right of the actual dollar figure (in billions), you’ll find its rank for that particular year.

And for data junkies, these groupings are those at NAICS’ sixth level of disaggregation – one I like because in many cases it permits distinguishing between final products and the parts and components that make them up. Since for decades, so much U.S. and global trade today takes place in those inputs (because the manufacturing process has become so fragmented because creating complex worldwide supply chains became a premier business model), this distinction has mattered crucially in understanding trade flows.

                                                      2019                             2021

civil aircraft & parts:               $125.953   1                 $79.510   1

natural gas:                                $21.823   4                 $54.923   2

soybeans:                                   $18.493   6                 $27.110   3

other special class provns:         $24.499   3                 $27.019   4

petroleum refinery products:      $30.583  2                 $26.245   5

waste and scrap:                         $13.065  7                 $21.362   6

plastics meterials and resins:     $18.803   5                 $18.771   7

corn:                                             $7.620  11               $18.674    8

semiconductor machinery:          $1.408  43                $11.971   9

semiconductors/related devices: $5.994  14                $10.326  10

non-anthracite coal/petroleum gas:  $9.312  8              $9.250   11

used/second hand merchandise:  $8.805  10                 $8.604  12

non-poultry meat:                        $7.364  12                 $7.898  13

wheat:                                          $5.898  15                 $6.891  14

motor vehicle bodies:                  $9.201  9                   $6.886  15

cotton:                                         $6.225  13                  $5.789  16

copper, nickel, lead, zinc:           $4.402  18                 $5.471   17

tree nuts:                                     $5.096  16                 $4.712   18

prepared/preserved poultry:        $3.745  20                $4.554   19

misc basic inorganic chemicals: $4.169  19                $4.081   20

Some reshuffling of the order of these biggest trade flow winners has taken place. Most stunningly, semiconductor manufacturing equipment jumped from the industry with the forty third widest trade surplus in 2019 to number nine in 2021. Computer parts was in 17^th place in 2019 and fell all the way to 52d place (and out of the Top Twenty) in 2021. And motor vehicle bodies dropped from number nine to number 15. But otherwise, the two lists look remarkably similar. In fact, the seven biggest trade surplus industries of 2019 were also the seven biggest in 2021, though the order changed sllghtly.

What has seen much more major change during this two-year period have been the absolute numbers themselves, and these movements do seem pandemic related, though in different ways. Commodities like natural gas and corn (and to a lesser extent, wheat) appear to have been dramatically affected by inflation.

Trade in semiconductors and the machines that make them clearly reflect the increased importance of the “stay at home economy” – both in terms of leisure and the workplace. (The skyrocketing of the semiconductor machinery surplus, however, is also a reminder of how many of the world’s semiconductors are made outside the United States these days – although the microchip industry has also been decidedly cyclical for many years).

Meanwhile, the nosedive in the aerospace surplus has of course resulted from the woes of Boeing, both because of the CCP Virus-related global slump in air travel, and the company’s own manufacturing and safety problems.

Did this pattern repeat for the twenty sectors that ran the biggest trade deficits in those two years? Here are those lists, with the actual figures again in the billions of dollars:

autos & light duty vehicles:    -$126.272  1                -$96.250   1

goods returned from Canada:    -$91.240  2               -$96.124   2

broadcast & wireless comms equip:  -$72.231  3       -$80.075   3

computers:                                 -$59.443  6                -$79.209   4

crude petroleum:                        -$62.006  5                -$63.495  5

pharmaceutical preparations:     -$62.236  4                -$63.477  6

female cut & sew apparel:         -$42.088  7                -$41.028  7

audio & video equipment:         -$22.184  12               -$34.349   8

male cut & sew apparel:            -$30.889   8                 -$29.851  9

misc motor vehicle parts:           -$23.242  11               -$29.055  10

dolls, toys & games:                  -$17.285   14              -$26.789   11

printed circuit assemblies:         -$16.709   16              -$26.588   12

iron & steel & ferroalloy:          -$16.954   15              -$26.294   13

footwear:                                    -$25.597  10              -$26.037   14

major household appliances:      -$14.128  19              -$20.849   15

misc plastics products:                -$12.886 20              -$20.566   16

jewelry & silverware:                   -$3.476  68             -$17.819   17

motor vehicle electrical equip:   -$14.418  17             -$16.151   18

curtains & linens:                       -$12.134   22             -$15.256   19

aircraft engines & engine parts: -$25.670   9               -$14.070   20

The patterns revealed on this list closely resemble those made clear from the Top Twenty surplus list – some reshuffling but – with just a few exceptions like jewelry and silverware, (Home Shopping Network lines burning up?), and aircraft engines and engine parts – little major change. Indeed, the order of the top three hasn’t changed a bit, and as with the biggest trade surplus sectors, the makeup of the top seven is identical (though the order has been slightly modified).

As with the big surplus winners (though on the consumption side, not the production side), the advent of the “stay at home economy” is evident from the large increases in the absolute trade deficits for computers and audio and video equipment (though not so much for the broadcast and wireless gear category, which contains cell phones).

