(What’s Left of) Our Economy: More Evidence That Stimulus-Bloated Demand is the Main U.S. Inflation Driver

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CCP Virus, China, consumer price index, consumers, coronavirus, COVID 19, Covid relief, CPI, demand, inflation, Jobs, population, retirement, stimulus, Sun Belt, supply, supply chains, The New York Times, Ukraine War, workers, Wuhan virus, Zero Covid, {What's Left of) Our Economy

The New York Times just provided some important evidence on the big role played by super-charged consumer demand in super-charging inflation – this article showing that the Sun Belt has been the U.S. region where prices have been rising fastest.

The finding matters because a debate has been raging among politicians and economists over the leading causes of multi-decade high inflation rates with which Americans have been struggling over the last year and a half or so.

On one side are those who claim that overly generous government stimulus spending is the main culprit, because it’s increased U.S. buying power much faster than the supply of goods and services has grown. On the other side are those who focus on the inadequate amount of goods and services that companies are turning out, stemming from supply chain disruptions rooted in the stop-and-go nature of the American economy from successive waves of pandemic downturns and slowdowns to the Ukraine war to China’s ridiculously draconian Zero Covid policies.

Clearly, all these developments deserve blame, but the regional disparities in inflation rates provide pretty convincing support for emphasizing bloated demand.

Here’s the latest annual disparity in the headline Consumer Price Index as presented in the Times article:

U.S. total:    8.5 percent

South:          9.4 percent

Midwest:     8.6 percent

West:          8.3 percent

Northeast:   7.3 percent

It correlates roughly, by the way, with the data in this report last spring from the Republican members of Congress’ Joint Economic Committee.

And here’s a principal, demand-related reason: The Sun Belt states of the South and West have been the U.S. states that have gained the most population during the pandemic period. Indeed, according to the latest U.S. Census data, eight of the ten states with the fastest overall population growth between July, 2020 and July, 2021 was a southern or southwestern state, and the same holds for five of the ten states with the fastest population growth in percentage terms.

It’s true that population growth often increases supply, too – by boosting numbers of workers. The U.S. government doesn’t break out job creation along the above regional lines, but a look at individual state totals doesn’t conclusively brand the Sun Belt as an national employment leader. On average, relatively speaking, Arizona, California, Florida, Nevada, and Texas have created more jobs from the pandemic-period bottom in April, 2020 through last month, as shown in this table:

U.S. total:    +16.87 percent

California:   +17.98 percent

Florida:        +21.05 percent

Texas:          +17.31 percent

Arizona:       +16.02 percent

Nevada:        +30.92 percent

But don’t forget – many of these states have outsized travel and tourism sectors, and you know what happened to those activities during the worst of the pandemic. So in part, their employment bounced back so quickly because they had plummeted so dramatically as the CCP Virus’ first wave spread.

Moreover, many of these states are big retirement destinations, too, and as their overall population increase makes clear, this trend has intensified since the pandemic arrived. Of course, the workers in any given state don’t only sell goods and services to that state’s population, and a given state’s residents don’t only buy goods and services from providers in that state. Yet it’s certainly noteworthy that the number of the Sun Belt states’ consumers rose faster relative to the national average than the number of Sun Belt workers.

And in this vein, Sun Belt inflation probably is also particularly hot partly because so many of the newcomers are wealthy. Indeed, one recent study found that, early in the pandemic, “Of the 10 states with the largest influx of high-earning households, nine are located in the Sun Belt, including the six-highest ranked states, starting with Florida.”

Because they bring so much spending power to their new home states, these wealthier Americans naturally tend to drive prices up unusually fast.

As the Times article notes, some prominent reasons for scorching Sun Belt inflation are unrelated to population-driven demand growth – notably much lower population densities that generate more gasoline-using driving.  But the impact of population movement and all the disproportionately high inflation it’s clearly creating is hard to ignore.  And if a consumption shock has spurred so much inflation in the Sun Belt, why wouldn’t it be affecting prices this way in the rest of the nation, too?          

