Industry Crib Sheet: U.S. Posts Weak December Employment Numbers
January 13, 2014
The national unemployment rate dropped another 0.3 percent to 6.7 percent in December, but the U.S. economy added just 74,000 jobs in the month, well short of economists' expectations of 195,000 new jobs. The weak December results cooled down a two-month rally, when businesses added an upwardly revised 241,000 jobs in November and 200,000 positions in October.
The U.S. added an average 182,000 jobs per month in 2013, which was just below 2012's 183,000 per month. The decline in the unemployment rate came mainly from Americans dropping out of the labor market, as the number of unemployed fell by 490,000 to 10.4 million in December. Only 62.8 percent of working-age Americans are currently participating in the labor force -- the lowest level in three decades. The unemployment rate has dropped more than a full percentage point since January 2013, when it was 7.9 percent.
Manufacturing employment slowed down in December, with the addition of 9,000 jobs. The sector added 77,000 jobs in 2013, which was exactly half the number of positions it opened in 2012. As of December, there were 12 million employees on manufacturing payrolls.
The big gains within the sector came from the primary metals, fabricated metal products, transportation equipment, and food manufacturing industries. The electronics and computer manufacturing industry had the biggest drop in employment last month.
The construction sector lost 16,000 jobs, while the mining sector, which includes the oil and gas industry, added more than 5,000 jobs. Government positions (local, state, and federal) shrank by 13,000; the federal government has cut nearly 100,000 jobs over the past three years.
Despite a weak December, many economists remain upbeat, with a few saying the numbers were likely skewed because of unseasonably harsh weather that kept Americans from working. For example, they pointed to the erosion of construction jobs as housing starts continued to grow. Economists are expecting positive corrections to December's numbers in the months ahead.
Robust job numbers last October and November, along with other positively trending major economic indicators, convinced the Federal Reserve to begin tapering its federal stimulus program, known as quantitative easing. In the light of the latest employment report, analysts and observers are conflicted on whether the Fed will continue to trim its bond purchases to $65 billion a month. Ben Bernanke, Fed chair, will be succeeded by Janet Yellen at the end of this month.
U.S. monthly trade imbalance continued to shrink in November, as the country shaved its deficit to $34.3 billion from October's revised $39.3 billion. American businesses are exporting more and importing less; November's $194.9 billion in exports were an all-time high. The monthly trade deficit is at its lowest level in more than four years.
The nation sent abroad $1.7 billion more in goods and services than October's revised $193.1 billion. It continued to cut its imports to $229.1 billion from October's $232.5 billion. Compared with November 2012, exports expanded by 5.2 percent and imports shrank by 1.1 percent. That resulted in a $12.2 billion smaller trade gap year over year.
November was buoyed by exports of industrial supplies, capital goods, and automobiles. The nation brought in less industrial supplies and consumer goods but more cars and capital goods. But as a whole, companies are earning more revenue overseas than ever, while American consumers are buying less foreign goods. Through 11 months of 2013, the U.S. trade deficit was pacing 12.3 percent smaller than 2012.
U.S. businesses sent a record $2.2 trillion in exports in 2012, and with an 11-month total of $2.08 trillion in 2013, it is a virtual lock that they will set another all-time high. Aside from food, exports of industrial supplies, capital goods, automobiles, and consumer goods were all pacing ahead of 2012 through 11 months. However, the pace of export growth is still behind President Barack Obama's ambitious goal of doubling exports to $3 trillion by the end of this year. Chad Moutray, chief economist for the National Association of Manufacturers, described the pace of growth for manufactured goods exports as "frustratingly slow."
The nation's trade imbalance with China, by far the largest with any country, narrowed once again in November, by 6.7 percent to $26.9 billion. However, the year-to-date gap between the two countries was bigger than that of 2012, and the deficit is expected widen to another new record. The month-to-month deficit with the European Union contracted in November, but the 2013 year-to-date gap is larger than the one in 2012.
U.S. gross domestic product grew by a revised 4.1 percent in the third quarter of 2013 -- significantly higher than expectations. However, economists had anticipated fourth-quarter GDP growth of just 1 to 2 percent. Economists are now more bullish about another robust quarterly expansion in the GDP after the encouraging trade report.
Meanwhile, Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, and Max Baucus (D-Mont.), chairman of the Senate Finance Committee, last Thursday introduced bipartisan legislation into Congress to renew Trade Promotion Authority, which would give the Obama administration the fast-track power it needs to expedite negotiations for the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. The Bipartisan Congressional Trade Priorities Act, which is supported by numerous manufacturing and business trade groups, would renew executive authority for up to seven years.
Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA), says 2014 will be a similarly flat year like 2013, going against the grain with many economists who are surmising strong growth this year. Kuehl says there are four roadblocks that will keep U.S. economic growth from gaining momentum: changes at the Fed, the political impasse in Washington, a rebound in raw materials and labor costs, and consumer confidence.
