(What’s Left of) Our Economy: Slower Growth and More Hiring in U.S. Manufacturing, Too

Tags

aerospace, aircraft, aircraft engines, aircraft parts, CCP Virus, chemicals, coronavirus, COVID 19, electronics products, Employment, fabricated metal products, furniture, Jobs, machinery, manufacturing, medicines, miscellaneous durable goods, non-farm jobs, non-farm payrolls, paper, paper and paper products, pharmaceuticals, recession, semiconductors, surgical equipment, textiles, vaccines, {What's Left of) Our Economy

When it comes both to the U.S. economy in general and domestic manufacturing in particular, this morning’s official jobs report (for July) strongly supported a widely held supposition of economists – that employment is a lagging indicator of trouble.

That’s because laying off workers supposedly is seen as a last resort by businesses facing bad times, and the new results for non-farm payrolls (the U.S. government’s definition of the national jobs universe) seems to have validated this view in spades. Even though the economic growth has been slowing dramatically from last year’s rapid pace, employers boosted their headcounts by a stunning 528,000 last month (including 471,000 in the private sector). And even though inflation-adjusted American manufacturing production has fallen for the last two data months (May and June – the July results will come out August 16), U.S.-based industry added workers for the fifteenth straight month.

Indeed, July’s 30,000 increase in manufacturing jobs was the biggest monthly gain since April’s 61,000. And the numbers included the best hiring month of all time (or at least since that data series began in 1990) for the big pharmaceuticals and medicines industry. Moreover, revisions left the solid results of June and May virtually unchanged.

As a result, domestic manufacturing employment is 0.32 percent higher than its level in February, 2020 – just before the CCP Virus struck the U.S. economy in force and sent economic activity spiraling downward. Last month, when it finally regained its pre-pandemic jobs levels, the net gain was 0.09 percent.

Since July’s overall jobs improvement was so great, manufacturing is no longer the economy’s post-pandemic employment champion. That title has passed again to the total private sector, where payrolls are now 0.49 percent higher than in February, 2020. But manufacturing’s net job creation pace continues to exceed that of the non-farm economy (which includes the public sector). Its workforce is just 0.02 percent larger than just before the pandemic’s arrival.

The huge July surge in non-farm and private sector net hiring did depress manufacturing’s share of those workforces – from 9.86 percent of private sector jobs to 9.85 percent, and from 8.42 percent of non-farm jobs to 8.41 percent. But manufacturing employment is still up in relative terms since February, 2020 – climbing from 9.83 percent of private sector employment and 8.38 percent of non-farm employment.

Job-creation winners abounded throughout manufacturing’s major sectors in July, with the standouts being:

>fabricated metals products, where payrolls grew by 4,200. Revisions, however, continued to be weak, with June’s sequential loss remaining at 600; May’s originally reported 7,100 surge revised lower first to 6,900 and now to 6,600 (still the best since February’s 9,300 pop); and April’s results staying at a twice downgraded 1,400. Employment in this big sector is now 2.04 percent below its immediate pre-pandemic levels, versus the 2.31 percent shortfall calculable last month;

>miscellaneous durable goods (the major category containing many of the key medical devices used to combat the virus), which added 3,700 workers in its strongest monthly performance since last November’s 10,400. But revisions were on balance negative here, too, with June’s initially reported 2,400 job growth now judged to have been 1,700, May’s initially upgraded 1,300 advance downgraded to 1,000, and only April’s results breaking the pattern, with its upgraded 600 job loss staying unchanged.

Miscellaneous goods’ workforce is now 2.79 percent higher than in February, 2020, versus the 2.36 percent calculable last month;

>chemicals, which remained on a hot streak last month. Its companies added 3,700 employees on month in July, its June performance was revised way up from a 1,200 improvement to 4,500, its initially downgraded May rise upgraded to 5,100 (the greatest improvement since January’s 5,500), and April’s increase settling at 1,700 after being first reported as 1,000. As of July, 5.84 percent more workers were employed in the chemicals industry than in February, 2020, versus the 4.83 percent calculable last month; 

>machinery, which RealityChek regulars know is a bellwether for the rest of manufacturing and the whole economy because of how widely its products are used. Its employment increased by 3,400 on month in July; June’s initially reported 1,000 rise is now pegged as 1,600; May’s initially reported 3,200 job decrease has now ben revised all the way up to a jobs gain of 200; and April’s final total stayed at a twice downgraded 5,800. Consequently, machinery employment has rebounded to within 1.47 percent of its immediate pre-pandemic level, versus the 2.05 percent shortfall calculable last month; and 

>computer and electronics products, which contains shortage-plagued semiconductor sector, also boosted its employment by 3,400 sequentially in July. June’s initially reported 2,300 net new job creation is now judged to have been 2,000, but May’s totals were revised up a second time, to 5,300 (its best monthly performance since the 6,300 recorded in May, 2020, during the economy’s strong bounceback from the first CCP virus wave), and April’s thrice upgraded figure remained the same at 4,900. This progress pushed headcounts in this sector 0.41 percent above their February, 2020 levels, versus the 0.11 percent calculable last month.

The worst performers among July’s few maufacturing losers:

>paper and paper products, where employment fell month-to-month by 1,200. At the same time, June’s initially reported 1,200 job increase was upgraded to 1,500; May’s advance was revised down but still remained at an increase of 700; and April’s initially downwardly revised 1,300 employment rise stayed at an upwardly revised 2,100 increase. Nonetheless, there are now 0.86 percent fewer jobs in paper and paper products compared with February, 2020, versus the 0.22 percent dip calculable last month;

>textile mills, whose July employment was off by 600. Revisions were mixed, with June’s initially reported jobs bump of 700 now judged to have been 300, but May’s initially reported payroll decrease of 700 now upgraded to a loss of 400, and April’s upgraded 800-job increase remaining the same. Since just before the pandemic arrived,, however, textile mill jobs have shrunk by 6.18 percent, versus the 5.15 percent calculable last month; and

>furniture and related products, where headcounts sank by 600 on month. Worse, revisions on balance were decidedly negative. June’s initially reported employment improvement of 100 is now considered to be a drop of 1,100; May’s results, first reported as a 1,000 jump, were downgraded a second time to a mere 100 advance; and April’s initially reported 1,100 drop have been revised up only to 900 job loss. Whereas as of last month, the furniture complex’s workforce had risen to 0.60 higher than its February, 2020 level, it’s now sunk back to 0.03 percent lower.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and most turned in performances even better than manufacturing as a whole.