 

(What’s Left of) Our Economy: Another Dreadful U.S. Consumer Inflation Report

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Commerce Department, consumer price index, consumers, core inflation, cost of living, CPI, demand, energy, Federal Reserve, food, inflation, Labor Department, monetary policy, PCE, personal consumption expenditures index, prices, supply chains, Ukraine War, Zero Covid, {What's Left of) Our Economy

Optimism about U.S. inflation took another blow yesterday morning – though it shouldn’t have been unexpected – with the release of the latest data on the Federal Reserve’s favorite measure of price changes. I said “shouldn’t have been unexpected” because, as Fed Chair Jerome Powell and others have noted, this gauge and the higher profile Consumer Price Index (CPI) put out by the Labor Department normally track each other pretty closely over the long run, and those CPI results were deeply discouraging.

Nonetheless, latest results from the Price Indexes for Personal Consumption Expenditures (PCE) monitored by the Commerce Department matter because they strongly confirmed the latest CPI figures – which were pretty awful – starting with the month-to-month changes for the entire economy.

In June, headline PCE inflation shot up sequentially by a full one percent – much faster than May’s 0.6 percent and indeed the fastest rate not only throughout this latest high-inflation period, but the fastest since it increased by one percent in September, 2005.

But another observation should make even clearer how unusual that monthly headline increase was. The Commerce Department has been keeping these data since February, 1959. That’s 749 months worth of results through last month. How many times has monthly headline PCE inflation been one percent or higher? Twelve. And the all-time record is just 1.2 percent, hit in March, 1980, and February and March, 1974.

The annual figures were no better, and RealityChek regulars know that they’re more reliable than the monthlies because they measure changes over a longer time period, and therefore smooth out short-term fluctations.

June’s 6.8 percent rise was the strongest of the current high inflation era, and a significant pickup from May’s 6.3 percent. And it looks even worse when the fading baseline effect is taken into account. The June yearly jump in headline PCE came off a June, 2020-21 increase of four percent. So that year’s June PCE rate was already twice the Federal Reserve’s two percent annual inflation target.

By comparison, headline PCE this March was only a little lower than the June result – 6.6 percent. But the baseline figure for the previous March was only 2.5 percent. That rate was still higher than the Fed target, but not by much. So arguably unlike the price advances of June, this March’s inflation reflected some catching up from price increases that were still somewhat subdued due to the economy’s stop-go recovery from earlier during the pandemic.

Core PCE was lower by both measures, because it strips out the food and particularly energy prices that have spearheaded much headline inflation, and that are excluded supposedly because they’re volatile for reasons having little to do with the economy’s fundamental vulnerability to inflation. But here the monthly figures revealed new momentum, with the June seqential increase of 0.6 percent twice that of May’s 0.3 percent, and the highest such number since May and June of 2021.

Before then, however, core inflation hadn’t seen a monthly handle in the 0.6 percent neighborhood since September and October of 2001, which registered gains of 0.6 and 0.7percent, respectively.

On an annual basis, June’s core PCE increase of 4.8 percent was slightly higher than May’s 4.7 percent, but well below the recent peak of 5.3 percent in February. But the baseline effect should dispel any notions of progess being made. For June-to-June inflation for the previous year was 3.5 percent – meaningfully above the Fed’s two percent target. Core annual PCE inflation for the previous Februarys was just 1.5 percent – meaningfully below the Fed target.

As with most measures of U.S. economic perfomance, an unprecedented number of wild cards that can affect both PCE and CPI inflation has rendered most crystal balls (including mine) pretty unreliable. To cite just a few examples: Will China’s Zero Covid policy keep upending global supply chains and thus the prices of Chinese exports? Will the ongoing Ukraine War have similar impacts on many raw materials, especially energy? Will the Federal Reserve’s tightening of U.S. credit conditions per se bring inflation down significantly in the foreseeable future by dramatically slowing the nation’s growth? Will high and still soaring prices, coupled with vanishing savings rates, achieve the same objective if the Fed’s inflation-fighting zeal wanes? Or will the still huge amounts of money in most consumers’ bank accounts along with continuing robust job creation keep the demand for goods and services elevated for the time being whatever the Fed does?

Here’s what seems pretty certain to me: As long as that consumer demand remains strong, and as long as producer prices keep jumping, businesses will pass these rising costs on to their customers and keep consumer inflation worrisomely high. That seemed to be precisely the case in the last two months, with a torrid May read on producer prices being followed by the equally torrid June consumer inflation reports. So unless this wholesale inflation cooled a great deal this month, I’d expect at least another month of red hot consumer inflation. That producer price report is due out August 11.

