NAM: Monday Economic Report
Manufacturing production rebounded for the third straight month, rising by 3.4% in July. Despite progress over the past few months, output in the sector has fallen 7.7% year-over-year, with durable and nondurable goods output down 9.3% and 5.4%, respectively. Manufacturing capacity utilization rose 69.2% in July, although that is still down from 75.2% in February.
There were 336,000 manufacturing job openings in June, up from 306,000 in May, which had been the slowest pace since October 2016. Overall, job postings have drifted significantly lower over the past year—a trend that began before the COVID-19 pandemic. For instance, there were 486,000 and 360,000 job openings in the sector in June 2019 and December 2019, respectively.
Consumer spending at retailers rose 1.2% in July, slowing from 18.3% and 8.4% gains seen in May and June, respectively. More importantly, it was the third straight monthly increase in consumer purchasing after stay-at-home orders sent sales plummeting in the spring. Excluding automobiles, retail sales rose 1.9% in July. Retail spending has risen by a modest 2.7% since July 2019.
Moving forward, the August retail sales data will be closely watched, particularly with the expiration of the Federal Pandemic Unemployment Compensation program and the implementation of the president’s new, $400 per week in Lost Wages Assistance to certain unemployed or underemployed workers. Also, the continued spread of COVID-19 has led to renewed restrictions and closures in some areas of the country.
Initial unemployment claims fell below one million claims for the first time since mid-March—a pace that remains highly elevated, illustrating continuing pain in the labor market. There were 15,486,000 Americans receiving unemployment insurance for the week ending Aug. 1, or 10.6% of the workforce.
For its part, the Index of Consumer Sentiment from the University of Michigan and Thomson Reuters edged slightly higher in preliminary August data but remained well below prepandemic levels, suggesting that consumers remain more anxious about economic conditions than we would prefer.
Manufacturing labor productivity fell 15.5% at the annual rate in the second quarter, the largest decline on record since the data series began in 1987. With the U.S. economy grappling with the economic impacts of COVID-19, output plummeted at unprecedented levels, down by a sharp annualized 47% for the quarter.
Consumer and producer prices both jumped 0.6% in July, with costs bouncing back after experiencing declines in the spring due to COVID-19 and pullbacks in economic activity. Yet, pricing pressures remain in check for now, especially on a year-over-year basis.
The Federal Reserve is more worried about propping up the economy right now, and it continues to pursue extraordinary measures to stimulate growth—a stance that is unlikely to change for the foreseeable future.