Plus: Factory Orders Dip, Unemployment Rises, Consumer Confidence Improves and Workers’ Comp Benefits Edge Down.
Factory Orders Drop
New orders for United States manufactured goods decreased 0.5 percent in June, offsetting a 0.5 percent gain in May and marking the third decline in four months, according to the U.S. Department of Commerce. The total value of new orders fell by $2.1 billion down to $465.8 billion for the month.
However, new orders for manufactured durable goods, up for two consecutive months, rose 1.3 percent to $220.7 billion in June. Transportation equipment had the largest gain, climbing 8 percent to $68.7 billion. Excluding the often volatile transportation category, new orders fell 1.8 percent for the month, led by a 4.4 percent decline in demand for computers and electronics, a 2.1 percent drop in machinery and a 1.4 percent decrease in electrical equipment.
Orders for motor vehicles and parts decreased 0.7 percent, while orders for non-durable goods dropped 2 percent, the steepest decline since March 2009.
“Manufacturing, a key source of growth in the U.S. since the recession ended in June 2009, has weakened in recent months along with the broader economy,” the Associated Press notes. “U.S. consumers and businesses have cut back on spending, which has lowered demand for factory goods. Europe’s economic woes and slower growth in China, India and Brazil have also reduced demand for American exports.”
Orders for non-defense capital goods (excluding aircraft), which serve as a key gauge of future business investment plans, fell 1.7 percent in June, signaling weakness in the short-term outlook. Goods shipments, down two of the last three months, fell 1.1 percent to $469.9 billion following a 0.3 percent gain in May.
Engineering Services Market Expands
The global engineering services market expanded 2 percent from last year to $530 billion, according to IBISWorld’s Global Engineering Services market research report. The industry employs 2.9 million people and supports $318 billion in industry value added.
This gain follows a slowdown in growth due to the global recession that drove down demand for engineering services worldwide. Between 2007 and 2012, average growth was 0.5 percent, well below world GDP growth of 4.4 percent, according to a release on the findings. The market was weakened due to declines “in the value of global construction (0.3 percent) and the subdued or negative GDP growth evident in the largest economies (United States, Japan and the European Union).”
IBISWorld forecasts stronger global economic growth and increases in construction orders, driving further gains in the global engineering services market through 2017. Although the industry is fragmented across a large number of small establishments, many employing fewer than five people, IBISWorld is optimistic about the continuing trend of small companies engaging in mergers and alliances to capture greater market share.
Unemployment Rate Rises in July, Despite Job Gains
Although the U.S. labor market added 163,000 non-farm jobs in July – ending three consecutive months of job gains below 100,000 – the national unemployment rate inched up to 8.3 percent in July from 8.2 percent in June, according to the U.S. Department of Labor. Last month’s gain in job creation was the highest increase since February.
The largest employment gains were in professional and business services, which added 49,000 jobs last month, including 14,000 in temporary help services. Manufacturing added 25,000 jobs in July, largely due to a seasonally adjusted employment increase of 13,000 in the motor vehicle and parts industry, along with 5,000 new jobs in fabricated metal products.
“The increase in payrolls last month was confirmation the slump in job growth in the second quarter was largely payback for an unusually warm winter that had brought forward hiring into the early months of the year…” Reuters reports. “As such, this suggested that employment numbers for August could look more like July’s, reducing the pressure for the Fed to take further action next month.”
A separate Labor Department report found that jobless claims for the week ending July 28 rose by 8,000 to a total of 365,000. However, the four-week moving average, which provides a more stable view of labor market trends, fell by 2,750 claims to 365,500, the lowest level since late March.
Consumer Confidence Improves
The Conference Board’s Consumer Confidence Index increased 3.2 points to 65.9 in July, ending following four consecutive months of declines. The latest reading marks the highest level of consumer confidence since April and represent an improved outlook for economic conditions across a range of indicators.
The findings suggest widespread optimism for the short-term outlook. The percentage of consumers expecting business conditions to improve over the next six months rose to 18.9 percent in July from 16 percent in June, while those anticipating business conditions will worsen decreased to 14.6 percent from 15.8 percent. Those who believe the number of jobs will increase rose to 17.6 percent last month, up from 14.8 percent, and those anticipating fewer jobs fell to edged down to 20.3 percent from 20.8 percent.
Regarding current circumstances, the percentage of U.S. consumers who consider business conditions to be “good” edged down to 13.8 percent in July from 14.2 percent in June, while those who said conditions were “bad” fell to 34.2 percent from 35.9 percent, resulting in a net gain.
“[W]hile consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings,” Lynn Franco, director of economic indicators at the Conference Board, said. “Given the current economic environment — in particular the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months.”
Workers’ Comp Benefits Decline
A slow economic recovery contributed to a decline in workers’ compensation benefits in the U.S. in 2010, according to a new report released by the National Academy of Social Insurance (NASI).
NASI found that workers’ comp benefits fell by .07 percent to $57.5 billion between 2009 and 2010, largely due to a 2.1 percent decline in medical benefits for injured workers. Additionally, employers’ costs for workers’ compensation declined by 2.7 percent during the same period, a continuation of the downward trend in costs since 2006.
“This decline is probably due to the slow pace of the recovery, with many jurisdictions still experiencing relatively high unemployment rates,” said John F. Burton Jr., a member of the panel that oversees the report, said in a statement on the findings.
Other report highlights reveal that although medical payments dropped by 2.1 percent in 2010 to $28.1 billion nationwide, cash benefits to injured workers increased by 0.7 percent to $29.5 billion.
There has also been a rise in the share of medical benefits for workers’ comp, which has increased considerably over the past 40 years. EHS Today notes that while medical benefits nationwide accounted for 30 percent of total benefits in the 1970s, that share increased to almost 50 percent in 2010, a trend attributed to the rising cost of health care.