The semiconductor industry is still struggling with the aforementioned shortages that are hampering so many other parts of the economy. But the 1,700 jobs it added on month in June were the most since the 1,800 in January, 2019, and revisions were positive. May’s initially reported 800 jobs gain is now pegged as having been 1,000 and April’s first reported 100 increase has been upgraded more than ten-fold – to 1,100.

The upshot seems to be that the recent high profile announcements of new domestic microchip fab construction are showing up in the employment data. As of last month, the sector’s payrolls were only 2.20 percent higher than just before the pandemic’s large-scale onset (though in fairness, semiconductor employment actually rose during the steep 2020 downturn). As of today, however, employment is up 3.22 percent during that period. (Note: The 1,400 semiconductor job growth I said last month took place in December, 2021 in fact came in the previous December. Apologies for the error.)

In surgical appliances and supplies (which includes so many of the personal protective equipment and other medical goods so widely used to fight the CCP Virus), June employment dropped by 800 – these companies’ worst monthly performance since last July’s 1,100 decline. At least revisions were positive. May’s initially reported gain of 400 is now estimated at 500, and April’s figure stayed at an upgraded loss of 100. The surgical appliances and supplies sector now employs 3.69 percent more workers than in February, 2020; last month, this increase had been 4.36 percent.

The pharmaceuticals and medicines industry, by contrast, generated record-smashing net job creation in June. The 4,300 rise was the biggest monthly total ever in a data series that goes back to 1990, and greatly eclipsed the old mark of 3,200 recorded in September, 2019. Revisions, moreover, were excellent, with May’s initially reported 100 payroll decline now raised all the way up to a 1,200 gain, and April’s increase remaining at an upgraded 1,500. Headcounts in these businesses are now 11.58 percent higher than just before the pandemic, versus the 10.10 percent calculable last month.

The much smaller medicines subsector containing vaccines performed well on the jobs front, too, hiring 1,100 net new workers in June. In addition, May’s initially reported 600 increase is now judged to have been 700, and April’s monthly improvement stayed at 1,100. This subsector’s workforce has now expanded by 26.29 percent since just before the pandemic arrived in force, as opposed to the 24.47 percent calculable last month.

An aerospace cluster hit especially hard by CCP Virus-related travel restrictions experienced another robust employment month in June.

Aircraft companies hired 1,500 net new workers on month, and revisions were excellent as well. May’s initially reported net new hires figure was upgraded from 1,300 to 1,600 – their best such performance since last June’s increase of 4,400 (mis-reported last month as a rise of 4,000). And April’s advance remained at an upgraded 500. As a result, the aircraft workforce is only 9.64 percent smaller than just before the pandemic arrived, versus the 10.30 percent calculable last month.

Aircraft engines and engine parts jobs were up by 800 sequentially in June, May’s initially reported increase of 700 was revised up to 900, but April’s results stayed at a downwardly revised 800. This improvement enabled employment at these firms to come within 9.81 percent of their February, 2020 levels, versus the 10.91 percent calculable last month.

These increases were mirrored in the non-engine aircraft parts and equipment industry, which added 600 workers on month. May’s initially reported 300 jobs increase remained unrevised as did April’s upgraded 400 increase. The non-engine aircraft parts and equipment sectors, as a result, crept to within 14.62 percent of their employment levels of February, 2020, versus the 15.14 percent calculable last month.

The big questions for American workers, and domestic industry as a whole including manufacturing, are whether economic growth will really continue to deteriorate further (here’s a recent forecast that it won’t, at least in the third quarter); and if it does, will businesses continue to “hoard” labor. Let me know if there’s anyone you trust to provide accurate answers.

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

Tags

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: U.S.-Based Manufacturing Returns to Pre-Pandemic Job Levels

Tags

aerospace, aircraft, aircraft engines, aircraft parts, Bureau of Labor Statistics, CCP Virus, coronavirus, COVID 19, Employment, fabricated metal products, Federal Reserve, food products, inflation, Jobs, Labor Department, machinery, manufacturing, miscellaneous non-durable goods, monetary policy, non-farm jobs, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, printing, private sector, recession, semiconductors, supply chain, surgical equipment, textiles, transportation equipment, vaccines, {What's Left of) Our Economy

A power outage in my Maryland suburb of Washington, D.C. prevented me from filing my usual same-day post on the manufacturing highlights of the latest official U.S. jobs release, but the big news is still eminently worth reporting:

Specifically, “It’s back.” According to yesterday’s employment report from the Labor Department (for June), as was the case with the private sector overall, U.S.-based manufacturing last month finally regained all the jobs it lost – and then some – during the deep but short CCP Virus- and lockdowns-induced recession of spring, 2020.

The new figures show that by adding 29,000 workers on net sequentially during June, and having added slightly more to their headcounts in April than previously reported, domestic industry’s employment last month stood at 12.797 million. That’s 0.09 percent more than the 12.785 million on their payrolls in February, 2020, the last full data month before the pandemic’s arrival in force began decimating and distorting the economy.

As of June, American private sector workers now number 129.765 million – 0.11 percent above its immediate pre-pandemic level of 129.625 million.

Yet the entire non-farm economy (the employment universe of the Labor Department’s Bureau of Labor Statistics, which tracks employment trends for the federal government) still hasn’t recovered all the jobs it lost during March and April, 2020. Because public sector employment is still off some, June’s 151.980 million non-farm payroll count remains 2.38 percent below the February, 2020 total of 152.504 million.

