December 6 , 2010
Seven of the 13 major indicators that came out last week improved. (To see all of last week's reports, see the Latest Economic Reports section below.)
Seven of the 13 major indicators that came out last week improved. (To see all of last week's reports, see the Latest Economic Reports section below.)
Last week's reports painted a decidedly mixed picture of the economy. While some positive momentum appears to be building on the housing front, consumer activity, while still growing, is losing some steam. There were mixed signals in the manufacturing sector as well. While the Dallas Fed's report of Texas manufacturing activity showed a noticeable improvement last month -- as did other Federal Reserve regional manufacturing reports for November -- the closely watched Institute for Supply Management's (ISM) manufacturing report showed that the pace of the manufacturing recovery slowed a bit last month. This was complemented by the surprisingly sour November employment report released last Friday.
The Labor Department's November employment report was disappointing: The economy added just 39,000 in November, down significantly from the 172,000 jobs created in October. Private-sector payrolls edged up just 50,000 in November and more than offset a decline of 11,000 government jobs (see tan and blue bars in the chart above). The anemic growth in private sector employment in November was the first increase below 100,000 in five months and the slowest upturn since the 16,000 gain in January. The job growth that did occur was mainly in temporary and healthcare services. Outside of these areas, employment growth was largely absent. As a result, the unemployment rate rose to 9.8 percent in November (the highest level since April) after hovering at 9.6 percent for three months (see black line in chart).
Manufacturing employment fell by 13,000 last month. Within the sector, employment changes were moderate: Of the industries that reduced employment, no single decline exceeded 3,000. Similarly, of the industries that increased employment, no single increase exceeded 2,000. Still, the fact that manufacturing employment fell for a fourth consecutive month in November shows that the manufacturing recovery has lost momentum. After increasing employment by 170,000 through the first seven months of the year (the largest seven-month gain in a dozen years), manufacturing employment has fallen by 56,000 since July.
Given that much of the economic growth experienced earlier in the year was driven by temporary factors such as inventory rebuilding and various federal stimulus measures, it is not too surprising that the employment recovery has moderated in recent months. Unfortunately, with businesses and consumers now facing the prospects of higher tax rates in less than a month, the chances that the recovery will weaken further are very real unless policy-makers in Washington can agree to not raise taxes.
Dave Huether
Chief Economist
National Association of Manufacturers
NAM GAINS COMMENT EXTENSION FOR OSHA'S NOISE PROPOSAL
NAM Capital BriefingIn late October, the Occupational Safety and Health Administration (OSHA) announced its intention to go outside the formal rulemaking process regarding noise abatement programs. The new interpretation elevates the standard for administrative and engineering noise controls, making them required unless an employer can sufficiently demonstrate that making such changes will put the company out of business. Given the broad economic impact of such a requirement and the difficulty of gathering relevant data from which to base a decision, the NAM requested a 90-day extension to the initial December 20 comment deadline to adequately assess the impact. On November 19, the Department of Labor's Office of the Solicitor announced that the NAM's request has been granted. This comment deadline extension will allow the NAM additional time to assess the impact of the interpretation with member companies. For more information, click here.
OVER 500 MANUFACTURERS SPEAK OUT ON EPA CLIMATE REGULATIONS
NAM Capital BriefingManufacturers demonstrated their overwhelming opposition to the Environmental Protection Agency's (EPA) efforts to regulate greenhouse gas (GHG) emissions under the Clean Air Act in a petition to the Agency on December 1. The petition, submitted in response to the EPA's Permitting Guidance for GHG Regulations, includes signatures from 576 large and small manufacturers from across the country. The NAM also submitted more lengthy comments to the Agency expressing concern with the short timeframe for stakeholder input and that states will not be ready to address GHG permitting on January 2, 2011. The comments are available here.
DEFICIT COMMISSION RELEASES BUDGET REPORT
NAM Capital BriefingOn December 1, the President's bipartisan deficit commission released a plan to balance the budget and make recommendations to improve the long-term fiscal outlook. The proposal includes significant spending cuts, comprehensive tax reform and substantial changes to Social Security and Medicare. NAM President John Engler made the following statement in response: "The nation needs sensible fiscal policies that will lead to durable economic growth and job creation. The commission's report provides a good starting point for developing policies that will strengthen our economy and overall competitiveness." The deficit panel will hold its final meeting on Friday, December 3 but it is expected that the proposal will fall short of the 18 votes required to force a vote in Congress.
ECONOMIC OUTLOOK REMAINS UNCHANGED
NAM Capital BriefingAfter falling to a record low in the first quarter of 2009 and improving over the next five consecutive quarters, the business outlook remained essentially unchanged in the third quarter of 2010 from the previous quarter. This signals that manufacturers do not expect economic conditions to improve measurably over the coming year.