(What’s Left of) Our Economy: Is the U.S. Trade Deficit’s Latest Dip More than Recession-y?

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CCP Virus, China, coronavirus, COVID 19, economic growth, exports, GDP, goods trade, gross domestic product, imports, inflation-adjusted growth, real GDP, real trade deficit, recession, services trade, supply chains, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

Although yesterday’s official figures show that the U.S. economy has now shrunk for the second straight quarter, the nation’s chronic and immense trade deficit played a diametrically different role in producing the final results. Whereas during the first quarter of this year, the trade gap’s widening was the difference between expansion and contraction of the gross domestic product (GDP – the standard measure of the economy’s size), during the second quarter (at least according to the new advance figures), its narrowing kept the drop in GDP from being considerably worse.   

The tumble of 0.94 percent at annual rates revealed in GDP after inflation (the most widely followed measure, and the GDP gauge that will be used throughout this post unless otherwise specified) came on top of a 1.58 percent decrease in the first quarter. As many have observed, two consecutive quarters of real GDP decline has long been a common definition of a recession.

This time around, however, a 4.53 percent fall-off in the inflation-adjusted trade shortfall, from a record $1.5447 trillion at annual rates to $1.4747 trillion, generated 1.43 percentage points of sequential growth in the second quarter. Although the new deficit was still the second biggest on record, the improvement prevented the quarter’s GDP drop from reaching 2.37 percent – which would have been the worst such performance since the nearly 36 percent crash dive recorded between the first and second quarters of 2020, when the CCP Virus pandemic and its impact on the economy were at their worst.

This year’s second quarter, moreover, marked the first time that America’s trade flows had added to growth, and the biggest such contribution in absolute terms, since that spring of 2020, when the pandemic and related mandated and voluntary curbs on economic activity greatly depressed U.S. imports. In relative terms, the second quarter’s trade contribution to growth was the best since the second quarter of 2009, near the end of the Great Recession that followed the global financial crisis. During that quarter, real GDP sank at an annual rate of 0.68 percent, but trade generated 1.53 percentage points of growth.

By contrast, during the first quarter, the trade deficit’s expansion subtracted a whopping 3.23 percentage points from the change in GDP – which turned what would have been a 1.65 percent sequential increase into that 1.58 percent shrinkage.

The reduction in the trade deficit also enabled the shortfall to decrease as a percentage of the entire economy from the first quarter’s all-time high of 7.83 percent to 7.49 percent. Further, the 4.34 percent sequential decrease represented by this progress was the biggest since the 9.45 percent decline in the fourth quarter of 2019 – just before the pandemic arrived state-side in force.

At the same time, at 7.49 percent of real GDP, the second quarter trade deficit was still the second highest ever, and since that immediately pre-pandemic-y fourth quarter of 2019, the trade shortfall has ballooned by 73.99 percent. As of the first quarter, it had swollen during this period by 82.24 percent.

Ordinarily, the reasons for this trade deficit decline would be a clearcut positive:  Even though the gap usually narrows as the economy weakens, it stemmed from  total exports (counting goods and services) advancing much faster than the much larger amount of imports. But as the nation and world are still in the CCP Virus and in the middle of the Ukraine War, with all the supply chain turbulence they’ve both brought on and will surely keep bringing, drawing strong conclusions still seems unusually hazardous.   

Those total U.S. exports improved by 4.22 percent on quarter, from $2.3613 trillion at annual rates to $2.4410 trillion – the highest such total since the $2.5533 trillion recorded in the fourth quarter of 2019, just before the pandemic hit the U.S. economy. The results were especially encouraging since total exports fell sequentially in the first quarter (by 1.23 percent), and given the global economic slowdown and the dollar’s strengthening to roughly 20-year highs versus nearly all currencies. This move in and of itself put U.S.-origin goods and services at a price disadvantage versus foreign competitors the world over.

Combined goods and services exports are now down just 3.61 percent since that fourth quarter of 2019, versus the 7.52 percent calculable last quarter.

Total imports inched up just 0.76 percent, although the new $3.9357 trillion annualized level did amount to a sixth straight record and an eighth consecutive quarterly increase. These purchases have now climbed by 15.37 percent during the pandemic era, versus the 14.85 percent calculable last quarter.