The June jobs report left manufacturing employment at the same level of total non-farm employment (8.42 percent) as in May, and a slightly smaller (9.86 percent versus 9.87 percent) share of total pivate sector employment that month.

But since the CCP Virus’ large-scale arrival, domestic industry has boosted these percentages from 8.38 percent and 9.83 percent, respectively.

Another reason for optimism about the manufacturing results of the June jobs report: The 29,000 payrolls boost was a nice increase from May’s unrevised 18,000 increase – the worst monthly performance since April, 2021’s 28,000. And as noted above, this past April’s excellent results saw their second upward revision – from 58,000 to 61,000 (the highest month-to-month gain since last July’s 62,000).

May’s biggest manufacturing jobs winners among the broadest Individual industry categories monitored by the Labor Department were:

>transportation equipment, which has been on a genuine rollercoaster. June’s hiring increase of 7,200 followed a May loss revised down from 7,900 to 9,800 – the worst such monthly drop since February’s 19,900. Yet the April figure for the sector was upgraded from an unrevised 19,500 to 20,100 – and followed a March advance of 25,000. That was the best such performance since October’s 28,200.

Yet all this tumult – due largely to an ongoing semiconductor shortage still plaguing the automotive sector in particular – still left transportation equipment employment 2.23 percent lower than in immediately pre-pandemic-y February, 2020 – as opposed to the 2.57 percent figure calculable last month;

>miscellaneous non-durable goods, where headcounts improved by 5,400 – the biggest monthly increase since February, 2021’s 5,500. But volatility is evident here, too, as May’s previously reported 2,900 jobs decrease was revised downgraded 3,400 – the biggest decline since December, 2020’s -9,400. Yet payrolls in this catch-all sector are now 9.68 percent higher than in February, 2020 – up from the 8.12 percent calculable from last month’s figures;

>plastics and rubber products, whose 5,300 hiring advance was its best since April’s now twice upgraded 8,000 rise. Moreover, May’s initially reported jobs decrease of 400 is now judged to have been a gain of 2,600. These companies now employ 4.33 percent more workers than just before the pandemic’s large-scale arrival in February, 2020, versus the 2.88 percent calculable last month; and

>food manufacturing, which added 4,800 employees on month in June. In addition, May’s initially reported 6,100 increase was revised up to 7,600, more than offsetting a second downgrade of the April advance from 7,700 0 7,100. This huge industry’s workforce is now 2.87 percent greater than in February, 2020, as opposed to the 2.53 percent figure calculable last month.

The biggest jobs losers in June among the broadest manufacturing sectors were:

>printing and related support activities, where 900 jobs were cut in the biggest monthly decrease since January’s 1,800. Worse, May’s initially reported employment retreat of 400 is now estimated at 700, and April’s upgraded increase (of 3,100) was revised down to 3,900. Employment by these companies is now down by 10.63 percent since just before the CCP Virus’ arrival in force in February, 2020, versus the 10.23 percent calculable last month;

>textile product mills, whose sequential June jobs loss of 700 was its worst since last September’s 900. May’s initially reported 100 employment dip stayed unrevised, but April’s initially upgraded results (from a headcount loss of 400 to one of 300) is now judged to be a decline of 400 once again. Consequently, payrolls in this sector are now off by 5.32 percent since February, 2020, as opposed t the 4.60 percent calculable last month; and

>fabricated metal products, whose 600 job loss in June was its worst such retreat since April, 2021’s 1,600, and the first fall-off since then. Revisions were mixed, with May’s initially reported increase of 7,100 downgraded to 6,900 (still its best sequential performance since February’s 9,300 surge) but April’s losses were revised down again, from 1,600 to 1,400. Despite its recent hiring hot streak, however, payrolls in this large sector are still 2.31 percent below pre-pandemic-y February, 2020’s level, versus the 2.24 percent calculable last month.

As known by RealityChek regulars, the big machinery industry is a bellwether for all of domestic manufacturing and indeed the entire U.S. economy, since so many industries use its products. So it was definitely good news that employment in this sector rose on month in June by 1,000 after having dropped by a downwardly adjusted 3,200 in May. That’s the sector’s worst such performance since it shed 7,000 workers last November. (Note: Last month, I mistakenly reported the May, 2021 decrease at 7,900.)

Yet April’s hiring gains were revised down again – from 5,900 to 5,800 – and machinery employment is still off since just before the pandemic’s arrival by 2.05 percent, versus the 2.12 percent calculable last month.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and interestingly, their May performance was generally better than that for domestic industry as a whole.

The semiconductor industry still struggling with the aforementioned shortages boosted employment on month in May by 800, and April’s initially reported 900 increase was revised up to 1,100 – the best since December’s 1,400. Even though March’s jobs improvement remained at a downgraded 400, payrolls in the sector moved up to 2.20 percent higher than just before the pandemic arrived in February, 2020 from the 1.66 percent calculable last month. And although progress seems modest, it must be remembered that even during the early spring, 2020 downturn, these companies added to their headcounts.

In surgical appliances and supplies (which includes all the personal protective equipment and other medical goods so widely used to fight the CCP Virus), employment in May climbed by 400 on month, April’s initially reported 200 loss is now estimated at just 100, and March’s unrevised 1,100 increase stayed unrevised. These results mean that these sectors have increased their workforces by 4.36 percent since February, 2020, versus the 3.88 percent calculable last month.

The large pharmaceuticals and medicines industry was a partial exception to this pattern, losing 100 jobs sequentially in May. But April’s initially reported 1,400 rise (the best monthly performance since last June’s 2,600) is now judged to have been 1,500. And March’s advance stayed at an upwardly revised 1,200. As a result, these industries now employ 10.10 percent more workers than in immediately pre-pandemic-y February, 2020, versus the 9.78 percent calculable last month.

The medicines subsector containing vaccines hired 600 net new employees on month in May, April’s 1,100 payrolls increase (the best such performance since December’s 2,000), stayed unrevised, as was March’s previously upgraded 600 increase. Consequently, these companies’ headcounts are now 25.08 percent above their February, 2020 levels, versus the 24.47 percent improvement calculable last month.

