The unemployment rate remained near 50-year lows, even after inching up from 3.5% to 3.6%. Encouragingly, the rise in the unemployment rate stemmed from an acceleration in the labor market participation rate, up from 63.2% to 63.4%, the best reading since June 2013. Nonfarm payrolls increased by a solid 225,000 in January.
Yet, manufacturing employment fell by 12,000 workers in January, dropping for the third time in the past four months. Indeed, over that four-month time frame, hiring in the sector was essentially stagnant. That suggests that, while there have been some signs of stabilization in other indicators, manufacturing job growth has lagged that progress. We still expect to see improvements moving forward, especially considering greater trade certainty and some economic progress globally.
Along those lines, the Institute for Supply Management® reported that manufacturing activity rebounded, up from 47.8 in December to 50.9 in January, starting 2020 off on a stronger note after contracting for five straight months at the end of 2019.
New orders for manufactured goods rose 1.8% in December, skewed by significant gains for both defense aircraft and parts and ships and boats. Excluding defense sales, orders fell 0.6%. New orders for core capital goods-a proxy for capital spending in the U.S. economy-declined 0.8% in December. Nonetheless, core capital goods spending has risen 0.9% over the past 12 months, the best year-over-year reading since June.
The bulk of the sentiment surveys and economic data described below predate recent worries about the novel coronavirus outbreak. Manufacturers in the United States and elsewhere are experiencing production disruptions and lost sales.
Nonetheless, the J.P. Morgan Global Manufacturing PMI expanded for the third straight month, rising to a nine-month high. Respondents were also the most upbeat in their assessments for future output since August 2018.
Eight of the top 10 markets for U.S.-manufactured goods experienced stronger manufacturing activity in January than in December, continuing the stabilization trend seen in recent months.
After more than three years of work, manufacturers began 2020 by focusing on the following issues:
1. Applauding final U.S. government approval of the United States-Mexico-Canada Agreement, with full implementation expected later this year
2. Welcoming signing of a “Phase One” U.S.-China deal while urging that intensive talks continue on the many remaining issues as part of a broader bilateral trade agreement
3. Working to ensure that the seven-year reauthorization of the U.S. Export-Import Bank is fully utilized by manufacturers across the country
4. Manufacturers remain focused on several other important trade priorities:
5. Moving forward a positive agenda at the critically important World Trade Organization
6. Securing a strong Miscellaneous Tariff Bill in 2020 to eliminate tariffs on products not produced or available in the United States
7. Monitoring congressional activity relating to sanctions:
- Manufacturing production edged down 0.1% in January after inching up by 0.1% in December. Overall, the data continued to reflect weakness in the sector, even as activity has stabilized somewhat in the past three months. Over the course of the past 12 months, manufacturing production has declined 0.8%, up from 1.3% year-over-year in the previous release.
- Nonetheless, my forecast for manufacturing production growth in 2020 is currently 0.5%, representing some progress from essentially stagnant average annual growth in 2019.
- Job openings in the manufacturing sector weakened once again. They went down from 381,000 in November to 360,000 in December, the slowest pace since May 2017. Despite softer data at the end of the year, manufacturing job postings remained elevated over much of 2019, averaging more than 462,000 per month, including the all-time high reached in June (515,000).