Manufacturing Forges Ahead, Despite Head Winds
Despite incredible headwinds the manufacturing industry in the US continues to produce and to set records.
Manufacturing employment jumped by 60,000 in October, and total employment in the sector has risen 298,000 year to date in 2021, putting it on track for the best annual job growth since 1997.
The average hourly earnings of production and nonsupervisory workers in manufacturing rose to $24.22 in October, with a 5.4% increase over the past year, the fastest wage growth since August 1982.
Nonfarm payroll employment increased by 531,000 in October, and the unemployment rate dropped to 4.6%
Demand cooled somewhat but remained solid. Supply chain disruptions, logistics challenges, workforce shortages and soaring costs have dampened demand.
New orders for manufactured goods rose 0.2% to a record $515.9 billion in September, albeit at a slower pace. Excluding transportation equipment, manufacturing orders increased 0.7% in September. Overall, the manufacturing sector continues to expand strongly—despite significant challenges—with new orders soaring 10.2% year to date.
Private manufacturing construction spending declined 1.6% to $72.42 billion in September, falling to a five-month low. While construction activity in the manufacturing sector has risen 4.7% year-over-year, spending remains 4.9% below the $76.16 billion in activity recorded in February 2020.
The U.S. trade deficit rose from $72.81 billion in August to a record $80.93 billion in September. Goods exports fell sharply for the month, with goods imports rising. The volatility in the September data likely stemmed from ongoing supply chain difficulties, including the chip shortage. Growth in goods imports has outpaced the increase in goods exports year to date.
More positively, U.S.-manufactured goods exports totaled $831.87 billion through the first nine months of 2021, soaring 18.80% from $700.24 billion year to date in 2020.
As expected, the Federal Open Market Committee has decided to start tapering its asset purchases later this month. The Federal Reserve has been purchasing as much as $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities each month since the beginning of the pandemic. It will start scaling that back by $15 billion in November, another $15 billion in December, and so on, likely ending these purchases entirely by mid-2022.
The FOMC kept the federal funds range of zero to 25 basis points, also as predicted. It is not likely to shift its interest rate policy until mid-2022, contingent on incoming economic data.