Monday Economic Report: Manufacturing Wages and Salaries Rise 4.1% Year-Over-Year in Q4

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).

By Chad Moutray, Ph.D., CBE – January 31, 2022

Weekly NAM Economic Toplines: 

• Private manufacturing wages and salaries rose 1.0% in the fourth quarter. That increase translated into 4.1% growth over the past 12 months, the fastest pace in the history of the data series, which dates to the beginning of 2001. For all private-sector employees, wages and salaries increased 1.2% in the fourth quarter, with a record 5.0% growth year-over-year.

• Personal income rose 0.3% in December, with 7.3% growth over the past 12 months. At the same time, personal consumption expenditures fell 0.6% in December, declining for the first time since February. In December, spending on durable and nondurable goods decreased 4.1% and 1.7%, respectively. More encouragingly, personal spending has jumped 13.3% over the past 12 months. 

• With spending lower, the personal saving rate increased from 7.2% in November to 7.9% in December. The saving rate averaged 11.9% in 2021, down from 16.3% in 2020 but up from 7.6% in both 2018 and 2019. 

• The PCE deflatorrose 0.4% in December. Overall, the PCE deflator has risen 5.8% year-over-year, the greatest increase since July 1982. Core inflation has increased 4.9% since December 2020, the fastest pace of inflation since September 1983. Core inflation is likely to remain elevated, even if the first half of 2022 brings some stabilization. The current forecast is for the core PCE deflator to be roughly 2.8% year-over-year by the end of 2022.

• For its part, the Federal Reserve will wind down its asset purchases, with quantitative easing ending in early March. The FOMC is also likely to increase short-term interest rates as soon as the March 15–16 meeting, with three or four rate hikes expected this year. 

• Worries about inflation, as well as the spread of the omicron variant, dampened measures of consumer confidence, including those from both the Conference Board and the University of Michigan. In January, the latter index fell to the lowest point since November 2011.

• The U.S. economy jumped 6.9% at the annual rate in the fourth quarter. Real GDP growth was buoyed by very strong increases in spending on business inventories and services. The data also show negative impacts from ongoing supply chain disruptions and the spread of the omicron virus, with weaker-than-desired spending on consumer goods and business investment.

• Overall, the U.S. economy rebounded very strongly in 2021, with real GDP soaring 5.7% following the 3.4% decline seen in 2020. The current forecast for 2022 is for 4.3% growth. 

• New orders for durable goods fell 0.9% from a record $270.1 billion in November to $267.6 billion in December. Sizable decreases occurred for aircraft and parts orders, which can be highly volatile from month to month. Excluding transportation equipment, new durable goods orders increased 0.4% in December. New orders have jumped 12.7% over the past 12 months, or 11.9% with transportation equipment excluded.

• Although sales for nondefense capital goods excluding aircraft—a proxy for capital spending in the U.S. economy—remained essentially flat, they also inched up from $79.031 billion in November to a new record of $79.065 billion in December.

• The IHS Markit Flash U.S. Manufacturing PMI slowed for the sixth straight month, down from 57.7 in December to 55.0 in January, the slowest pace of growth since October 2020.

• Manufacturing sentiment surveys from the Kansas City and RichmondFederal Reserve Banks were mixed in January, but both reported slower sales for the month. Companies continued to be challenged by supplier issues, as noted by reduced inventories and long vendor lead times, and prices remained very elevated. But, the outlook for the next six months remained positive.

Read Economic Report