The damage done by the worldwide semiconductor shortage can be seen in the dramatically lower motor vehicle trade deficit. And aerospace woes come through loud and clear from the even steeper drop in the aircraft engines deficit.

Another take on the trade balance figures is provided by examining the sectors where trade balances have improved the most (either because surpluses have expanded or because deficits have shrunk), and worsened the most (either because surpluses have shrunk or deficits expanded). Below are the biggest trade balance “improvers” by percentage change among the sectors that have either run the fifty biggest trade surpluses or the fifty biggest trade deficits. The sectors with “deficit” to the right of the percentage change are those where trade shortfalls declined.

miscellaneous grains:                                     +1,021.72 percent

semiconductor manufacturing equipment:        +750.18 percent

Jewelry and silverware:                                     +412.65 percent   deficit

sawmill products:                                               +270.45 percent   deficit

storage batteries:                                                +168.67 percent   deficit

natural gas:                                                         +151.67 percent

corn:                                                                   +145.07 percent

surgical appliances & supplies:                          +134.60 percent   deficit

sporting & athletic goods:                                    +86.13 percent   deficit

artificial/synthetic fibers/filaments:                     +74.73 percent   deficit

semiconductors/related devices:                          +72.28 percent

small electrical appliances:                                  +71.87 percent   deficit

waste and scrap:                                                    +65.50 percent

animal fats/oils/byproducts :                                 +63.15 percent

motor vehicle steering &suspension & parts:       +60.49 percent   deficit

misc plastics products:                                          +59.60 percent   deficit

printed circuit assemblies:                                    +59.13 percent   deficit

cooling, heating, & ventilation equipment:          +55.91 percent   deficit

dolls, toys, & games:                                            +54.86 percent   deficit

audio & video equipment:                                    +54.84 percent   deficit

One trend that should jump out right away: Thirteen of the twenty sectors that have improved their trade balances the most are still in deficit – which reflects the nation’s continuing huge trade gap.

Since some of the greatest changes in the order of sectors with the biggest trade deficits and surpluses have come in pandemic-related sectors, it’s not surprising that such industries are prominent on the list of improvers. Hence the appearance of semiconductors and their manufacturing equipment, and commodities like miscellaneous grains, corn, and natural gas.

As for sawmill products, their results owe largely to U.S. lumber tariffs. In sporting and athletic goods, can the deficit’s shrinkage be due to a pandemic-y dropoff in physical activity?

Totally puzzling, though – the improvement in electrical appliances and audio and video equipment, where so much production has migrated overseas in recent decades, and because imports of the latter would seem to have jumped to serve so much of the stay-at-home demand.

But on the encouraging side – the big decrease in the trade deficit in surgical appliances and supplies, which includes all the personal protective equipment (like facemasks, gloves, and medical gowns) that have figured so prominently in the nation’s pandemic response, along with ventilators.

Now the twenty major sectors whose trade balances have worsened the most:

oil & gasfield machinery:                                  +54.65 percent

aircraft engines & engine parts:                         +45.23 percent   deficit

civilian aircraft, engines, & parts:                      +36.87 percent

railroad rolling stock:                                         +35.04 percent

turbines & turbine generator sets:                      +33.09 percent

non-diagnostic biological products:                   +31.84 percent   deficit

in-vitro diagnostic substances:                           +31.10 percent

cyclic crude & other intermediate chemicals:    +31.05 percent

guided missiles & space vehicles:                      +30.07 percent

fibers, yarns, & threads:                                     +29.32 percent

motor vehicle bodies:                                          +25.16 percent

paper bags/coated & treated paper:                    +23.26 percent

autos & light duty vehicles:                               +23.78 percent   deficit

petroleum refinery products:                              +14.19 percent

misc animal foods:                                              +10.35 percent

aircraft:                                                                  +9.98 percent   deficit

paints & coatings:                                                  +9.07 percent

tree nuts:                                                                +7.54 percent

cotton:                                                                    +7.00 percent

male cut & sew apparel:                                        +3.36 percent   deficit

Interestingly, although the nation’s huge and chronic trade deficits means that many more industries run them than surpluses, fifteen of the twenty sectors listed above as leading trade deficit losers are surplus industries. So during the pandemic period so far, their surpluses have shrunk. Moreover, the degree of shrinkage has only been kept relatively low because the surpluses weren’t that big to begin with.

For the aforementioned reasons, the aerospace cluster is well-represented among the big deficit losers. But it’s strange that, during the pandemic so far, the U.S. trade shortfall in the non-diagnostic biologic products category that contains vaccines has gone way up.

Overall, however, the weaker export performance even among big U.S. net export winners points to the global economic slump that’s been created by the CCP Virus and the curbs on business and personal activity it’s spawned – which have combined to drag down growth abroad, in U.S. export markets, more than at home. But the remarkably stable makeup of U.S. surpluses and deficits strongly suggests that any new post-virus normal in American trade will strongly resemble the old one.