NAM: Monday Economic Report
Manufacturing job openings soared to 706,000 in March, a new record. Business leaders in the sector need to ramp up production, capacity and staffing in light of robust demand, the reopening of the U.S. and global economy and the very strong economic outlook for the coming months. As a result, job postings have risen to stratospheric levels. These data offer an encouraging sign that manufacturers feel confident enough about economic growth over the coming months for their businesses to post new jobs.
Nonfarm business job openings jumped to 8,123,000 in March, also a new record. There are currently 1.20 unemployed workers for every one job opening in the U.S. economy. In addition, nonfarm payroll quits rose to a pre-pandemic high, and quits in the manufacturing sector—an important measure regarding “churn” in the labor market—was the most since January 2001.
The National Federation of Independent Business reported that 44% of respondents had job openings that they were unable to fill in April, a new record, with workforce challenges once again being the top “single most important problem.”
Manufacturing production rose 0.4% in April, extending the 3.1% gain in March. Excluding motor vehicles, which plummeted 4.3% due to supply chain challenges, manufacturing production increased 0.6% in April.
Since February 2020, output in the manufacturing sector is down 1.7% from pre-pandemic levels. I continue to expect manufacturing production to be back to pre-pandemic levels by July.
After retail sales soared by 10.7% in March, fueled by stimulus payments and pent-up demand, consumer spending was flat in April. Excluding motor vehicles and parts, which increased by 2.9%, retail spending fell 0.8% for the month.
Despite a disappointing reading, it is important to note that the sharply higher increases in March were largely sustained moving into April, even without additional stimulus. More importantly, retail sales should continue to grow strongly over the coming months as the U.S. economy continues to reopen.
For what it is worth, retail sales have increased a robust 17.9% since February 2020, or since the pandemic began, or 14.7% with motor vehicles and gasoline excluded.
Consumer confidence declined from 88.3 in April to 82.8 in May, a three-month low, according to preliminary data from the University of Michigan and Thomson Reuters. Americans felt less upbeat in their assessments of both current and future economic conditions, largely on worries about inflation. The expected increase in prices was the largest in a decade in the survey, and accordingly, real income expectations were also weaker.
Consumer and producer prices increased sharply in April. The year-over-year paces both set new records. Even adjusting for “base effects” by looking at the changes in costs since February 2020, it is clear that pricing pressures have accelerated very significantly, exacerbated by supply chain constraints and shortages related to the reopening of the economy.
Manufacturing leaders continue to cite supply chain disruptions as a key challenge. With that in mind, the jump in raw material prices was not a surprise. A fair number of these increases will be transitory, but there is also a worry that cost pressures will not abate, particularly given the strength of the rebounding economy.
That will put pressure on the Federal Reserve and its stance of keeping rates near zero with aggressive bond-buying for the foreseeable future. If cost pressures are less transitory than the Federal Reserve believes, the shift toward normalization could be sooner.