The goods trade deficit, meanwhile, declined by 3.96 percent sequentially, from the first quarter record total $1.6572 trillion annualized to $1.5916 trillion. This drop was the first since the peak pandemic-y second quarter of 2020, and the biggest since the 6.52 percent shrinkage in the fourth quarter of 2019. The goods trade gap, consequently, has grown by 48.55 percent since the end of 2019, as opposed to the 54.68 percent calculable last quarter.

Goods exports in the second quarter rose 3.69 percent from the first quarter’s $1.7577 trillion at annual rates to a new record $1.8225 trillion – surpassing the previous all-time high of $1.8046 trillion set in the first quarter of 2019. These new results also mean that goods exports have finally exceeded pre-pandemic levels (by 2.24 percent). After the first quarter ended, they were still down 1.39 percent since the fourth quarter of 2019.

Goods imports, however, recorded their first quarterly decrease since the third quarter of 2021 – though only from a worst ever $3.4149 trillion annualized to $3.4141 trillion. But these imports are still 19.63 percent higher than in that immediate pre-pandemic fourth quarter of 2019.

The services trade surplus improved by 8.60 percent between the first and second quarters, from $109.3 billion at annual rates to $118.7 billion. Reflecting the unusually hard hit delivered by the pandemic to the service sector, however, this surplus is still 47.64 percent lower than its level just before the virus began seriously affecting the U.S. economy. That is, it’s been nearly cut in half.

Services exports in the second quarter actually increased sequentially for the third straight time. And the 5.56 percent advance, from $631.5 billion annualized to $666.6 billion was the strongest since the 5.83 percent jump in the fourth quarter of 2006. Nonetheless, services exports remain 13.84 percent off their immediate pre-pandemic level, versus the 18.38 percent calculable last quarter.

Services imports are now back above their pre-pandemic levels, too (by 1.65 percent), having risen 4.92 percent sequentially in the second quarter, from $522.2 billion at annual rates to $547.9. The improvement, moreover, was the fastest since the 7.80 percent recorded in last year’s third quarter.

As mentioned above, usually it’s unambiguously good news for both trade, and to a lesser extent, the entire economy, when the trade deficit diminishes because exports are up considerably faster than imports. It’s normally even better news when these kinds of results are delivered in challenging international and exchange rate environments. But with the Ukraine War and China’s Zero Covid policy still distorting U.S. and global trade flows and unlikely to end anytime soon, unbridled optimism is hard to justify. So like the Federal Reserve, RealityChek will remain data dependent as it tries to detemine the outlook for U.S. trade’s fortunes.

Making News: Back on National Radio on Biden and Supply Chain Security

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Biden administration, CBS Eye on the World with John Batchelor, China, friend-shoring, Making News, national security, reshoring, supply chains

I’m pleased to announce that I’m scheduled to return tonight to “CBS Eye on the World with John Batchelor.” I don’t know yet exactly when the taped segment will be broadcast, but John’s show airs week night’s between 10 PM and midnight EST, he’s always worth tuning in. Tonight’s segment will ask whether the Biden administration’s “friend-shoring” strategy can actually make supply chains more reliable for a wide range of goods critical for U.S. national security and prosperity – and in particular reduce China’s place in them.

You can listen live at links like this one, and as always, if you can’t, I’ll post a link to the podcast as soon as it’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

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

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aircraft, aircraft parts, apparel, appliances, automotive, CCP Virus, China, coronavirus, COVID 19, dollar, electrical components, electrical equipment, exchange rates, Federal Reserve, fiscal policy, inflation, inflation-adjusted growth, machinery, manufacturing, medical devices, medicines, metals, miscellaneous durable goods, monetary policy, personal protective equipment, petroleum and coal products, pharmaceuticals, production, real output, recession, semiconductor shortage, semiconductors, stimulus, supply chains, textiles, Trade Deficits, Wuhan virus, Zero Covid, {What's Left of) Our Economy

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: Is the New (April) U.S. Trade Report a False Dawn?

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Advanced Technology Products, Biden, Census Bureau, China, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, South Korea, stimulus, supply chains, Switzerland, tariffs, Trade, trade deficit, Zero Covid, {What's Left of) Our Economy

Although today’s new official figures showed a major dropoff in the U.S. trade deficit between March and April, and the results came from a normally encouraging combination of more exports and fewer imports, the Census data also show that big caveats and questions are hanging over these results and how enduring they might be.

