Americans received a number of good economic reports last week. On the all-important topic of jobs, the unemployment rate fell to 8.6 percent – its lowest level since March 2009 – with 120,000 net employees hired in the month of November. This unemployment rate was much lower than many analysts had forecast, which could be due in part to an increase in discouraged workers. Nonetheless, much of the employment news was positive. For manufacturers, though, the latest news also suggests that jobs in the sector continue to grow more slowly, with an increase of just 2,000 for the month.
I believe that the manufacturing jobs picture will improve as we move into 2012. A number of areas of activity have improved in recent months, and employment – a lagging indicator – will soon follow. The Federal Reserve Board's Beige Book noted that manufacturers mostly saw increases in new orders, shipments and production, with a few exceptions. This trend also was observed in various regional sentiment surveys, including ones from Chicago and Dallas released last week. Most importantly, these same studies suggest higher confidence over the coming six months, including additional hiring and capital spending.
The Institute for Supply Management reinforced this, with its Purchasing Managers' Index increasing to 52.7 in November. New orders and production were the biggest contributors to this rise, and exports edged higher. The index for employment grew at a slower pace – consistent with the Bureau of Labor Statistics (BLS) data released the next day. At the same time, BLS also revised its estimates for productivity growth for the third quarter of this year. Manufacturers had a 5 percent increase in labor productivity for the quarter, which was twice what the overall economy experienced, and the durable goods sector's productivity jumped by 9.5 percent. This helps to keep unit labor costs in check from a competitive standpoint, but it also suggests that manufacturers will need to increase their hiring if these rates of output and productivity growth continue.
In announcing higher consumer confidence numbers, Lynn Franco of the Conference Board said, "Consumers appear to be entering the holiday season in better spirits…." Indeed, holiday spending to date has been impressive, and it is notable that nearly 50,000 of the net new jobs in the month of November were in the retail sector. (Although this could also suggest some temporary hires.) Workers are more upbeat than in past months, and they are spending. It is also true that this optimism remains a cautious one. Consumer confidence has risen, but it remains low. Moreover, the public is closely following the events in Washington, D.C., and Europe with tremendous anxiety.
This week, we will release the results from the latest NAM/IndustryWeek Survey of Manufacturers. Thank you for taking the time to complete it. In addition, we will receive new export figures from the U.S. Department of Commerce on Friday.
Chad Moutray
Chief Economist
National Association of Manufacturers
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