Good job creation also continued throughout an aerospace cluster hit especially hard by CCP Virus-related travel restrictions. Aircraft manufacturers added 1,300 workers in May, their most robust monthly hiring since last June’s 4,000 jump. April’s initially reported climb of 200 was upgraded to 500, and March’s results stayed at an upwardly revised 1,200. These companies’ workforces have now crept to within 10.30 percent of their pre-pandemic total, versus the 10.96 percent shortfall calculable last month.\

In aircraft engines and engine parts, jobs rose by 700 sequentially in May, and though April’s initially reported increase of 900 is now judged to be 800, it was still the best such performance since February’s increase of 900. March’s new hires stayed at an upwardly revised 600, leaving employment in this sector 10.91 percent below February, 2020 levels, versus the 11.56 percent calculable last month.\

Non-engine aircraft parts and equipment makers kept making steady employment progress as well. They added 300 workers on month in May, and their initially reported new April hiring of 300 is now estimated at 400. March’s employment increase stayed unrevised at 700, but this sector still employs 15.14 percent fewer workers than in February, 2020, versus the 15.48 percent calculable last month.

With the Federal Reserve still on record as seeing the need for slowing the economy’s growth (at best) in order to fight inflation, signs of recession multiplying (e.g., here), domestic industry’s major export markets looking increasingly weak as well, the Ukraine War dragging on, and supply chain problems ongoing (see, e.g., here and here) it’s difficult to expect U.S.-based manufacturers to escape these powerful downdrafts. But these companies have kept turning in remarkably strong results in production as well as hiring, so who’s to say they can’t keep bucking the odds?

(What’s Left of) Our Economy: Revisions Take U.S. Manufacturing’s Solid Pandemic-Era Performance Down a Notch

Tags

aerospace, aircraft, aircraft parts, apparel, appliances, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, durable goods, electrical components, electrical equipment, fabricated metal products, Federal Reserve, furniture, inflation-adjusted output, machinery, manufacturing, medical devices, miscellaneous durable goods, miscellaneous nondurable goods, nondurable goods, nonmetallic mineral products, paper, petroleum and coal products, pharmaceuticals, plastics and rubber products, printing, real growth, recession, semiconductors, textiles, wood products, Wuhan virus, {What's Left of) Our Economy

Sharp-eyed RealityChek readers have no doubt noticed my habit of noting that “final” versions of official U.S. economic data are typically final only “for now.” That’s because Washington’s statistics gathering agencies, to their credit, look back regularly on several years’ worth of figures to see where updates are needed because new information has come in, and this morning, the Federal Reserve released its own such “benchmark” revision of its manufacturing production data.

The results don’t contain any earthshaking changes, but they do alter the picture of domestic industry’s inflation-adjusted growth during the pandemic period, as well as of the performance of specific sectors, in non-trivial ways.

The main bottom lines: First, the Fed previously estimated that U.S.-based manufacturers had increased their constant dollar production from February, 2020 (the month before the CCP Virus’ arrival in force began roiling the entire American economy) through last month, by 4.94 percent. Today, the Fed told us that the advance was just 4.12 percent.

Second, as a result, domestic industry has further to go in real terms to recover its all-time high than the central bank had judged. As of the last regular monthly industrial production increase, U.S.-based manufacturing was 2.41 percent smaller after inflation than in December, 2007 – still its peak. But the new figures show that these manufacturers are still three percent behind the after-inflation output eight-ball.

Third, and especially interesting given the recent, significant U.S. growth slowdown and distinct possibility of a recession before too long, the revisions add (though just slightly) to the evidence that the overall economy’s woes this year are indeed beginning to affect manufacturing. Before the revision, the Fed judged that real manufacturing output had expanded by 2.68 percent between last December and this May, and slipped by 0.07 percent between April and May. The new figures: 2.46 percent and -0.22 percent, respectively.

The virus-era downward revisions affected durable goods and nondurable goods industries alike. The previous price-adjusted growth figure for the former during the pandemic period was 6.31 percent. Now it’s pegged at 5.18 percent. For the latter, the downgrade was from 3.42 percent to 2.99 percent.

Before the revisions, of the twenty broadest sub-sectors of manufacturing tracked by the Fed, only five suffered inflation-adjusted production declines from immediate pre-pandemic-y February, 2020 through this May, and all were found in the nondurables super-category. They were miscellaneous non-durable goods (down 11.43 percent), textiles (down 3.80 percent), paper (2.33 percent), printing and related activities (1.89 percent), and petroleum and coal products (1.21 percent).

The new data show that the number of growth losers has expanded to eight;. Four sectors were added: fabricated metals products (down 1.30 percent), nonmetallic mineral products (1.06 percent), apparel and leather goods (off by 0.59 percent), and furniture and related products (0.17 percent). And petroleum and coal products’ contant dollar production was upgraded from a 1.21 percent decrease during the pandemic period to a 2.96 percent gain.

The names on the list of top five pandemic period growers remained the same, with after-inflation production actually improving in aerospace and miscellaneous transportation (from 18.99 percent to 19.69 percent), miscellaneous durable goods (from 11.41 percent to 12.43 percent), and machinery (from 6.29 percent to 6.52 percent). But real production gains were revised down in computer and electronics products (from 10.42 percent to 7.38 percent), and chemicals (from 8.48 percent to 7.55 percent).

In absolute tems, the biggest price-adjusted output upgrades were registered in miscellaneous nondurable goods (from an 11.43 pecent nosedive to a smaller drop of 7.56 percent), electrical equipment, appliances and components (from a 2.19 percent rise to one of 4.95 percent), the aforementioned petroleum and coal products sector, wood products (from a 5.24 percent increase to 6.45 percent), and plastics and rubber products (from 1.78 percent growth to 2.76 percent).

The biggest real production downgrades came in the printing sector (all the way from a 1.89 percent inflation-adjusted output shrinkage to one of 9.52 percent), apparel and leather goods (from a 4.59 percent real production rise to a 0.59 percent dip), nonmetallic mineral products (from 2.58 percent price-adjusted growth to a 1.06 percent decline), and the aforementioned computer and electronics product sector.

