This morning, the Bureau of Labor Statistics reported that nonfarm payroll employment rose by just 54,000 in May, its slowest pace in 8 months. The April nonfarm payroll numbers were also revised down slightly, with a gain of 232,000 (instead of 244,000) new jobs. The unemployment rate in May rose from 9.0 to 9.1 percent. Manufacturing employment dipped by 5,000, and with the accompanying revisions, we can now say that manufacturers have increased employment only by 243,000 since December 2009.
Today’s report clearly indicates that rising raw material and energy prices are taking a toll on the economy, particularly when you look at the sectors which are hardest hit. While overall manufacturing output continues to grow, there are definitely reasons for caution ahead.
Digging deeper into the manufacturing numbers, employment changes in durable goods industries gained 8,000 jobs on net, while nondurables lost 13,000.
Employment gains in sectors such as fabricated metal products (+6,500), machinery (+5,500), primary metals (+3,100), and furniture and related products (+2,200) were offset by losses in sectors such as transportation equipment (-8,800), food manufacturing (-7,000), printing and related support activities (-4,300), and paper and paper products (-2,500).
Average weekly hours in manufacturing remained relatively stable, going from 40.8 hours in April to 40.9 hours in May, with 3.2 hours of overtime on average in each month. Meanwhile, average weekly earnings also edged higher for manufacturing workers, up from $953.04 in April to $961.41 in May.
Other sectors in the economy were mixed. Some areas of strength include professional and business services (+44,000), health care (+17,000), transportation and warehousing (+8,000), and mining (+7,000). There was continued weakness in the following sectors, however: local government (-28,000), retail trade (-8,500), and leisure and hospitality (-6,000). Most of the other major sectors remained largely unchanged.
An important point to note is that the durable goods sector, with the exception of transportation, did relatively well, which we hope is a good sign moving forward. However, the uncertainty of the policies coming from Washington continues to weigh heavily on manufacturers.
Chad Moutray is chief economist, National Association of Manufacturers.