Year ends on down note for manufacturing, but employment sees good gains

ChallengeThe close of 2018 was a mixed bag for manufacturing. The Institute for Supply Management’s December Purchasing Management Index (PMI) survey revealed economic activity in the manufacturing sector fell 5.2 percentage points to 54.1 from November’s PMI of 59.3%. (Numbers above 50 indicate a growing trend while those below 50 show a contraction.)

The New Orders Index was particularly interesting, falling 11.0% in December from 62.1% in November to 51.1% in December. The Production Index also fell, down 6.3% in December to 54.3 from a strong November of 60.6%. Order Backlog was also impacted, falling 6.4% in December to 50.0%—on the cusp of contracting—from 56.4% in November.

While the report might seem to be negative, the news isn’t really all that bad. December tends to be a laggard month for several reasons: Holiday shutdowns impact productivity numbers and new orders tend to be slower because many companies haven’t released new budgets for the next year.

However, there are a few new stumbling blocks facing manufacturers, including uncertainties surrounding China's economic outlook, as well as the unsettled tariff battle. Trade is certainly casting a shadow of doubt on manufacturing.

That didn’t seem to put a damper on employment, though, which was a bright spot in the PMI, released Jan. 3, 2019: Unemployment fell by just 2.2% to 56.2% from November’s 58.4%.  

In a press release from the Alliance for American Manufacturing, President Scott Paul acknowledged the 32,000 new factory jobs added in December in the latest report from the Bureau of Labor Statistics as the result of trade enforcement. “December was another great month for manufacturing. With 32,000 new jobs last month, tough action against trade cheats is helping create new jobs for American workers,” Paul stated. “The 116th Congress must keep this growth in mind and support policies that will strengthen this trend, such as robust infrastructure investment. With more manufacturing jobs, communities throughout the country grow,” Paul added.

Image courtesy freshidea/Adobe Stock.

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