Monday Economic Report: The ISM® Manufacturing Purchasing Managers’ Index® Rose

Manufacturing employment rose by 18,000 in May, the weakest monthly increase in 13 months. Despite some softening, as well as significant ongoing challenges with supply chain disruptions, workforce shortages and soaring costs, hiring in the sector has remained robust. Through the first five months of 2022, the sector hired 213,000 employees, building on the 365,000 workers added in calendar year 2021, the most since 1994. Currently, the manufacturing sector has 12,768,000 employees, with 17,000 fewer workers today relative to February 2020. Manufacturing employment is on track to return to pre-pandemic levels in the next month or two. The average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.4% to $24.94 in May, up 5.5% from one year ago. The year-over-year pace of wage growth edged down from 5.7% in March and April, which had been the fastest pace since August 1982.  Meanwhile, nonfarm payroll employment increased by 390,000 in May, averaging a solid 408,000 over the past three months. The unemployment rate remained at a post-pandemic low of 3.6%, and the labor force participation rate ticked up from 62.2% to 62.3%. April’s report recorded 996,000  manufacturing job openings,  a new all-time high. Over the past 12 months, job openings in the sector have averaged nearly 877,250. The number of job postings continued to be well above pre-pandemic levels, as companies ramped up activity and looked for more workers to meet the additional capacity.  In the larger economy, nonfarm business job openings remained highly elevated, although they pulled back from a record 11,855,000 in March to 11,400,000 in April. The April report also documented 5,941,000 unemployed Americans, which translated into 52.1 unemployed workers for every 100 job openings in the U.S. economy, not far from March’s record (50.2). The  ISM® Manufacturing Purchasing Managers’ Index®  rose from 55.4 in April to 56.1 in May, continuing to expand modestly and reflecting resilience in the sector despite numerous economic hurdles. Cost pressures remained highly elevated but decelerated slightly in May. New orders for manufactured goods  rose 0.3% to a record $533.2 billion in April, slowing from the 1.8% gain seen in March but continuing to reflect expanding demand. New factory orders have soared 14.0% year-over-year, or 12.4% with transportation equipment excluded. Private manufacturing construction spending  rose 1.6% to $96.36 billion at the annual rate in April. Private construction activity in the sector has trended strongly higher since bottoming out at $65.92 billion in December 2020. In contrast to some of those measures, overall assessments about economic conditions in the Dallas Federal Reserve Bank’s district  declined  in May for the first time since July 2020. The sample comments noted challenges with supply chain disruptions, workforce shortages and inflation. Responses were conflicted in terms of sales growth, with some citing continued strength while others noted some slowing. Consumer confidence  ticked down from 108.6 in April to 106.4 in May, a three-month low, according to the Conference Board. Americans felt less upbeat in their assessments of the current and future economic environment in May, with consumers remaining anxious about inflation and “a perceived softening in labor market conditions.” READ FULL REPORT