Or maybe not so many jobs. The most recent job report suggests that employment in manufacturing fell last month. Of course, one month does not make a trend and these numbers are often subject to large revisions. However, this report, combined with other data suggests that the pause button for manufacturing was hit. Last summer we saw a similar pattern. It is hard to say that manufacturing growth has stalled for good but that may be the case given a slowdown globally and uncertainty over where government policy is headed.
The slowdown in manufacturing reflects a slowdown in orders and demand, driven by concerns about global economic growth and future government policy. The August 2012 jobs report from the U.S. Bureau of Labor Statistics (BLS) was particularly disappointing. Manufacturing employment fell by 15,000 in August. A major contributor to the decline in August was employment tumbling in motor vehicles and parts (-8,000) which offset a gain in July. Basically, auto manufacturers laid off fewer workers for factory retooling than usual in July, and fewer workers were recalled in August. The one bright spot in the report was non-durable goods manufacturing added approximately 2,000 jobs in August. In a separate analysis, BLS also provides data on the share of manufacturing establishments across industries increasing or decreasing employment. The 1-month diffusion index for manufacturing declined to 36.4 in August from 50.6 in July. A diffusion index above 50 indicates that more manufacturing industries had increasing employment with values below 50 indicating more industries had decreasing employment. The August index is the lowest level for manufacturing since 2009.
This release confirms some other data which has pointed to softening in manufacturing. The Beige Book released in August pointed to a mixed picture for manufacturing across the Federal Reserve districts with modest growth in manufacturing jobs and demand. Most Districts reported that manufacturers were adding jobs and demand has increased for skilled manufacturing and engineering positions. Reinforcing this picture, the Institute for Supply Management’s (ISM) forward looking indicators point to lower levels of new orders, lower production and increasing inventories. In addition, the ISM export index, reinforcing the uncertainty about global economic conditions, contracted for the third consecutive month.
So, we have a muddled picture. It appears that the manufacturing engine is beginning to sputter. Is this what you are seeing in your area or in your company? Drop me a line and let me know.