First and foremost, the improvement in the combined goods and services deficits, and all virtually all the trade balances comprising it, could be resulting from a dramatic slowdown in U.S. economic growth. Second, the latest decline in the chronic and huge U.S. goods trade gap with China surely stems from Beijing’s recent over-the-top (but surely temporary) Zero Covid policies, which have further snagged already tangled up supply chains. And third, large revisions in some of the numbers (especially for services trade) inevitably cast some doubt as to their reliability lately.

In fact, these features of the report – along with the still-near historic levels of many of these trade deficits and other usually typical gap-widening developments like a strong U.S. dollar and still-astronomical levels of economic stimulus from Washington – are telling me that my prediction last month of higher deficits to come will age pretty well.

Not that the narrowing of the trade gap in April was bupkis. The combined goods and services deficit fell 19.11 percent from March’s all-time high of $107.65 billion (which itself was revised down a hefty 1.96 percent) to $87.08 billion. This level was the lowest since December’s $78.87 billion and the nosedive the biggest since December, 2012’s 19.85 percent.

And as just mentioned, the improvement came from the right combination of reasons. Total exports hit their third straight monthly record, rising 3.49 percent from an upwardly revised (by 0.99 percent) $244.11 billion to $252.62 billion

Overall imports, meanwhile, tumbled 3.43 percent from their record $351.79 billion to $339.70 billion. The total was the second biggest ever, but the decrease was the greatest since the 13.16 shrinkage during pandemic-y and recession-y April, 2020.

The trade shortfall in goods was down 15.04 percent from a downwardly revised (by 1.04 percent) $126.81 billion in March to $107.74 percent in April. This level, too, was the lowest since December’s $100.52 billion, and the 15.04 percent sequential tumble the biggest since April, 2015’s 15.09 percent.

Goods exports rose sequentially by 3.57 percent in April, from 170.04 billion to a third consecutive record of $176.11 billion. And U.S. purchases of foreign goods sank by 4.38 percent on month in April, from a downwardly revised (by 0.65 percent) record $296.85 billion to $283.84 billion (as with total imports, the second highest result of all time). The decrease was the biggest since the 12.79 percent drop in that pandemic-y April, 2020.

But even the above sizable revisions paled before those made for services trade. The March surplus was upgraded fully 4.48 percent, from $18.34 billion to $19.16 billion, and the April figure grew by another 7.83 percent to $20.66 billion – the highest level since December’s $21.66 billion.

Services exports (apparently) deserve much of the credit. They reached an all-time high of $76.52 billion. This total bested May, 2019’s previous record of $75.41 billion by only 1.46 percent, but the milestone is significant given the outsized hit suffered by the service sector worldwide during the pandemic period.

April services exports, moreover, rose 3.30 percent from March’s $74.07 billion – a total that itself was revised up by 4.23 percent.

Services imports set their third consecutive monthly record in April, rising 1.73 percent, to $55.86 billion, from March’s upwardly revised (by 4.19 percent) $54.19 billion.

A big April fall-off also came in the non-oil goods trade deficit – known to RealityChek regulars as the Made in Washington trade deficit, because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

This shortfall decreased by 14.72 percent in April, to $108.68 billion, from March’s downwardly revised record $127.42 billion. The drop was the biggest since March, 2013’s 16.74 percent.

The enormous and persistent manufacturing trade deficit retreated in April from record levels, too. But even though the month’s $124.41 billion shortfall was 12.71 percent lower than March’s all-time high $142.22 billion, and even though the monthly decline of 12.71 percent was the biggest since pandemic-y February, 2020’s 23.09 percent, this deficit was still the second biggest ever.

April’s manufactures exports of $109.36 billion were 4.03 percent lower than March’s record $113.96 billion, but were still the second best total on record. Ditto for the month’s manufactures imports, which tumbled 8.85 percent from their March record of $256.18 billion to $233.50 billion.

Another April fall-off from a record monthly deficit came in advanced technology products (ATP). After ballooning by 73.65 percent sequentially in March, to $23.31 billion, the recently volatile gap narrowed in April by 21.50 percent, to $18.30 billion.

