January jobs, ISM reports show continued manufacturing growth

In the face of economic slowdown fears, 2019 is off to a better-than-expected start for employment growth.

January’s jobs report released on Friday by the Bureau of Labor Statistics (BLS) revealed that U.S. companies added around 304,000 jobs last month and average hourly wages grew 3.2 percent for private-sector workers from one year ago. The unemployment rate rose to 4 percent mostly due to the record-long partial government shutdown.

The manufacturing industry as a whole created 13,000 jobs in January with the durable goods sectors contributing to an additional 20,000 jobs (nondurable good decreased by 7,000).

This coincided with positive numbers from the January 2019 Manufacturing ISM (Institute for Supply Management) Report on Business, which registered a 56.6 percent PMI (Purchasing Managers’ Index). That’s a 2.3 percent increase from December and the 117th straight month of overall economic growth.

ISM also reported significant gains in new orders (58.2 percent, a nearly 7 percent increase from the previous month) and production (60.5 percent, a 6.4 percent bump from December).

Metal-working sectors benefited from manufacturing expansion. Of the 18 industries responding on the ISM report, 14 registered growth, including those in fabricated metal products and primary metals.

“It’s going to be a very strong spring,” said one anonymous representative from the fabricated metal products segment. "Business levels will be just as good [compared to] the same time frame in 2018.”

That's also reflected on a narrowed regional scope. The Mid-American Economy's monthly report from Creighton University, which tracks and surveys supply managers in Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota, reported its highest index level (56) since September. It was also the 26th consecutive month of the index remaining above the neutral 50. The region's job expansion was also noteworthy with a strong employment index of 58.5, a significant increase from 50 in December.

Ernie Goss, director of Creighton University’s Economic Forecasting Group and the Jack A. MacAllister Chair in Regional Economics in the Heider College of Business, points to the area's positive growth pace against mounting skills gap and tariff/international trade tensions.

“Overall manufacturing employment growth in the region over the past 12 months has been very healthy at 2.4 percent, compared to a lower 2.3 percent for the U.S,” said Goss. “I expect this gap to close in the months ahead as regional job growth slows faster than national manufacturing job growth. Regional job growth for durable goods producers has been approximately three times that of nondurable goods manufacturers over recent months.”

With this continuous upward trend in manufacturing employment, the industry stands out as one of the U.S. economy's best storylines says National Association of Manufacturers (NAM) Chief Economist Chad Moutray.

“This report shows that manufacturers are keeping their promise to hire more workers and raise wages in the wake of tax and regulatory reform,” said Moutray. “Additional action on key priorities, such as approving the USMCA (United States-Mexico-Canada Agreement), will give manufacturing the confidence and certainty it needs to continue the strong growth of the past two years.”

But January’s ISM report also indicated a decline in deliveries (56.2 percent, a 2.8 percent drop from December) and an uptick in inventories (52.8 percent, a 1.6 percent bump from the previous month). The prices index (49.6 percent) also dipped 5.3 percent from December’s 54.9 percent. The drop indicates that raw material prices have lowered for the first time in almost three years.

ISM Manufacturing Business Survey Committee Chair Timothy Fiore says January’s data shows that manufacturing continues to expand despite weak growth in December, but the fluctuation in prices and inputs indicate alternation in supply chain constraints.

“Comments from the panel reflect continued expanding business strength, supported by strong demand and output,” said Fiore. “Demand expansion improved with the New Orders Index reading returning to the high 50s, the Customers’ Inventories Index remaining too low, and the Backlog of Orders remaining at a near-zero-expansion level. Consumption continued to strengthen, with production expanding strongly and employment continuing to expand at previous-month levels. Inputs — expressed as supplier deliveries, inventories and imports — continued to improve, but are negative to PMI expansion. Inputs reflect an easing business environment, confirmed by Prices Index contraction.”