"By the middle of 2014 costs will likely be rising across the board," Kuehl said. "The producers of metal and other raw materials have been reducing production to bring supply in line with demand. Wages will rise for the people needed as they will be in short supply." For manufacturers, rising costs will threaten to offset favorable conditions such as better accessibility to credit and export demand.
Kuehl said that along with Janet Yellen replacing Ben Bernanke as chair of the Federal Reserve, there will be a major regime turnover that will leave the central bank in flux. Yellen's current vice chair position will be vacant, and three of the five members of the Fed's "permanent committee" are departing. Members of the Fed's Open Market Committee, made up of the presidents of the regional Feds, are scheduled to rotate.
"Yellen is not facing an easy transition," Kuehl said. "In all likelihood, the Fed's major actions will stay as they have been. No interest rate hikes or changes to the reserve ratio are likely. The cautious and slow reduction in the bond buying process is the only real difference that will be observed in 2014."
Because 2014 is a midterm election year and control of Congress is at stake, Democrat and Republican lawmakers will be "doing absolutely nothing to alienate the core," Kuehl added. As a result, deal-making will be "almost impossible, as the candidates will be rewarded for their obstinacy and punished for any hint of flexibility," he noted. "Political games will do nothing to help the economy grow and may actually do some real damage, perhaps dragging the GDP growth rate by half a point over the course of the year."
Kuehl also expects consumer attitudes about the economy and political crisis to edge negatively, despite rising home values, a generally improving job market, and low gasoline prices. "It appears that consumers...have become deeply skeptical about potential for real recovery," he said. "If that attitude persists, the first quarter will be weak, and a big rebound in attitude is unlikely for the course of the year."
Kuehl believes the economy will grow between 2.5 and 3 percent in 2014.
The 2,500-member FMA represents the metal fabricating and forming industry and is based in Rockford, Ill.
After the 2012 launch of a pilot research institute to accelerate the U.S.'s leadership in additive manufacturing and 3D printing, President Barack Obama last year announced that three more so-called manufacturing innovation institutes would be established by the end of 2013 to explore other leading-edge technologies. However, the Obama administration has missed the self-imposed deadline, and no new time line for the three institutes has been made public.
Two years ago, Obama unveiled the National Network for Manufacturing Innovation (NNMI), a system of regional research and development institutes around the country intended to speed commercialization of advanced manufacturing technologies, production processes, and products, as well as cultivate an advanced manufacturing workforce. Each hub would be self-sustaining and run by a public-private consortium of government agencies, academic institutions, companies, and nonprofit organizations. The first hub was awarded to a group based in Youngstown, Ohio, with a matching $30 million federal grant to launch the National Additive Manufacturing Innovation Institute (NAMII), which has since been renamed America Makes.
The NNMI is part of a broad agenda and investment plan by the Obama administration to raise U.S. manufacturing competitiveness, which includes the Investing in Manufacturing Communities Partnership (IMCP). The administration's fiscal-year 2014 budget includes $1 billion for funding the NNMI that needs to be approved by Congress. Obama envisioned a network of 15 institutes across the country but last year announced a new goal of 45 institutes to be created over the next 10 years. Bipartisan legislation to formally create the NNMI was introduced into Congress last August.
Nevertheless, the White House is continuing to push the NNMI forward, committing $200 million to set up the three institutes, two of which are being led by the Department of Defense and the other by the Department of Energy -- all in partnership with the Department of Commerce, NASA, and the National Science Foundation. The DOD institutes will be focused on advanced digital manufacturing tools and manufacturing of advanced lightweight metals, called DMDI and LM3I, respectively, while the DOE institute is tasked to develop power electronic devices based on wideband gap semiconductors. The deadline for bids for DMDI has been extended to Jan. 31, though the status of LM3I and the DOE initiative is unknown.
At the same time, the Advanced Manufacturing National Program Office (AMNPO), made up of representatives from the five federal agencies participating in the NNMI, had invited public comments in November on two governing documents. One was on intellectual property rights management and the other on performance metrics for the individual institutes and the network as a whole.
Meanwhile, America Makes reported a "stellar" 2013, and the institute now has 82 partner entities. It formed the MakerBot Academy, whose aim is to put a 3D printer in every school in the U.S. and so far has reached 103,000 students. Its Innovation Factory, open to the public in Youngstown, has 18 3D printers on display and had 2,500 visitors in 2013. The institute raised $9.5 million to initialize seven additive manufacturing research projects involving 35 institute members. It participated in last year's FIRST Robotics Competition and is collaborating with partners to donate 450 3D printers to this year's competing high-school teams, reaching another 71,000 students.MORE FROM THOMASNET NEWS: Metal Cutting Machinery Orders Inch Up, Cutting Tools Plummet