Category : Newsletter Articles

U.S. JOB OPENINGS declined
561,000 to 6.8 million in November. / BLOOMBERG NEWS FILE PHOTO/MIKE FUENTES

WASHINGTON – United States
job openings fell in November to the lowest level in almost two years,
indicating more employers see headcounts sufficient enough to meet demand.

The number of positions
waiting to be filled decreased by 561,000 to 6.8 million, the lowest since
February 2018, according to the Labor Department’s Job Openings and Labor
Turnover Survey, or JOLTS, released Friday. Openings have steadily declined
since a 2018 peak of 7.63 million.

The recent drop in open positions is consistent with moderation in both the job market and the economy. Nonetheless, openings continue to exceed the number of unemployed as the tight labor market makes it difficult to find experienced workers. Labor shortages are also evident in lower-wage industries, which has prompted employers to offer higher pay.

Total vacancies exceeded the number of unemployed by just under 1 million in November, the report showed.

A gauge of United States
manufacturing rebounded sharply in January, topping estimates and signaling
growth in the beleaguered sector for the first time since July.

The Institute for Supply
Management’s purchasing managers’ index, based on a survey of manufacturers,
increased to 50.9 in January from an almost four-year low of 47.8, according to
Monday’s data. While just above the 50 level that signals expansion, the
monthly advance was the largest since mid-2013. ISM last week revised data back
to 2012. Stocks, bond yields and the dollar extended gains after the report.

The gain – exceeding the median
projection for 48.5 – reflected sizable improvements in the orders and
production components, while the employment gauge contracted at a slower pace.
The new orders index jumped to an eight-month high of 52 and the production
gauge surged 9.5 points, also the largest gain in more than six years.

The J.P. Morgan Global Manufacturing PMI expanded for the second straight month, albeit only marginally, at 50.1 in December. More importantly, it sustained progress in the sector following six consecutive months of contraction.

Half of the top 12 markets for U.S.-manufactured goods contracted in December, down from seven in November. However, nine of these markets had lower PMI readings in December than in November. As a result, while global manufacturing activity has stabilized somewhat in the past few months, the sector remains weaker than desired.

Manufacturing employment fell by 12,000 workers in December, dropping for the second time in the past three months. In 2019, manufacturers added roughly 3,800 workers per month on average, compared to the average of 22,000 manufacturing workers created each month in 2018.

While the manufacturing sector has steadied somewhat recently, it remains weaker than desired as firms continue to grapple with slowing global growth and trade uncertainties. Eleven of the 19 major manufacturing sectors experienced reduced hiring in December. Average hourly earnings for production and nonsupervisory workers in manufacturing rose 2.8% year-over-year.

How the tariffs are set to
change:

“In exchange for China’s purchasing commitments, the Trump administration will cancel new tariffs on roughly $156 billion in Chinese imports that were set to take effect Dec. 15.”

“It has also agreed to cut in half the existing 15% tariff rate on roughly $120 billion of Chinese goods that had been imposed on Sept. 1. But tariffs will remain on roughly $360 billion of annual Chinese imports to the U.S., a majority of the Chinese goods sold in America.”

NAM President and CEO Jay
Timmons appeared on CNBC early this morning to talk about the deal. He said:

“Manufacturers are extraordinarily pleased that we have been able to complete phase one [of the trade deal] . . . The good news for manufacturers is there’s a key priority that has been addressed and that is enforceable rules regarding intellectual property theft and holding China accountable.”

“We are very pleased about that; we are looking forward to phase two because there are a lot of other issues that still have to be addressed.”

The U.S. economy grew 2.1%
at the annual rate in the fourth quarter. Global headwinds and trade
uncertainties continued to have large impacts on the underlying data, with
businesses hesitant to invest in their firms and sizable declines in exports
and imports, especially the latter.

New durable goods orders rose 2.4% in December, bouncing back after falling 3.1% in November. With that said, the latest figures are boosted by very strong defense aircraft and parts orders. Excluding transportation equipment, new orders edged down by 0.1%.

New durable goods orders have fallen 3.7% over the past 12 months, with a decline of 1.0% with transportation equipment excluded. As such, durable goods manufacturers ended the year on another disappointing note. Core capital goods spending-a proxy for capital spending in the U.S. economy-decreased 0.9% in December, but on a year-over-year basis, this figure increased 0.9%.

Private manufacturing wages and salaries rose 0.7% in the fourth quarter, up from 0.6% in the third quarter. That translated into 3.2% growth over the past 12 months, the fastest year-over-year pace of growth since the first quarter of 2002, or in nearly 18 years.

