Monday Economic Report - Monthly Changes in Employment
Monday, December 11, 2017
Posted by: Alyce Ryan
Written By: Chad Moutray, Ph.D., CBE
AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report” from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).
The Bureau of Labor Statistics reported that manufacturers added 31,000 workers in November, extending the gain of 23,000 in October. More importantly, the sector has added an average of 15,545 employees on net per month so far in 2017—quite a turnaround from the loss of 16,000 workers in 2016 as a whole. This is a sign that firms have stepped up their hiring as a result of a stronger economic outlook and increased demand and production activity. Indeed, since the end of the Great Recession, manufacturing employment has risen by 1,061,000 workers, with 12.51 million employees in the sector in this report.
Moreover, manufacturers continue to say that the inability to attract and retain a quality workforce is one of their top concerns, which is further proof that the labor market has tightened considerably. Along those lines, there has been some upward pressure on wages, even with a slight easing in the November figures. Average weekly earnings for manufacturing workers edged down from $1,094.08 in October to $1,092.44 in November. Nonetheless, average weekly earnings in the sector have risen 2.6 percent over the past 12 months, up from $1,064.53 in November 2016.
Meanwhile, nonfarm payrolls also grew stronger than expected, up 228,000 in November and better than the consensus estimate of around 195,000. Moreover, nonfarm payroll employment has averaged 174,182 per month year to date. That is a decent pace, even with some easing from the average rate of 186,667 each month for all of last year. The unemployment rate remained the same at 4.1 percent, continuing to be its lowest level since December 2000.
Turning to other economic indicators, new factory orders edged down 0.1 percent in October, but with the highly volatile transportation segment excluded, new orders for manufactured goods increased 0.8 percent for the month. Overall, new factory orders, which have struggled mightily over the past few years, have trended largely in the right direction more recently, up nearly 3.7 percent since October 2016, or 6.8 percent when excluding transportation equipment sales. In addition, economists often look at core capital goods—or nondefense capital goods excluding aircraft—as a proxy for capital spending in the economy, and that measure is very encouraging. Core capital goods demand increased 0.3 percent in October, with a robust gain of 9.3 percent over the past 12 months.
On the trade front, U.S.-manufactured goods exports totaled $906.96 billion year to date in October, up 3.79 percent from $873.81 billion one year ago. This reflects better year-to-date figures to the top-six markets for U.S.-manufactured goods, and in general, manufacturers in the United States have benefited from improvements in the global economy, lifting demand for sales abroad. With that said, the U.S. trade deficit rose from $44.89 billion in September to $48.73 billion in October, its highest level since January. The increase stemmed mostly from a jump in goods imports, but goods exports, which declined slightly in October, were not far from September’s figure, which was its best reading since December 2014. Beyond goods, service-sector exports and imports both rose to new all-time highs.
For their part, Americans remain mostly upbeat in their outlook, even with some easing in preliminary results from the University of Michigan and Thomson Reuters survey in December. The Index of Consumer Sentiment has fallen from 100.7 in October—its highest point since January 2004—to 98.5 in November to 96.8 in December. Yet, the headline index averaged 96.9 in 2017, up from 91.8 in 2016. Surveys of Consumers Chief Economist Richard Curtin noted higher income expectations in the latest data, with buying plans also quite strong. Indeed, data on consumer borrowing supports this latter point, with Americans less cautious in their spending and more willing to use their credit cards for purchases than just a few months ago. The Federal Reserve Board reported that U.S. consumer credit outstanding increased 6.5 percent at the annual rate in October, with year-over-year growth of 5.4 percent. In addition, revolving credit, which includes credit cards and other credit lines, jumped 9.9 percent in October, accelerating strongly from 6.2 percent and 7.3 percent in August and September, respectively.
This week, the Federal Reserve will dominate economic headlines, with the Federal Open Market Committee widely expected to raise short-term interest rates for the third time in 2017. While interest rates will continue to be historically low, the Federal Reserve has expressed a desire to normalize rates and the size of its balance sheet, reflecting improvements in overall economic conditions. Moreover, it will be the second-to-last FOMC meeting chaired by Federal Reserve Chair Janet Yellen, with Jay Powell’s nomination moving through the confirmation process steadily.
November industrial production data will be released on Friday. In October, manufacturing production expanded robustly, up 1.3 percent, rebounding from slowdowns related to recent hurricanes in the prior report. More importantly, output in the sector had risen 2.5 percent over the past 12 months, the best year-over-year rate since August 2014. It is hoped new data will show continued signs of strength for manufacturers, including in sentiment surveys from IHS Markit and the New York Federal Reserve Bank. Other reports out this week include updates on consumer and producer prices, job openings, retail sales and small business optimism.