Manufacturing And Trade Sales Slip In August

The combined value of distributive trade sales and manufacturers’ shipments for August, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1.353 trillion. That is down 0.4% from July and up 4.4% from a year ago.

Manufacturers’ and trade inventories were estimated at an end-of-month level of $1.752 trillion. That is up 0.2% from July and up 5.6% from a year ago.

Both Monthly Change

Annual Change

Trade Monthly

Monthly Trade

The total business inventories-to-sales ratio at the end of August was 1.295, up from 1.287 in July. The August 2013 ratio was 1.280.

Ratios

The Emerging Services Economy

China Services

Developing countries need a new growth model. The problem is not just that they need to wean themselves from their reliance on fickle capital inflows and commodity booms, which have often left them vulnerable to shocks and prone to crises. More important, export-oriented industrialization, history’s most certain path to riches, may have run its course.

Manufacturing today is not what it used to be. It has become much more capital- and skill-intensive, with greatly diminished potential to absorb large amounts of labor from the countryside.

While global supply chains have facilitated entry into manufacturing, they have also reduced the gains in terms of value added that accrue at home. Many traditional industries, such as textiles and steel, are likely to face shrinking global markets and over-capacity, driven by demand shifts and environmental concerns. And one downside of China’s success is that many other countries are finding it much harder to establish more than a niche in manufacturing. As a consequence, developing countries are starting to de-industrialize and become more dependent on services at much lower levels of income than has been the pattern for developed countries – a phenomenon that I have called premature de-industrialization.

Are Services the New Manufactures?
Dani Rodrik

U.S. Economy Adds 248k Jobs In September

The U.S. Bureau of Labor Statistics reported this morning that 248k nonfarm payrolls were added during the month of September. This follows revised payrolls gains of 180k in August and 243k in July.

NFP

A bulk of the August job gains came in the Professional Services industry.

Payrolls This Month

The Education and Health Services industry, along with the Leisure and Hospitality and Professional Services industries, have contributed the most to the job gains over the last 8 years. Although Construction and Manufacturing employment both grew in September, theses sectors have had the most difficulty recovering from the economic downturn.

Industry Change

The household survey shows that 671k full-time jobs were added in September, while part-time employment decreased by 384k. Since November 2007, when the household survey showed peak employment, full-time jobs have decreased by 2.6 million and part-time jobs have increased by 2.6 million.

FTPT Change

Part-time employees made up 18.66% of the workforce in September, down from 18.96% in August.

All Employed

Those part-time for economic reasons, workers who would prefer to be full-time but are involuntarily part-time, as a share of those part-time for noneconomic reasons decreased to 36.3% from 37.3%.

Economic Reasons

The unemployment rate (U-3) was 5.9% in September, down from 6.1% in August. The broader underemployment rate (U-6) decreased to 11.8% from 12.0%.

Unemployment Rate

Youth unemployment continues to be volatile.

U-3 Age

Unemployment for those less than a high school diploma decreased to 8.4%.

U-3 Education

Blacks continue to experience the highest unemployment rate at 11.0%.

U-3 Race

The labor force participation rate was 62.7%, down from 62.8%, while the employment-to-population ratio was unchanged at 59.0%.

Participation

Participation among men decreased to 69.1% from 69.2% and participation among women decreased to 56.7% from 56.9%.

LFP Sex

The participation rate for prime age workers (25-54) decreased to 80.7% from 81.1%.

Participation Age

Since the total participation rate peaked in August 2008, participation has only risen in the 55+ age bracket.

Participation Change

Average weekly hours worked by production and supervisory employees were 33.7 from 33.8, while average hourly earnings were unchanged at $20.67. This decreased average weekly earnings to $696.58, up 2.6% from a year ago.

Earnings

Hours

Average duration of unemployment in September was 31.5 weeks, down from 331.7 in August and the historical high of 40.7 in 2011, but still elevated by historical standards.

Duration

Of those unemployed, 47.2% have been so for 15 weeks or longer.

Duration Distribution

Overall, this was a mixed employment report. Payrolls growth was mildly strong but with not great industry mix, the full-time/part-time split was encouragingly positive for a second month in a row, the unemployment rate declined but once again in tandem with a drop in participation, unemployment duration decreased but only marginally, and average earnings show no signs of acceleration.

The Impact Of China On U.S. Manufacturing

Assembly

The recent growth in manufacturing imports to the US is largely a consequence of China’s emergence on the global stage coupled with its deep comparative advantage in labour-intensive goods. The jobs in apparel, furniture, shoes, and other wage-sensitive products that the United States has lost to China are unlikely to return. Even as China’s labour costs rise, the factories that produce these goods are more likely to relocate to Bangladesh, Vietnam, or other countries rising in China’s wake than to reappear on US shores.