Uncertainty continues to be the top reason for the manufacturing community's economic outlook, and the policies coming out of Washington are contributing to this uncertainty. The looming expiration of the lower tax rates enacted in 2001 and 2003 combined with unnecessary costs and burdens stemming from increasing government regulations have caused manufacturers to delay hiring decisions and reduce investments.
While Congress may still be able to work out an extension of the tax rates during the lame-duck session, manufacturers have to plan for potential tax increases. In addition, some of the new regulations proposed by the Administration are scheduled to go into effect in January 2011. Tax increases and additional regulations will force employers to divert resources away from job creation, expansion and investment. As a result, manufacturers only expect a moderate recovery in the near future.
Congress must act to alleviate this uncertainty so that small and medium-sized manufacturers can resume hiring, which is essential for a stronger U.S. economy.
INDUSTRY SEEKS BROAD LEGISLATIVE MORATORIUM ON EPA AIR, CLIMATE RULES
Aaron LovellNote: this model is circulating throughout the country and is being picked up some state legislatures. It could be that a lawmaker in Utah may decide to make a statement with such a resolution.
A key industry attorney is pushing model resolution language for state legislatures to adopt that calls on Congress to enact a two-year moratorium on new EPA air rules, block the agency from regulating greenhouse gases (GHGs), defund the agency’s air and climate programs and require a multi-agency study on the cumulative effects of the agency’s rules.
Peter Glaser, an attorney with Troutman Sanders who represents clients in several pending EPA rulemakings, floated the proposed resolution language Dec. 2 at a meeting of the American Legislative Exchange Council (ALEC), a group that represents conservative and free-market state legislators.
While many agency critics are pushing for Congress to block EPA from regulating greenhouse gases from stationary sources, as well as a host of air rules, Glaser’s call marks what may be the first time an agency opponent has called for a broad moratorium on any new air rule -- though the resolution does make an exception for emergency measures.
During the presentation, some audience members also suggested going even further, saying states could refuse to fund federal environmental programs, a move that would temporarily kill the programs because the agency likely lacks funds to pay states to implement them.
In his presentation to ALEC, Glaser said the upcoming air and GHG rules constituted a “regulatory train wreck” for industry with questionable benefits for the environment and potentially large costs in terms of job creation and gross domestic product.
He said there is currently a “sweet spot” for states to influence federal action and that the resolution could help “build support” among lawmakers in Washington to take action against EPA’s rules on GHG emissions and other air pollutants. “EPA needs to know Middle America is pushing back,” he added.
The proposed resolution, as provided by Glaser, would have state legislatures call on Congress to impose a “moratorium on promulgation of any new air quality regulation by EPA by any means necessary, except to directly address an imminent health or environmental emergency, for a period of at least two years, including defunding EPA air quality regulatory activities.”
The resolution also asks Congress to “adopt legislation prohibiting EPA by any means necessary from regulating [GHG] emissions, including if necessary defunding EPA [GHG] regulatory activities.”
The resolution further asks Congress to require the administration to undertake a study of the impacts of the EPA air and GHG rules on jobs, competitiveness and the economy. “This study should be a multi-agency study drawing on the expertise both of EPA and of agencies and departments having expertise in and responsibility for the economy and the electric system and should provide an objective cost-benefit analysis of all of EPA’s current and planned regulation together,” the resolution says.
Audience members, including a former director of the Michigan Department of Environmental Quality, suggested further state action could also stymie EPA efforts. The former director said that state environmental programs operate largely on behalf of the federal government and that if enough states decide not to allow funding to be spent to implement the federal policies, including state implementation plans under the air program, the moves could force EPA to reconsider the rules.
“EPA does not have the ability to run these programs,” the director said.
Other members of the audience, which was comprised largely of state politicians and officials, seemed supportive of the resolution and asked for other legislative ideas that statehouses could pursue to stop the EPA rules. Glaser said passage of the resolutions could “happen fairly quickly” and would get the legislatures on record calling on Congress to stop the rules. He said there were other steps states could take, but did not elaborate.
At the same time, ALEC is also considering model legislation to deal with a number of EPA air rules. For example, at a Dec. 1 working group at the ALEC meeting, participants considered another resolution on what constitutes best available control technology for coal-based power plants.
Glaser also said, with the Republican gains in Congress, the Congressional Review Act could also be utilized by lawmakers to more closely consider significant new rules. “I fully expect the Congressional Review Act to be one of the tools used to stop the tide of regulations -- the veto threat notwithstanding,” he said.
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