Manufacturing production rose 0.2% in December, but, overall, the data continued to reflect weaknesses for the sector in 2019. Over the past 12 months, output has declined 1.3%, with year-over-year growth negative for six straight months to end the year. Looking at annual averages, manufacturing production declined 0.2% in 2019, pulling back from the 2.3% gain seen in 2018.

There have been some signs of stabilization in other data points, especially in global markets and considering recent trade developments. My forecast for manufacturing production growth in 2020 is 0.5%. Along those lines, surveys from the New York and Philadelphia Federal Reserve Banks found expanding activity in January, beginning the year on a positive note.

Total industrial production declined 0.3% in December. Utilities output fell 5.6%, largely because there was less spent on heating costs due to warmer temperatures, pulling the headline measure lower. Overall, industrial production fell 1.0% over the past 12 months, declining on a year-over-year basis for the fourth straight month.

Job openings in the manufacturing sector fell to just 388,000 in November, the slowest pace since December 2017. Nonetheless, manufacturing job postings remained elevated over much of 2019, averaging more than 472,000 per month year to date, including the all-time high reached in June (515,000). The overall labor market remains solid, even with softer net hiring, with job openings continuing to outpace unemployment by nearly one million.

National Association of Manufacturers Chief Economist Chad Moutray, however, commented in a statement that the report marked a “rebound” for manufacturing. He said that manufacturers are now seeing slow-moving “signs of stabilization,” and urged the United States to ratify USMCA, make progress on negotiations with China, and reauthorize the Export-Import bank long-term in order to keep the stabilization “on track.”

Federal Overtime Salaried Employees Change:

Employees who make less than $35,568 are now eligible for
overtime pay under a final rule issued today by the U.S. Department of Labor
(DOL). The new rate will take effect Jan. 1, 2020. To be exempt from overtime
under the federal Fair Labor Standards Act (FLSA), employees must be paid a
salary of at least the threshold amount and meet certain duties tests. If they
are paid less or do not meet the tests, they must be paid 1 1/2 times their
regular hourly rate for hours worked in excess of 40 in a workweek. Under the
new rule, nondiscretionary bonuses and incentive payments (including
commissions) paid on an annual or more frequent basis may be used to satisfy up
to 10 percent of the standard salary level.

In addition to raising the salary cutoff for exempt workers, the new
rule raises the threshold for highly compensated employees from $100,000 a year
to $107,432 (of which $684 must be paid weekly on a salary or fee basis). The
increase is about $40,000 less than what the DOL initially proposed because it
is based on the 80th percentile, rather than the 90th percentile, of all
full-time salaried workers’ earnings nationwide.

United
States factory production rebounded by more than forecast in November and rose
excluding a surge in auto production following the end of the General Motors
Co. strike, in a sign of stabilization in manufacturing.

• The 1.1% increase in manufacturing output, the
  biggest gain since early 2018, followed a 0.7% decrease in October, Federal
  Reserve data showed Tuesday, topping the median estimate of economists for a
  0.8% gain. The increase is welcome to manufacturers, who have faced
  headwinds throughout the year including persistent trade- policy uncertainty
  and slowing global demand. Even with the gain in November, though, factory
  output fell 0.8% from a year earlier, and figures were revised lower for
  September and October, indicating that activity remains relatively subdued.
  This month’s proposed initial trade accord between the U.S. and China could
  bode well for output in 2020 if confidence improves.

Whitehouse introduced the American Business Tariff Relief Act last year to address concerns raised by Rhode Island businesses regarding the process for companies to apply for exclusions from increased tariffs.  The legislation would require the U.S. Trade Representative and the Department of Commerce to establish a process under which U.S. businesses can request exclusions from increased tariffs prior to the imposition of the new tariffs.

Whitehouse has also introduced No Tax Breaks for Outsourcing Act to level the playing field for American companies by ensuring that multinationals pay the same tax rate on profits earned abroad as they do in the United States.  The legislation would end incentives created by President Trump’s tax law to outsource jobs and shift profits offshore.

Manufacturing
employment jumped by 54,000 workers in November, bouncing back from the loss of
43,000 employees in October. Much of that volatility stemmed from the effects
of the auto strike, with motor vehicles and parts employment up 41,300 in November,
rebounding from a similar loss in the prior report.

There were 12,865,000 manufacturing workers in November, the best reading in 11 years, with 1,412,000 employees added since the end of the Great Recession. Nonetheless, manufacturing job growth has slowed to an average of just more than 5,000 additional workers per month year to date. That contrasts with the average of 22,800 manufacturing employees created each month through the first 11 months of 2018.