Both the better manufactuing and ATP trade figures surely stemmed at least in part from the Zero Covid policies that interfered with so much industrial production from China. The U.S. goods deficit with the People’s Repubic, however, narrowed by just 10.02 percent on month in April, from $34 billion to $30.57 billion. Even so, the level was the lowest since last July’s $28.56 billion.

U.S. goods exports to China were down on month in April by 16.25 percent (their biggest drop since February, 2021’s 278.85 percent), from $13.38 billion to $11.20b. This total is the lowest since last September’s $11.03 billion.

The much greater amount of U.S. goods imports from China plummeted 11.82 percent n month in April, from $47.37 billion to $41.77 billion – the lowest level since last July’s $40.32 billion.

Also notable – breaking a pattern going back several years — the 10.02 percent April monthly drop in the U.S. goods deficit with China was smaller than the month’s sequential decline in the non-oil goods deficit (14.72 percent). And on a yar-to-date basis, the China deficit is up only slightly less (27.59 percent) than the non-oil deficit (28.95 percent). So the next few months’ worth of data may shed some light on whether the Trump (now Biden) tariffs on China are losing their effectiveness, or whether the last few months’ numbers are anomalies.

Other significant April results for individual U.S. trade partners: The goods deficit with South Korea set a new record of $4.09 billion – 23.79 percent higher than March’s total of $3.30 billion and 21.70 percent greater than the old record of $3.36 billion set last September.

And the goods deficit with Switzerland cratered in April by 67.63 percent, to $2.89 billion, from March’s $8.93 billion level. The percentage shrinkage of this bilateral trade gap was the biggest since September, 2018, when a $1.22 billion U.S. deficit turned into a $149 million surplus.

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

Tags

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: The Latest Sign That Inflation is Here to Stay

Tags

baseline effect, consumer price index, cost of living, CPI, Federal Reserve, inflation, monetary policy, PPI, Producer Price Index, recession, supply chains, wholesale inflation, wholesale prices, {What's Left of) Our Economy

If you follow the news about the U.S. economy, you know by now that the federal government’s Producer Price Index (PPI – its measure of wholesale price inflation), rose at a slightly slower annual rate in April (11.03 percent) than in March (11.18 percent).

Ditto for the core PPI, which omits not only food and energy but trade services – since supposedly they’re volatile for reasons having nothing to do with the economy’s fundamental vulnerability to out-of-the-ordinary price changes (decreases as well as increases).

Both PPIs measure how much businesses charge each other for the goods and services they turn into final products and sell to households and individuals. That’s why they’re naturally seen as precursors of future consumer inflation rates (measured by the Consumer Price Index, or CPI).

After all, as long as the economy’s overall demand levels (reflecting overall growth levels) remain healthy, these businesses mostly will be able to pass these cost increases on to customers and actually will. Higher consumer inflation follows. So anything like the opposite is happening, and if producer prices are easing at all (even from historic highs), that’s got to be encouraging news on the consumer and overall inflation fronts.

But did the April yearly rate of increase really slow down? Maybe not. That’s because it’s a preliminary reading and, as shown by the left-hand column in the table below, since last September, every revision of that first estimate went up.

Jan 2021: 1.60 percent now 1.59                                1.97 percent

Feb 2021: 2.96 percent now 2.95                               1.11 percent

March 2021: 4.15 percent now 4.06                           0.34 percent

April 2021: 6.51 percent now 6.43                  -1.52 percent now -1.44

May 2021: 6.99 percent now 6.91                   -1.10 percent now -1.01

June 2021: 7.56 percent now 7.49                   -0.68 percent now -0.59

July 2021: 7.96 percent now 7.83                    -0.25 percent now -0.17

Aug 2021: 8.65 percent now 8.58                    -0.25 percent now -0.17

Sept 2021: 8.78 percent now 8.82                             0.34 percent

Oct 2021:  8.87 percent now 8.90                             0.59 percent

Nov 2021: 9.88 percent now 9.94                     0.85 percent now 0.76

Dec 2021: 9.99 percent now 10.58                   0.84 percent now 0.76

Jan 2022: 10.08 percent now 10.17                  1.60 percent now 1.59

Feb 2022: 10.27 percent now 10.51                 2.96 percent now 2.95

March 2022: 11.18 percent now 11.54             4.15 percent now 4.06

April, 2022: 11.03 percent                                       6.43 percent

Sure, the April revision could be a downgrade – like those between January and August, 2021. But the odds of an upgrade look pretty good.