RealityChek has been following with special interest narrower sectors that have attracted unusual attention since the CCP Virus arrived, and the new industrial production revision shows that constant dollar output climbed by more than previously estimated in aircraft and parts (24.89 percent versus 19.08 percent) and medical equipment and supplies (14.48 percent versus 11.51 percent), and by less in semiconductors and other electronic components (22.48 percent versus 23.82 percent) and in pharmaceuticals and medicine (12.79 percent versus 14.78 percent).

These Fed revisions are hardly a reason to push the panic button about U.S. manufacturing. But because domestic industry’s fortunes during the pandemic era have been so closely tied to blazing hot demand for its products, it’s hardly great news to learn that with signs abounding of a slumping American economy, manufacturing is approaching this apparent downturn in less robust shape than thought as late as yesterday.   

(What’s Left of) Our Economy: U.S. Manufacturing Growth is Overcoming the Ukraine War, Too

Tags

aerospace, aircraft, aircraft parts, appliances, automotive, electrical components, electrical equipment, Federal Reserve, furniture, inflation, logistics, machinery, manufacturing, medical devices, medical equipment, metals, monetary policy, non-metallic mineral products, pharmaceuticals, printing, semiconductors, supply chains, textiles, transportation, {What's Left of) Our Economy

My day got away from me yesterday, so I couldn’t finish up my report on that morning’s Federal Reserve’s newest U.S. manufacturing production figures (for March) till now. But they’re worth examining in detail because although they’re the first such data to be released since the Ukraine war broke out and began disrupting global supply chains for important goods, they strongly resembled last month’s statistics – which were the final pre-war figures.

And just as interesting: Many of the results for individual industries illustrated strikingly the roller coaster ride on which much of domestic industry remains, with multi-month bests in particular coming right on the heels of multi-month worsts. Moreover, underscoring much of the uncertainty created by Ukraine-related tumult coming on top of (and in China’s case, alongside) CCP Virus-related tumult, some revisions of previous months’ readings were unusually large.

In inflation-adjusted terms, American manufacturing output grew 0.87 percent sequentially in March. The increase was powered largely by a 7.80 percent monthly jump in real output in the exceptionally volatile automotive sector. But even stripping out vehicles and parts production, price-adjusted manufacturing production improved by 0.40 percent in March.

In addition, revisions were mildly positive. February’s initially reported 1.20 percent constant dollar month-on-month production increase – the best such performance since last October’s 1.71 percent – was upgraded to 1.22 percent. January’s downwardly revised 0.03 percent improvement is now estimated at 0.11 percent. And December’s small dip was revised up again – from -0.06 percent to -005 percent.

Consequently, since the last full data month before the CCP Virus began roiling the U.S. economy (February, 2020), domestic manufacturing has expanded by 4.42 percent – up from the 3.37 percent calculable last month.

At the same time, U.S.-based industry is still 2.91 percent smaller than at its all-time peak – reached just before the Great Recession in December, 2007 – although that’s up from the 3.88 percent deficit calculable last month.

March’s biggest manufacturing production winners were:

>automotive, as mentioned above. That was the biggest sequential gain since last October’s 10.64 percent, but it follows a February drop that’s been downgraded from 3.55 percent to 4.64 percent. And that was the worst monthly figure since last September’s 6.32 percent. All these (and previous) ups and downs left after-inflation vehicle and parts production 3.50 percent below their immediate pre-pandemic (February, 2020) levels;

>aerospace and miscellaneous transportation, where after-inflation production rose by 1.90 percent on month. The February advance, was downgraded substantially, from 3.22 percent to 1.64 percent, leaving the March increase the biggest since last July’s 4.21 percent. These industries are now 16.43 percent larger in real terms than in February, 2020;

>electrical equipment, appliances and components’ price-adjusted production climbed 1.03 percent sequentially and February’s increase was revised all the way up from 0.48 pecent to 1.95 percent– best since last July’s 3.24 percent. Inflation-adjusted output in these sectors is now 5.55 percent above thei February, 2020 levels; and

>plastics and rubber products, which displayed a similar pattern. Real output was up 1.14 percent sequentially in March, and February’s results were more than doubled – from +1.46 percent to +3.14 percent. That burst – the best since August, 2020’s 3.85 percent – left constant dollar production for these industries 3.56 percent greater than in immediate pre-pandemic-y February. 2020

In addition machinery, which is such a bellwether for both the rest of industry and the entire economy because of the widespread use of its products, price-adjusted output in March improved by 0.78 percent over February’s results. And although the February improvement was downgraded from 0.78 percent to 0.54 percent, after-inflation machinery production is still up 8.29 percent since February, 2020.

The biggest March manufacturing growth losers were:

>non-metallic mineral products, whose 1.15 percent March monthly decline was the worst such figure since last May’s 2.29 percent decrease. But this drop-off followed a February monthly surge that was upgraded from 3.46 percent to 3.94 percent – the .best such showing the 4.34 percent of June, 2020 – early in the recovery from the deep economic downturn triggered by the first wave of the CCP Virus and related lockdowns and behavioral curbs. Real output in this sector has now risen by 3.28 percent since February. 2020;

>primary metals, where similarly. March’s 1.69 percent fall was the biggest since January’s 2.46 percent drop – and followed a February 2.26 percent increase that was upgraded from the previously reported 2.10 percent and represented the best monthly performance last April’s 3.48 percent. Primary metals inflation-adjusted output is now 1.16 greater than in Februrary, 2020;

>furniture and related products’ after-inflation production sank by 1.51 percent from February to March – the worst such figure since February, 2021’s 3.21 drop. But March’s lousy results followed a February increase that was also more than doubled – from 2.52 percent to a 5.63 jump that was this sector’s best since June 2020’s 5.66 percent. These results brought real output in furniture and related products to within 0.80 percent of its immediate, February, 2020 pre-pndemic level;

>textiles’ 1.46 percent monthly March real output decrease was its worst monthly result since January’s 2.30 percent drop. But it, too, followed a strong February. That month’s improvement was upgraded from 0.03 percent to 0.97 percent – the biggest monthl increase since September’s 1.36 percent. Yet in real terms, the industry is still 5.84 percent smaller than in February. 2020;

>and printing and related support activities. It’s 1.10 percent March sequential after-inflation output retreat was also its worst since January’s 2.16 percent decrease. But it, too, followed a strong February. Indeed, that months’ inflation-adjusted production increase was revised up from 1.66 percent to 2.66 percent – its best such performance since last May’s 2.75 percent rise. This cluster, though, has still shrunk by 4.69 percent in constant dollar terms since February. 2020.

