NAM: Monday Economic Report
Manufacturing employment fell by 2,000 workers in September, and it has slowed considerably year to date, with the sector averaging roughly 4,500 new workers per month so far in 2019 relative to the more robust average of almost 22,000 per month in 2018. This mirrors other data, including production and sentiment numbers, which show manufacturing activity slowing due to weaker global growth and ongoing trade uncertainties.
With that said, there were 12.85 million employees in manufacturing in September, pulling back just slightly from nearly an 11-year high. Moreover, firms continue to cite difficulty in obtaining talent as a top concern, with record-high levels of job openings.
In the larger economy, nonfarm payrolls increased by 136,000 in September. Meanwhile, the unemployment rate fell to 3.5 percent, the lowest since December 1969, and the so-called “real unemployment” rate fell to 6.9 percent, a rate not seen since December 2000.
The Institute for Supply Management’s® Manufacturing Purchasing Managers’ Index® plummeted to the weakest reading in 10 years. The composite index dropped from 49.1 in August to 47.8 in September, contracting for the second straight month and the lowest point since June 2009.
In the ISM® release, the index for exports contracted sharply, falling from 43.3 to 41.0, a level not seen since March 2009. New orders, production and employment also contracted for the month. Hiring, which had been a strong point among manufacturers, declined at the fastest rate since January 2016.
New orders for manufactured goods edged down 0.1 percent in August. Over the past 12 months, factory orders have fallen 1.9 percent, or a decline of 0.4 percent year-over-year with transportation equipment excluded. In addition, core capital goods orders—a proxy for capital spending—declined 0.4 percent year-over-year, illustrating weaknesses in the U.S. economy not seen in nearly three years.
On a regional level, the Dallas Federal Reserve Bank reported a slight expansion of manufacturing activity in September, but the forward-looking measures and sample comments made it clear that respondents feel cautious about the months ahead.
Private manufacturing construction spending rose 0.5 percent in August, with a modest increase of 1.6 percent year-over-year. In the larger economy, total private construction spending was flat in August, but private residential construction increased 0.9 percent for the month. The latter was likely boosted by reduced mortgage rates, which have helped to produce some rebounds in a housing market that has struggled mightily over the past year or so.
The U.S. trade deficit increased from $54.04 billion in July to $54.90 billion in August. In non-seasonally adjusted data, U.S.-manufactured goods exports have fallen 2.49 percent through the first eight months of 2019 relative to the same period in 2018. This suggests that international demand for U.S.-manufactured goods has weakened in the first half of this year after experiencing better data in both 2017 and 2018.