NAM: Monday Economic Report
Manufacturers added 26,000 workers in July, slowing from gains of 240,000 and 357,000 in May and June, respectively, but still a solid increase. Despite the increases seen over the past three months, however, manufacturing employment was down by 740,000 in July relative to the level seen in February, illustrating the steep climb still needed to get back to prepandemic levels.
The U.S. economy added 1,763,000 workers in July, but the nonfarm sector has lost 12,881,000 jobs since February. The unemployment rate declined from 11.1% in June to 10.2% in July.
The current outlook is for manufacturing employment to bounce back to roughly 12,450,000 million workers by year’s end, with an unemployment rate around 9%.
The Institute for Supply Management® reported that manufacturing activity continued to rebound in July, expanding at the fastest pace since March 2019. The headline index was buoyed by strong growth for new orders and production, both of which had their best readings since autumn 2018. Employment remained weak, though, continuing to decline significantly.
New orders for manufactured goods increased 6.2% in June, extending the 7.7% gain in May, as the sector tries to recover from severe COVID-19 disruptions in March and April. Durable and nondurable goods sales rose 7.6% and 5.0% in June, respectively. Yet, new factory orders have fallen by a sharp 10.6% since June 2019.
The U.S. trade deficit declined from $54.80 billion in May, the highest point since December 2018, to $50.70 billion in June, with growth in goods exports rising faster than goods imports. Yet, U.S.-manufactured goods exports were off 17.17% year-to-date in 2020 relative to activity in the first half of 2019.
After declining for six straight months, private manufacturing construction spending rose 1.7% from $70.86 billion in May to $72.07 billion in June. However, activity has fallen 9.1% year-over-year.
We will be watching several key indicators this week, including updates on consumer and producer prices, industrial production, job openings and retail sales, among others. Manufacturing production was 11.1% lower in June than in February, and we will be looking for the sector to increase output in July. However, the sector still has a large gap to overcome to get back to the pace seen before the COVID-19 pandemic.