• The
  ISM®
  Manufacturing Purchasing Managers’ Index®
  contracted for the fourth straight month, suggesting ongoing weaknesses in
  the sector in November. While production contracted for the month, it
  stabilized somewhat in the latest data, falling at a slower rate and
  bouncing back from the worst reading since April 2009.
• New
  orders for manufactured goods rose 0.3%
  in October, but were flat with defense sales excluded. Overall, the data
  continue to highlight weaknesses in the manufacturing sector across the
  past 12 months, with global softness and trade uncertainties weighing on
  activity and factory orders down 1.2% since October 2018. On a more
  positive note, core capital goods spending—a proxy for capital spending—rose
  1.1% in October, perhaps a sign of some stabilization in the measure.

 The Institute for Supply Management® reported that manufacturing activity contracted for the fifth straight month, falling to the lowest level since June 2009. Indeed, even as other measures have shown some stabilization in the sector, the headline index from ISM® declined from 48.1 in November to 47.2 in December.

This suggested that the manufacturing sector remained weak in December, with continued sales and export challenges and only cautious optimism for the coming months, according to the sample comments in the ISM® report.

United States manufacturers expect to reduce capital spending in 2020, a trend that could limit a rebound in the sector even as companies see profits improving.

Factory
executives forecast capital expenditures will decrease 2.1% in 2020, which if
realized would be the first annual decline in 11 years, according to a
semiannual survey from the Institute for Supply Management released Monday.
That compares to a reported increase of 6.4% in 2019. Managers at
non-manufacturing firms expect a 1.3% rise next year, slower than 2019’s
increase of 2%. While the group’s monthly data show the manufacturing sector is
currently contracting, the report indicates a turnaround may begin in the first
half of 2020 and pick up later in the year. Factories remain in a fragile
position after tumbling into recession earlier this year, though concerns have
abated that the weakness will spread into the broader economy amid strong job
gains.

Even so,
companies across the economy have held off on long-term investments amid
uncertain trade policies, escalating tariffs and a moderating growth outlook.
The pullback weighed on economic growth in both the second and third quarters.

Economists are divided on whether the current hiring slowdown is a problem of supply or demand—are businesses having trouble finding enough workers, or do they simply need less of them? The Wall Street Journal’s recent survey (subscription) showed a nearly even split, though the edge went to those on the supply side. More:

• “In The Wall Street Journal’s latest survey of economists, 45.3% blamed the slowdown on the tight labor market, which has made it harder for many employers to find enough workers. An additional 37.7% of respondents said the issue was ebbing desire to expand payrolls.”
• “The first explanation would suggest the economic expansion can continue at a solid pace if more potential workers can be drawn into the labor force from sidelines.”

The Journal quotes NAM Chief Economist Chad Moutray, who highlights manufacturers’ supply problem:

• “Manufacturers have consistently cited an inability to find talent as a top concern, with some suggesting that a lack of sufficient workers has held back growth . . . . At the same time, hiring has weakened lately primarily due to global headwinds and ongoing trade uncertainties.”

Manufacturers are having trouble finding enough workers with the right skill sets, as the NAM’s quarterly outlook surveys show. The NAM and The Manufacturing Institute are working on alleviating that shortage, however, both in the short and long term.

For example, the Institute is announcing the launch of the STEM Careers Coalition with Discovery Education today, which will improve and expand STEM education in schools nationwide. The coalition’s partners include Chevron, API, Microsoft, Boeing and Best Buy. You can read more about it here.

RIMA will be offering eight-week GD&T Training starting on or about January 7^th, 2020.  The class will be led by Gene Berthiaume, Manufacturing Advisor with RIMA who has taught this class for the past 25 years to more than 300 students.  As in the past, the cost will be shared evenly between state training grants with the employer portion being $300 per student.  

This class covers 12
topics applicable in today’s manufacturing arena using lectures, group
assignments within class and homework. At its conclusion, the students
will understand each topic in detail and the correct inspection method for
each.  Student will be supplied
instruction material and supplemental worksheets.  More than likely the class will be either
Tuesday or Wednesday from 5:30 to 7:00 PM.  If there is interest in
holding the class on a Saturday morning that’s another possibility.

The class is limit to
13 students.  With the holiday’s fast
approaching, enrollment will close on December 13.  All the applications must be into Polaris by
that date. 

This is not an
introductory class to print reading but rather an
advanced application of the symbology or language
of Geometric Dimensioning and Tolerancing.  

Prior to actually
starting class, I will visit your facility to grasp an understanding of
your manufacturing business.  This will afford me the opportunity to
somewhat tailor our classroom discussions.

Vertikal6 are honored to be selected to receive the 2019 Providence Business News Business Excellence Award in the Small Business Category. This premier business awards event recognizes leadership and general excellence at private and public companies as well as non-profit organizations.  “We are so humbled to be named the “best of the best” in the small business category this year by Providence Business News. What an honor!” said Rick Norberg, Vertikal6 CEO. “Our team is like a family and are empowered to provide our clients with outstanding service every day.”