Moreover, the right-hand column in the table shows that the baseline effect, which was cause for some optimism that inflation might peak before too long, is more over than ever.

As known by RealityChek regulars, the unusually high and robustly rising annual CPI and PPI figures for last year stemmed largely from the change they represented from unusually low inflation rates the year before – which were driven down by the arrival of the CCP Virus and the sharp recession it induced by prompting on-and-off lockdowns of huge chunks of the economy, and major behavioral caution by businesses and individuals alike.

What that right-hand column shows is that these effects – even with the slightly better revisions displayed above – were profound enough to result in actual PPI annual decreases from April, 2019-2020 through August, 2019-2020. (The right-hand column also brings the story up to 2020-2021 for January through April – the baseline comparison year for the first four data months of 2021-2022.)

That is to say, the table reveals that the economy’s recovery in 2021 from virus-ridden and downturn-y 2020 amounted to a great catching up process that largely explains the bloated PPI figures. (The other major factor was supply chain disruption resulting from the stop-and-start nature of some of the virus waves and lockdowns, and therefore of the recovery itself.)

But the above table also shows that the baseline effect began fading significantly this past February. That month, the annual PPI rise of 10.27 percent came off a February, 2020-2021 increase of 2.95 percent. The similar January annual increase of 10.08 percent, by contrast, came off a 2020-2021 rise of a much lower 1.59 percent.

And just look at April! That 11.03 percent annual PPI jump has followed a 6.43 percent increase between the previous Aprils.

Moreover, the same kind of trend (at lower absolute levels) is evident from the core PPI data, as shown below. Again, the left-hand column displays the annual increases by month starting in January, 2021. The right-hand column shows the annual changes by month for the year before – the baseline. The only possible significant difference is that I haven’t tracked the revision record for this core PPI series, so I don’t know if the latest April result is likely to be upgraded or downgraded, or unrevised.

Jan 2021: 1.79 percent                                                    1.64 percent

Feb 2021: 2.33 percent                                                   1.36 percent

March 2021: 3.15 percent                                               1.00 percent

April 2021: 4.81 percent                                                -0.09 percent

May 2021: 5.25 percent                                                 -0.18 percent

June 2021: 5.60 percent                                                  0.09 percent

July 2021: 6.01 percent                                                   0.27 percent

Aug 2021: 6.19 percent                                                   0.36 percent

Sept 2021: 6.14 percent                                                  0.72 percent

Oct 2021: 6.26 percent                                                    0.90 percent

Nov 2021: 7.04 percent                                                   0.99 percent

Dec 2021: 7.18 percent                                                    1.17 percent

Jan 2022: 6.91 percent                                                     1.79 percent

Feb 2022: 6.76 percent                                                    2.33 percent

March 2022: 7.10 percent                                               3.15 percent

April, 2022: 6.92 percent                                                4.81 percent

The big takeaway here: Even more than yesterday’s April Consumer Price Index report, today’s release on the Producer Price Index is saying that alarmingly high inflation is here to stay for Americans for the forseeable future. It’s possible that the Federal Reserve, the U.S. government agency mainly responsible for handling inflation, can tighten monetary policy (to reduce that aforementioned consumer demand and in turn growth) skillfully enough to engineer a “soft landing” for the economy – i.e., bring price increases back to much less damaging levels while avoiding a recession. But keep in mind that the next time the central bank achieves this goal starting from inflation rates this hot will be the first.

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

Tags

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.       

 

Following Up: Podcast Now On-Line of Last Night’s National Radio Interview on Manufacturing & China Defeatism

Tags

CBS Eye on the World with John Batchelor, China, Following Up, Gordon G. Chang, John Batchelor, manufacturing, reshoring, supply chains, tariffs, Trade

I’m pleased to announce that the podcast of my interview last night on the nationally syndicated “CBS Eye on the World” with John Batchelor is now on-line.

Click here for a timely discussion – including co-host Gordon G. Chang – of whether the U.S. manufacturing revival pessimists are right, and bringing factories back from China really is a fool’s quest.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.