Plus: Factory Orders Climb, Unemployment Rate Falls to Four-Year Low, Wind Energy Faces End of Tax Credit and Petrochemical Prices Decline Worldwide.
Factory Orders Increase
New orders for United States manufactured goods rose 0.8 percent in October, following a 4.5 percent increase in September and marking the highest gain in eight months, according to the U.S. Department of Commerce. The value of new orders climbed by $3.8 billion to a total of $477.6 billion for the month. Excluding the often volatile transportation category, new orders rose 1.3 percent.
Demand for manufactured durable goods increased 0.5 percent to $217.9 billion, the fifth gain in the last six months. Machinery orders, up two consecutive months, posted the largest increase, climbing 4.6 percent to $31.3 billion. Meanwhile, primary metals orders increased 1.6 percent to $28.4 billion and orders for manufactured non-durable goods rose 1.1 percent to $259.7 billion.
“Manufacturing, the pillar of the recovery from the 2007-09 recession, has lost momentum in recent months as fears of the ‘fiscal cliff’ and slowing global demand slammed the economy,” Reuters notes. “October’s factory orders suggested that manufacturing was not heading for a hard landing, even though factories are struggling to regain momentum.”
On another positive note, orders for core capital goods (excluding aircraft and defense equipment), which serve as an indicator of future business investment, rose 2.9 percent after dropping 0.5 percent in September, suggesting companies have become less reluctant to spend. Goods shipments, up three of the last four months, increased 0.4 percent to $482.3 billion.
“Consumers may also be getting nervous about higher taxes. Economists cited the fiscal cliff as a key reason consumer spending fell in October by the most since May. When consumers cut back on spending, businesses typically reduce their pace of restocking. Both trends are expected to slow economic growth at the end of the year,” the Associated Press reports. “However, many economists believe growth will pick up in 2013 if Washington is able to resolve its budget dispute without inflicting serious harm on the economy.”
Apple to Shift Some Production Back to U.S.
Apple CEO Tim Cook last week announced the tech giant would move production of some of its Mac computers from Asia back to the U.S.
Cook said the company would invest $100 million into the move, possibly raising capital from other investors to increase that figure, Bloomberg Businessweek reports. Economist Dan Luria, of the Michigan Manufacturing Technology Center, compared the announcement to similar reshoring moves by hardware firms Lenovo Group and LG Chem, predicting Apple could create 200 manufacturing jobs in the U.S.
Cook, who took over as CEO of Apple from Steve Jobs before his Oct. 5, 2011 death, announced the move in an interview with NBC News. “We’ve been working for years on doing more and more in the United States,” he said. “When you back up and look at Apple’s effect on job creation in the United States, we estimate that we’ve created more than 600,000 jobs now.”
Apple has yet to release more details about the reshoring effort, though speculators predict the company’s Mac computer production in the U.S. will constitute a considerably smaller percentage of its technology offering than higher profile items like iPhones and iPads.
Unemployment Rate Falls to Four-Year Low
The U.S. labor market added 146,000 non-farm jobs in November, driving the national unemployment rate down to 7.7 percent, the lowest level since December 2008, according to the U.S. Department of Labor. Although the jobless rate remained largely unaffected by the impact of Hurricane Sandy, the drop in the national reading was due largely to people leaving the workforce.
“The latest employment report draws a portrait of an economy growing steadily at 2% a year and adding an average of 150,000 jobs a month,” MarketWatch notes. “Yet the U.S. would have to expand at a much faster clip and create jobs at twice the current rate to get the economy back on the same growth path before the 2007-2009 recession struck.”
The largest employment gains last month were in the retail trade industry, which added 53,000 jobs, followed by professional and business services, which gained 43,000 jobs. Meanwhile, manufacturing employment posted a small net loss. Job gains in the motor vehicles industry, which added 10,000 positions, and wood products, which added 3,000 jobs, were offset by losses in food manufacturing (-12,000) and chemicals (-9,000).
“Households claimed they had 122,000 fewer jobs in November, and also showed 350,000 people dropped out of the labor force,” CNN Money reports. “The unemployment rate fell because there were fewer people looking for work. The Labor Department only counts people who have searched for a job in the last four weeks as officially unemployed.”
Wind Energy Producers Threatened by Expiring Tax Credit
The federal production tax credit (PTC) that has helped expand the wind industry is in danger of expiring as the fiscal cliff deadline approaches. A bipartisan group of lawmakers is striving to pass a one-year extension of the credit. Without it, the U.S. wind industry faces the threat of losing jobs and production capabilities.
On Friday, governors from several western states called on Congress to extend the credit, claiming that it is integral to creating manufacturing jobs, improving security and achieving green energy goals.
In the past five years, the wind industry has accounted for one-third of new U.S. power generation, USA Today reports. Additionally, it has reduced air pollution by cutting 137,000 pounds of smog-forming emissions and 91,000 pounds of soot-forming emissions every year, according to Environment America, a federation of state-based, citizen-funded environmental advocacy organizations. Last month, the group issued a release showing how wind energy impacts the environment.
“Extending the wind Production Tax Credit is one of the most straightforward ways we can support clean, Made-in-America energy and American manufacturing jobs,” said U.S. Senator Mark Udall (D-Colo.). “We need the PTC to help create more good-paying jobs here at home, including jobs for our veterans, who are transitioning from the military into the civilian workforce.”
Without an extension, the wind industry faces extensive cutbacks. So far, reports reveal that mere uncertainty over the extension has already cost the industry thousands of jobs. Opponents of the tax credit extension claim that the estimated $1.3 billion cost to taxpayers is too steep.
Global Petrochemical Prices Fall
Prices in the $3 trillion global petrochemicals market fell by 2 percent in November down to an average of $1,323 per metric ton, according to the latest Platts Global Petrochemical Index (PGPI), a monthly report tracking seven widely used petrochemical products.
“November petrochemical prices moved almost lock step with global oil prices,” Jim Foster, Platts senior editor of petrochemical analytics, said in an announcement of the findings. “Crude oil was dominating many other petrochemical-specific supply and demand factors during the month.”
The November increase followed a less than 1 percent drop in October, when average prices fell to $1,351 per metric ton. On a year-over-year basis, petrochemical prices were up 14 percent from the November 2011 total.
Petrochemicals are commonly used in the manufacturing, construction, pharmaceuticals, aviation and electronics industries. These chemicals are part of the production processes for plastics, rubber, nylon and other materials.