Growth was solid, too, in industries that consistently have made headlines during the pandemic.

In the aircraft and aircraft parts sector, real production increased in March by 2.31 percent. Because February’s initially reported 2.52 percent monthly rise was marked all the way down to 1.13 percent, the March figure became these industries’ best since last July’s 3.44 percent (which I mistakenly reported last month was an August total). January’s results were downgraded, too – and for a second time, to 0.91 percent. But the sector is still 15.86 percent bigger than it was after inflation than in February, 2020.

The big pharmaceuticals and medicines sector turned in a more mixed performance. March’s 1.17 percent price-adjusted monthly production increase was the best such total since last August’s 2.39 percent. But February’s initially reported 1.08 percent gain is now reported as a 1.15 percent loss. January’s constant dollar production change, however, was revised up from a 0.14 percent drop to a 0.45 percent increase. All told, pharamaceuticals and medicines production is 14.75 percent higher afte inflation than in February, 2020.

But the news was unambiguously good in the medical equipment and supplies sector that contains so many of the products needed to fight the pandemic. The March inflation-adjusted output improvement was 1.81 percent and February’s production growth was upgraded from 1.39 pecent to 1.73 percent. Further, the January after-inflation growth figures – which had already been revised up from 2.50 percent to 3.26 percent – was upgraded further to 3.28 percent. And a December result that was first reported as a decline of 2.75 percent is now estimated to be a dip of just 0.37 percent. All told, output in these sectors has increased by 10.80 percent since immediately pre-pandemic-y February, 2020.

And although the national and global semiconductor shortage persists, U.S. domestic production kept rising healthily. Output in March improved month-to-month by 1.99 percent adjusted for inflation, February’s initially reported rise of 1.96 percent was upgraded to 2.87 percent (the best such growth since April, 2017’s 3.78 percent), and January’s downwardly revised 0.37 percent sequential output decline was revised up to a 0.05 percent gain. As a result, semiconductor production is upfully 25.99 percent over its immediate pre-pandemic levels.

The March manufacturing production figures portray a domestic industry resilient enough to withstand not only pestilence but (so far) war and the beginnings of tighter Federal Reserve monetary policy aimed at slowing U.S. growth in the name of reducing  inflation. No one knows what catastrophes the future may hold, or how much more the aforementioned problems could worsen. But it’s looking like any force powerful enough to derail American manufacturing for long may need to be truly Biblical in its proportions.

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

Tags

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 Delta Effect on U.S. Manufacturing Growth In Sight. Yet.

Tags

aerospace, aircraft, aircraft parts, appliances, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Delta variant, electrical components, electrical equipment, fabricated metal products, Fed, Federal Reserve, inflation-adjusted growth, inflation-adjusted output, machinery, manufacturing, medical supplies, medicines, personal protective equipment, petroleum and coal products, pharmaceuticals, plastics, PPE, real growth, recovery, reopening, rubber, textiles, vaccines, {What's Left of) Our Economy

The after-inflation U.S. manufacturing production data reported today by the Federal Reserve revealed plenty of newsy developments. But my choice for biggest is the finding that, in price-adjusted terms, domestic manufacturers’ output finally nosed back above its last pre-CCP Virus (February, 2020) level.

The new number isn’t an all-time high – that came in December, 2007, just as the financial crisis was about to plunge the entire U.S. economy into its worst non-pandemic-related downturn since the Great Depression of the 1930s. As of this July, real manufacturing production is still 5.94 percent below that peak.

Measured in constant dollars, however, such output is now 1.15 percent greater than just before the virus arrived in the United States in force. Not much, and of course any Delta variant-prompted curbs on economic activity or extra caution in consumer behavior could wipe out this progress. But you know what they say about a journey of a thousand miles.

Had this milestone not been reached, I’d have led off this post by noting that although some really unusual seasonal factors in the volatile automotive sector definitely juiced the excellent July sequential output gain, U.S.-based industry outside automotive performed impressively during the month as well.

Specifically, as the Fed’s press release noted, the whopping 11.24 percent jump in the price-adjusted output of vehicles and parts contributed about half of overall manufacturing’s 1.39 percent growth. That automotive figure was the best monthly improvement since the 29.39 percent rocket ride the sector generated in July, 2020 – when the whole economy was staging its rebound from that spring’s deep but brief virus-induced recession. And that overall real on-month production advance was the best for manufacturing in general since the 3.39 percent achieved in March – earlier in the initial post-pandemic recovery.

But in July, the rest of domestic industry still expanded by a strong 0.70 percent after inflation – its best inflation-adjusted growth since the 3.31 percent also recorded in March.

The revisions in this morning’s Fed data for the entire manufacturing sector were mixed. June’s initially reported 0.05 percent decline is now judged to be a 0.10 percent increase, and April’s previously reported 0.39 percent drop now stands as a 0.21 percent decrease. But May’s last reported increase – upgraded slightly to a strong 0.92 percent – is now estimated at just 0.65 percent.

Looking at broad industry categories, the big real output July winners in domestic manufacturing’s ranks aside from automotive were electrical equipment, appliances, and components (up 2.31 percent); plastics and rubber products (up 2.02 percent); machinery (1.91 percent); the broad aerospace and miscellaneous transportation sector (think “Boeing”), which rose by 1.90 percent; textiles (up 1.67 percent); and miscellaneous durable goods, which includes but is hardly confined to many pandemic-related medical supplies (up 1.55 percent).

