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.