Further, China’s impact on US manufacturing is far from complete. During the 2000s, the country rapidly expanded into the assembly of laptops and cell-phones, with production occurring increasingly under Chinese brands, such as Lenovo and Huawei. Despite this rather bleak panorama, there are sources of hope for manufacturing in the United States. Perhaps the most encouraging sign is that the response of many companies to increased trade pressure has been to increase investment in innovation (Bloom et al. 2011). The ensuing advance in technology may ultimately help create new markets for US producers. However, if the trend toward the automation of routine jobs in manufacturing continues (Autor and Dorn 2013), the application of these new technologies is likely to do much more to boost growth in value added than to expand employment on the factory floor.

The rise of China and the future of US manufacturing

Manufacturing And Trade Sales Increased 0.8% In July

The combined value of distributive trade sales and manufacturers’ shipments for July, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1.360 trillion. That is up 0.8% from June and up 5.3% from a year ago.

Manufacturers’ and trade inventories were estimated at an end-of-month level of $1.750 trillion. That is up 0.4% from June and up 5.9% from a year ago.

Monthly Change

Annual Change

Total Monthly

Sales SPlit

The total business inventories-to-sales ratio at the end of July was 1.287, down from 1.291 in June. The July 2013 ratio was 1.278.

Inventory Ratio

U.S. Economy Adds 142k Jobs In August

The U.S. Bureau of Labor Statistics reported this morning that 142k nonfarm payrolls were added during the month of August. This follows revised payrolls gains of 212k in July and 267k in June.

NFP

A bulk of the August job gains came in the Professional Services and Education and Health Services industries.

Payrolls Industry

Along with Leisure and Hospitality, these 3 industries have contributed the most to the job gains over the last 8 years. Although Construction employment grew in August, it and the Manufacturing industry have had the most difficulty recovering from the economic downturn.

Industry Jobs Change

The household survey shows that 367k full-time jobs were added in August, while part-time employment decreased by 327k. Since November 2007 however, when the household survey showed peak employment, full-time jobs have decreased by 3.3 million and part-time jobs have increased by 3.0 million.

FTPT Change

Part-time employees made up 18.96% of the workforce in August, down from 19.18% in July.

Part-time Share

Those part-time for economic reasons, workers who would prefer to be full-time but are involuntarily part-time, as a share of those part-time for noneconomic reasons decreased to 37.3% from 38.2%.

PT Economic Reasons

The unemployment rate (U-3) was 6.1% in August, down from 6.2% in July. The broader underemployment rate (U-6) decreased to 12.0% from 12.2%.

Unemployment Rate

Youth unemployment continues to be volatile.

Unemployment Rate Age

Unemployment for those with a high school diploma or some college has increased in consecutive months.

Unemployment Rate Education

Blacks continue to experience the highest unemployment rate at 11.4%.

Unemployment Rate Race

The labor force participation rate was 62.8%, down from 62.9%, while the employment-to-population ratio was unchanged at 59.0%.

Labor Force Participation

Participation among men decreased to 69.2% from 69.3% and participation among women was unchanged at 56.9%.

Participation by Sex

The participation rate for prime age workers (25-54) increased to 81.1% from 80.8%.

Participation Rates Age

However, since the total participation rate peaked in August 2008, participation has only risen in the 55+ age bracket.

Participation Rates Change

Average weekly hours worked by production and supervisory employees were unchanged at 33.7, while average hourly earnings increased to $20.68 from $20.62. This increased average weekly earnings to $696.92, up 2.4% from a year ago.

Earnings Growth

Hours

Average duration of unemployment in August was 31.7 weeks, down from 32.4 in July and the high of 40.7 in 2011, but still elevated by historical standards.

Unemployment Weeks Duration

Of those unemployed, 46.8% have been so for 15 weeks or longer.

Unemployment Duration

Overall, this was not a great employment report as the number of job additions was low, but there were some silver linings: The new jobs were overwhelmingly full-time positions, the length of time people are staying unemployed is shortening, and labor force participation increased for prime age workers.

Industrial Production Increases 0.4% In July

U.S. industrial production increased 0.4% in July after having increased 0.4% in June. At 104.4% of its 2007 average, total industrial production in July was 5.0% above its level of a year earlier.

Industrial Production

Industrial Production Change

The output of manufacturing increased 1.0% in July, the output of mines increased 0.3%, and the output of utilities decreased 3.4%.

Capacity utilization for total industry increased in July to 79.2%. That is 0.9% below its long-run (1972–2013) average.

Capacity Utilization

Full table from the release:

IP Table