As I keep noting, good machinery growth is especially encouraging, since its goods are used both throughout manufacturing and the economy as a whole, and strong demand signals optimism among manufacturers about their future prospects – which tends to feed on itself and impart continued momentum to industry.

The list of significant losers was much shorter, with real fabricated metal products output 0.42 percent lower than June levels and petroleum and coal products shrinking by 0.60 percent.

Turning to narrower manufacturing categories that remain in the news, despite Boeing’s still serious manufacturing and safety problems, and ongoing CCP Virus-created weakness in air transport, inflation-adjusted production of aircraft and parts continued its strong recent run. June’s initially reported 5.24 percent monthly output surge was revised down to 3.57 percent. But that’s still excellent by any measure. And July saw production climb another 2.78 percent. As a result, real output in this sector is now 9.95 percent higher than it was just before the pandemic’s arrival in the United States in February, 2020.

Real output in the pharmaceuticals and medicines sector (which includes vaccines) grew by 0.77 percent sequentially in July, and its real output is now 11.35 percent greater than just before the pandemic. But those revisions!

June’s initially reported 0.89 percent increase is now judged to be a 0.34 percent decrease, and May’s previously downgraded 0.15 percent rise has now been upgraded all the way to 1.54 percent.

An even better July was registered by the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. Monthly growth came in at 1.71 percent. But revisions here were puzzling, too.

June’s initially reported 0.99 percent sequential real production improvement is now seen as a major 1.54 percent falloff. And May’s monthly constant dollar growth, already upgraded from 0.19 percent to 1.18 percent, is now pegged at 1.86 percent.

I’m still optimistic about domestic manufacturing’s outlook, and that’s still based on domestic manufacturers’ own continued optimism – which as shown by the two major private sector monthly manufacturing surveys remained strong in July. (See here and here.)

But I also continue to view U.S. public health authorities’ judgment as suspect when it comes to the balance that needs to be struck between fighting the virus and keeping the economy satisfactorily open. So as long as new virus variants pose the threat of higher infection rates (though not at all necessarily of greater damage to Americans’ health), my own optimism has become more tempered.

Those Stubborn Facts: A Strange Definition of a Broken Trump Promise

Tags

Associated Press, CCP Virus, coronavirus, COVID 19, health security, Mainstream Media, manufacturing, masks, medical supplies, PPE, supply chain, textiles, Those Stiubborn Facts, Trump, Wuhan virus

“Shortages of meltblown textiles, key to N95 mask-making, illustrate ‘the failure of this administration to take necessary steps to fulfill’ its promise of restoring critical manufacturing capacity lost to China.”

– Associated Press, September 10, 2020

“Pre-pandemic, five U.S. producers were making about 42 million N95 masks a month. By October, that is projected to have increased to 11 U.S. producers making 168 million a month, which could amount to 2 billion a year….”

–Associated Press, September 10, 2020

“Also pre-pandemic, 24 U.S. companies were making meltblown, with 79 machine lines in operation….But only a fraction of that was going into medical respirators….By the end of 2021… there will be 28 new lines in the U.S., representing a 35% increase, with almost all of the newly produced textile going into medical supplies.”

–Associated Press, September 10, 2020

(Source: “Scarcity of key material squeezes medical mask manufacturing, by Martha Mendoza, Juliet Linderman, Thomas Peipert, and Irena Hwang,” Associated Press, September 10, 2020, https://apnews.com/02a0542e8a05176bd5d79757134bc277)

(What’s Left of) Our Economy: How Pre-Trump Trade Policies Devastated U.S. Protective Gear Capacity

Tags

apparel, CCP Virus, China, coronavirus, COVID 19, Fed, Federal Reserve, free trade, garments, health security, manufacturing, manufacturing capacity, NAFTA, non-durable goods, North American Free Trade Agreement, offshoring, textiles, Trade, Trump, World Trade Organization, WTO, Wuhan virus, {What's Left of) Our Economy

Recently I put up a post expressing gratitude that, despite their best efforts, pre-Trump U.S. trade policies didn’t manage to send the entire U.S. textile and apparel industries offshore. After all, companies in these sectors are the companies with the greatest expertise and capabilities in making all the personal protective equipment (PPE) crucial in the anti-CCP Virus fight.

Of course, the nation is therefore reliant for these and other medical products on countries, like China, which have responded to the emergency at various times with export bans. And in the case of pandemic-prone China, much production of all kinds was shut down temporarily because of the original virus outbreak.

Thanks to the release of the latest Federal Reserve industrial production data, it’s possible to quantify the damage done to these vital industries in ways other than the output figures I presented in that previous offering. That’s because the Fed’s monthly releases report in detail not only on increases or decreases in after-inflation output for manufacturing (and related) sectors. They also report the monthly changes in industrial capacity – the resources and facilities available to turn out various goods.

The results through last month are below. They use as baselines the month the North American Free Trade Agreement (NAFTA – which has now been turned into the U.S.-Mexico-Canada Agreement) went into effect, and the month that China entered the World Trade Organization (WTO). NAFTA’s January, 1994 onset signaled to many the transformation of U.S. trade policy into U.S. offshoring policy (see my book, The Race to the Bottom, for this argument). The January, 2002 beginning of China’s WTO membership gave the People’s Republic  overall, and its even-then-immense textile and especially apparel sectors, invaluable protection against American responses to its various forms of trade predation. (Limited safeguards versus “market-disrupting” surges in imports from China were written into the WTO agreement.)

