Monday Economic Report - September 12, 2016

A Publication of the National Association of Manufacturers

MONDAY ECONOMIC REPORTNAM/IndustryWeek Survey of Manufactures Business Outlook by Quarter, 2012-2014

Last week served as a pause from the heavier economic releases the past several weeks, giving us some time to process recent data. For the most part, the state of the economy remains complicated, with some signs of progress but also lingering challenges keeping our optimism in check. The Federal Reserve Board was equally mixed in its assessments in its monthly Beige Book. Perhaps the best illustration of the current climate was this description of how the various Federal Reserve districts describe manufacturing activity in their regions: “Activity in the manufacturing sector was flat to slightly up in general.” That mostly speaks to the mood among manufacturers, who remain cautious in their outlook even as demand and production have improved somewhat from weaknesses earlier in the year.

Indeed, two of the most recent indicators on manufacturing—the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) data and the Bureau of Labor Statistics’ employment numbers—were both disappointing in August. The ISM report found that manufacturing activity contracted unexpectedly for the first time since February, and the Bureau of Labor Statistics’ release noted that manufacturers hired 14,000 fewer workers on net in August, with a decrease of 39,000 employees year to date. Moreover, the service sector also appeared to be growing slower in August, fueling economic anxieties. The ISM Non-Manufacturing PMI declined from 55.5 in July to 51.4 in August, its lowest level since February 2010. We hope the August figures were an outlier, with measures of the U.S. economy showing renewed signs of stabilization and improvement moving forward.

Along those lines, there were two indicators that provided some encouragement about economic growth. First, manufacturing job openings accelerated in July for the second straight month. Postings in the sector jumped from 361,000 in June to 379,000 in July, even as openings remained below the all-time high of 397,000 in April. We have continued to see relatively healthy gains in manufacturing job openings, giving us optimism for faster hiring growth moving forward. Net hiring was also positive for the second consecutive month following four straight months of declines, but as noted earlier, actual job growth—beyond openings—indicates a lot of room for improvement. Moreover, nonfarm job openings in the larger economy hit a new all-time high, up from 5,643,000 in June to 5,871,000 in July. This was enough to beat the previous all-time high set one year ago.

The other reassuring element would be consumer spending, with Americans more willing to make purchases after holding back somewhat earlier in the year. U.S. consumer credit outstanding rose 5.8 percent at the annual rate in July, or 6.0 percent over the past 12 months. Revolving credit, which includes credit cards and other credit lines, increased 5.9 percent year-over-year. That is notable because the pace of growth has accelerated across the past 12 months, up from 3.8 percent year-over-year growth in July 2015. That mirrors stronger retail and personal spending reports of late, and it would seem to indicate an increased willingness to use credit cards when making purchases.

Turning to this week, we will be looking for signs of continued progress with the release of August industrial production figures on Thursday. This is particularly true after manufacturing production rebounded in July. September surveys from the New York and Philadelphia Federal Reserve Banks will provide additional detail on demand and shipments from a regional perspective. Along those lines, the NAM will release the latest findings of its Manufacturers’ Outlook Survey, including special questions on the Federal Reserve, capital spending, regulations and trade. Other highlights this week include new data on consumer confidence, producer prices, retail sales and small business optimism.

Chad Moutray, Ph.D., CBE
Chief Economist
National Association of Manufacturers

Economic Indicators

Last Week's Indicators (Summaries Appear Below)

Monday, September 5
LABOR DAY HOLIDAY

Tuesday, September 6
None

Wednesday, September 7
Federal Reserve Beige Book
Job Openings and Labor Turnover Survey

Thursday, September 8
Consumer Credit

Friday, September 9
Wholesale Trade

This Week's Indicators

Monday, September 12
None

Tuesday, September 13
NAM Manufacturers’ Outlook Survey
NFIB Small Business Survey

Wednesday, September 14
None

Thursday, September 15
Industrial Production
New York Fed Manufacturing Survey
Philadelphia Fed Manufacturing Survey
Producer Price Index
Retail Sales

Friday, September 16
University of Michigan Consumer Sentiment

Summaries for Last Week's Economic Indicators

Consumer Credit
The Federal Reserve Board reported that U.S. consumer credit outstanding rose 5.8 percent at the annual rate in July. Total consumer credit was $3.661 trillion, with $969.0 billion in revolving credit and $2.692 trillion in nonrevolving credit. Across the past 12 months, consumer credit has increased 6.0 percent, with roughly equal gains for both revolving and nonrevolving credit lines.

Nonrevolving credit, which includes auto and student loans, increased 6.1 percent over that time frame. In addition, revolving credit, which includes credit cards and other credit lines, increased 5.9 percent year-over-year. That is notable because the pace of growth has accelerated across the past 12 months, up from 3.8 percent year-over-year growth in July 2015. That mirrors stronger consumer spending data of late. As such, Americans are more willing to use their credit cards when making purchases, moving on from some of the caution we saw earlier in the year.

Job Openings and Labor Turnover Survey
The Bureau of Labor Statistics reported that manufacturing job openings accelerated in July for the second straight month. Postings in the sector jumped from 361,000 in June to 379,000 in July, even as openings remained below the all-time high of 397,000 in April. Through the first seven months of 2016, job openings have averaged 354,000 per month, up from 311,000 for 2015 as a whole. As such, we have continued to see relatively healthy gains in manufacturing job openings, giving us optimism for faster hiring growth moving forward. In the July data, the increase in job openings stemmed from a pickup in activity for durable goods firms (up from 200,000 to 227,000), whereas postings for nondurable goods entities declined for the third straight month (down from 160,000 to 152,000).

Meanwhile, net hiring was also more encouraging, with positive growth for the second consecutive month following four straight months of net declines. This was true in July despite declines in both hiring (down from 281,000 to 274,000) and separations (down from 264,000 to 258,000). Hiring increased for durable goods firms (up from 161,000 to 167,000), but this was offset by reduced hiring among nondurable goods manufacturers (down from 119,000 to 106,000). At the same time, total separations, which include quits, layoffs and retirements, fell to a 12-month low. Overall, net hiring (or hiring minus separations) equaled 16,000 in July, off slightly from 17,000 in June.

In the larger economy, nonfarm job openings hit a new all-time high, up from 5,643,000 in June to 5,871,000 in July. This was enough to beat the previous all-time high set one year ago. Job postings were mostly higher across the board, with the exception of reduced openings in the month for health care and social assistance, information, real estate services and state and local government. Beyond openings, net hiring in the overall economy remained elevated, rising from 208,000 in June to 290,000 in July.

Questions or Comments?

Contact Chief Economist Chad Moutray at cmoutray@nam.org.

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