NAM: Monday Economic Report
Several reports out last week reflect a bounce back in activity, which is encouraging and another sign that the worst of the downturn might be behind us. Yet, the data also suggest that there is still a long way to go to get back to pre-recessionary levels.
After declining 5.3% and 15.5% in March and April, respectively, manufacturing production rebounded somewhat, rising 3.8% in May. On a year-over-year basis, manufacturing production has declined 16.5%, with durable and nondurable goods output down 23.3% and 9.2%, respectively. Manufacturing capacity utilization was 60% in April, the lowest rate in the data’s history, which dates to January 1948, and in May, it edged up to 62.2%. It was 75.1% in February.
Regional manufacturing surveys from the New York and Philadelphia Federal Reserve Banks reflect some stabilization in new orders and shipments in the sector after plummeting in the prior two months, even as hiring remained weak in both districts. Manufacturers feel optimistic for continued expansion over the next six months.
Consumer spending at retailers jumped 17.7% in May, rebounding strongly after declining 8.2% and 14.7% in March and April, respectively. This suggests that Americans returned to stores to make purchases after stay-at-home orders sent sales plummeting. Even with solid growth in May, retail sales have fallen 6.1% over the past 12 months, with a decline of 3.9% year-over-year excluding automobiles and gasoline.
After declining to the slowest pace since February 2015 in April, new residential construction rose 4.3% in May, with the housing market stabilizing somewhat. On a year-over-year basis, new housing starts have dropped 23.2% from 1,268,000 units in May 2019, with single-family and multifamily activity down 17.8% and 33.1% over the past 12 months, respectively.
Meanwhile, housing permits jumped by an annualized 14.4% to 1,220,000 units in May. Since permits are a proxy of future activity, the data are encouraging, providing some cautious optimism that the housing market will continue to recover over the coming months. Builders feel more upbeat in their expectations for single-family sales over the next six months, particularly with mortgage rates hitting an all-time low last week.
The labor market has steadied somewhat, but the data continue to reflect significant economic hardships for many Americans, with historically elevated rates of unemployment nationally and in most states.
Initial unemployment claims decelerated for the 11th straight week, but with 1,508,000 claims for the week ending June 13, the pace remains frustratingly high. For the week ending June 6, there were 20,544,000 Americans receiving unemployment insurance, or 14.1% of the workforce.
With the motor vehicle sector coming back online, Michigan created the most net new manufacturing jobs in May, adding 33,700 workers. Yet, it was also among the states experiencing the greatest declines in manufacturing employment since the recession began in February.
Nevada had more than one-quarter of its workforce (25.3%) unemployed in May, the highest in the country but down from 30.1% in April. At the other end of the spectrum, Nebraska (5.2%) had the lowest unemployment rates nationally in May.