For comparison’s sake, the industrial capacity changes for non-durable goods manufacturing (the super-sector into which textiles and apparel are grouped), and total manufacturing are provided as well:

                                                       Since NAFTA onset    Since China WTO entry

Textiles:                                              -37.05 percent              -44.05 percent

Apparel & leather goods:                   -81.97 percent              -77.18 percent

Non-durables manufacturing:           +17.06 percent                -2.23 percent

Total manufacturing:                         +75.54 percent             +10.78 percent

Clearly, the decimation of apparel capacity sticks out prominently. But although the more capital-intensive textiles industry didn’t suffer nearly as much, it fared much worse than either manufacturing in toto or the non-durables sectors overall. That’s largely because as the apparel industry disappeared, so did a prime domestic customer for textiles producers.

It’s also obvious for all these categories that although NAFTA was, to say the least, hardly a bonanza, the big trade-related damage was done by China’s WTO entry. Afterward that event has been when the shrinkage of textiles capacity accelerated, when the vast majority of the post-NAFTA apparel damage was done, when non-durables capacity gains shifted into reverse, and when total manufacturing capacity growth slowed to a crawl.

Calls are now abounding for remedies to the resulting shortages – like greater stockpiling and various tax and subsidy incentives for reshoring at least some of this production. But material in stockpiles can decay if unused too long, and companies would be foolish to spend heavily on new U.S. factories if they still face the likelihood of being subsidized and dumped out of existence by predatory foreign trade policies. As a result, there’s no substitute for stiff tariffs, and a credible national resolve to keep them in place, for ensuring that America’s health security never becomes so degraded again.

(What’s Left of) Our Economy: When Industries Disappear

Tags

apparel, big government, Breitbart.com, conservatves, embroidery, Frances Martel, Immigration, labor unions, manufacturing, New Jersey, skills, textiles, Union City, unions, {What's Left of) Our Economy

Until I read Frances Martel’s “Hanging by a Thread,” I used to think of Union City as little more than one of those bleak-looking smallish northern New Jersey municipalities the Amtrak trains pass through on their way between New York City and points south.  How wrong I was!  And for such wide-ranging policy and political reasons!  

Not that you can’t simply enjoy her long feature for Breitbart.com for the fascinating descriptions of what makes her hometown special geologically (e.g., it sits on lots of Manhattan bedrock-like granite, good for supporting factories with heavy machines and multistory housing) and demographically (because it developed fairly late in the 19^th century, its population was always dominated by immigrants).

Clearly important as well is Martel’s main theme – how manufacturing built solid prosperity for Union City from the get-go, and how its demise, due to developments like (but not restricted to) offshoring-obsessed U.S. trade policies helped bring punishingly hard times. (Full disclosure: Martel interviewed me for the article, and quoted me quite generously.)

But if you’re thinking this is only an article for trade and/or manufacturing mavens, or for New Jersey history aficionadoes, you’re sorely mistaken. For along the way, “Hanging by a Thread” offers important insights into how these closely related subjects profoundly affect many of the nation’s other major issues and challenges.

For example, Martel offers a novel twist on the notion that the United States welcomed so many immigrants so consistently (though not always) from the mid-19^th century onwards in particular because of its urgent need for unskilled labor. No doubt most of the newcomers were poorly educated. But as “Hanging” makes clear, industry during this period used lots of complicated machinery, including the embroidery sector that became concentrated in Union City.

As Union City’s official historian told Martel, many of its first immigrants came from Germany, Switzerland, Austria, and other parts of Europe with major textile industries, and brought with them extensive experience working with such devices that employers clearly found valuable.

Since skills (of different kinds, of course) remain so crucial to economic success today, Union City’s past raises the question of whether – as Open Borders advocates seem to believe – the United States today should indiscriminately welcome immigrants regardless of skill levels and gainful employability.

Two other messages coming through loud and clear from Martel’s research and analysis are especially important for conservatives to heed. The first has to do with unions. Martel’s parents were hard-line anti-communists who fled Castro’s Cuba, and her mother worked in apparel. The author explains that these arrangements were seen as “a critical part of the factory ecosystem.” The following exchange, with her mother speaking first, makes the point vividly:

“‘I have always had a good union. It works, I think. It works to have a union because without a union, in a private place, you’re screwed,’ she told me.

“‘You don’t feel that there is a conflict between that and being a capitalist?’” I asked…..

“‘No. What? Being a capitalist? No,’ she replied, with confusion. ‘No, that has nothing to do with socialism, it’s just so that the worker has someone to defend them. If you don’t have a job, they can fire you whenever. That’s not fair. To throw you out for no reason, it’s unfair ifyou are working well.’”

Martel’s second message for conservatives actually echoes a point I’ve made before (e.g., here): The more enthusiastically traditional free trade policies are pursued by American leaders, the bigger government’s going to get. But as Martel makes clear, these approaches to the global economy are bound to generate needs that far exceed the kinds of welfare state benefits (ranging from income support to heavily subsidized healthcare) used to keep living standards above third world levels (or at least try to do so).

As the Union City example shows, relentless globalization can also turbocharge government’s role in economic development itself. The author explains that, since 2000, Union City Mayor Bob Stack (a big-city machine politician if ever there was one)

“took the reins on the eve of the guillotine falling on embroidery and has taken to meticulously rebuilding the identity of the city. He tore down Roosevelt Stadium, the sports venue at the heart of the city, to build a new Union City High School – with a stadium on the roof. Union City previously boasted two high schools, one for Union Hill and one for West Hoboken, that Stack turned into middle schools. He built parks in honor of the city’s Cuban, Colombian, and Dominican populations, and an ‘International Park.’ Seemingly every other street has a water park open in the summer for children to play in – the biggest, Firefighters’ Memorial Park, boasts an Olympic-sized swimming pool. His administration also refurbished the downtown library into the Musto Cultural Center and built its replacement, the library at José Martí Middle School (which his administration also built), in the shadow of what was once St. Michael’s monastery, an imposing Catholic historic site that now houses a Korean Presbyterian congregation.”

In other words, Union City realistically recognized the choices before it, and rejected “the option much of the Rust Belt took: do nothing, abandon ship, hope the invisible hand swoops in before you hit the concrete.” As a result (and also because of its proximity to New York City), it’s more than avoided the ghost town fates of counterparts like Gary, Indiana, Youngstown, Ohio, and Detroit, Michigan.