Federal Reserve Reports Manufacturing Activity is Up — A Sign for Friday’s Jobs Report?

Posted by elizabethbb on 06/05/2014

There’s some good news out of the Federal Reserve this week.

Manufacturing activity expanded nationwide over the past two months, especially in districts located along the East Coast, according to the Fed’s latest Beige Book survey. Released Wednesday, the survey reports that manufacturing activity is up in all 12 districts, most notably in areas where vehicle, aerospace, and metals manufacturing is taking place.

According to the Fed, activity “expanded robustly” in the Boston, New York, Atlanta, and Kansas City districts, while Chicago, St. Louis, Philadelphia, Cleveland, Dallas, and Minneapolis reported a “more modest pace of growth.” Manufacturing activity expanded slower in the Richmond and San Francisco districts, although both still saw gains.

What Does This Mean for Workers?

The rise in manufacturing might foreshadow good news in the next Jobs Report, which is due from the federal government on Friday morning. An uptick in manufacturing activity is a decent indicator that manufacturing hiring is on the rise — but it does not automatically signal that more hiring is actually taking place.

For example, 12 of the 13 firms contacted in the First District (which includes Boston) reported higher year-on-year-sales, while the remaining firm blamed its slow sales on weather and noted that “underlying sales growth is exceptionally strong.” But these same manufacturers also reported “flat employment and wage growth,” two firms reported staff reductions, and none of them reported “significant revisions to their capital spending plans.”

In the Third District (which includes Philadelphia), many manufacturers reported that they are looking to hire more workers, but can’t find qualified applicants:

As demand and production have increased, nearly one-half of the firms reported a mismatch between their firm's labor skill requirements and skills in the labor supply. About one-third of firms reported labor shortages, and one-third reported job vacancies open longer than three months. Skilled production machinists and tool, plant, and system operators were identified as most important to these firms.

Meanwhile, the Fourth District (which includes Cleveland) is seeing modest hiring gains for manufacturing jobs, and the Seventh District (which includes Chicago) saw an uptick in the need for temporary manufacturing workers. Several firms in the Eighth District (which includes St. Louis) said they planned to “add workers, expand operations, or open new facilities.”

As of now, 27,031 new manufacturing jobs must be created each month in order to reach President Obama’s goal of creating 1 million new manufacturing job in his second term. In April, 12,000 new manufacturing jobs were created.

There’s Still Bad News

The uptick in manufacturing is also welcome news this week considering the trade numbers released on Wednesday showed the overall U.S. international goods and services trade rose to $47.2 billion in April (up from $44.2 billion in March). The U.S. goods deficit with China soared to $27.3 billion, while the deficit with South Korea rose to $2.3 billion from $1.3 billion in March.

As Alliance for American Manufacturing (AAM) President Scott Paul noted, those trade numbers could be the worst economic news of the month.

“There is no doubt that surging imports from South Korea have led to layoffs in steel mills in Texas and Pennsylvania this week,” Paul said. “And there’s also no doubt in my mind that these steel products were dumped into this market, in violation of America’s trade laws.”

Will we end the week on a more positive note? We’ll find out Friday morning.

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