Plus: Demand for Robots Is Pacing at a New High This Year; and Quarterly Manufacturing Index Slows with Anemic Capex
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U.S. employment continued to make solid gains in October by adding 214,000 jobs, and the national unemployment rate ticked down once again to a fresh post-recession low of 5.8 percent.
Last month's payroll additions fell short of economists' forecasts of 230,000 new jobs, but in its October jobs report, the Labor Department upwardly revised September's payroll count from 248,000 to 256,000 jobs and significantly raised August's total from 180,000 to 203,000 jobs, effectively restoring a streak in which U.S. employment has added at least 200,000 jobs each month since January.
The August and September revisions added 31,000 more jobs than previously tallied, lifting the 12-month average gain to 222,000 going into October. The nine consecutive months where employers added at least 200,000 jobs represent the best run in the labor market since 1994, and the 49 straight months of positive jobs growth mark the longest such stretch since the 1930s.
"It's consistent solid growth," Rich Thompson, chief human resources officer at staffing firm Adecco Group North America, noted in a Forbes report. "Anytime you are over 200,000 that is good progress."
Similarly, Michelle Girard, U.S. chief economist for RBS, said the solid report indicates "ongoing health in the labor market" and "given the recent strengthening in labor market indicators, we still think some strong numbers are coming."
Nevertheless, average hourly earnings edged up 3 cents, or only 0.1 percent, in October to $24.57. That put the 2 percent year-over-year wage growth just in line with even depressed inflation, which is likely to keep the Federal Reserve from raising interest rates sooner than expected even after ending its bond-buying economic stimulus program. "Continued progress in labor markets will likely keep the Fed on a path to normalization, but it will likely remain patient ... given modest wage and inflation pressures," said Michael Gapen, a senior economist at Barclays, in a Reuters report.
Wage and salary growth is seen as a crucial driver in pushing up tepid consumer spending this quarter. Robert Hughes, senior research fellow at the American Institute for Economic Research, told Reuters that he expects consumer spending to make ongoing gains in light of rising household wealth and improving consumer confidence. One prominent consumer sentiment index, by Thomson Reuters and the University of Michigan, reached a seven-year high in October with a 86.9 reading, a 2.3-point rise over the previous month.
Despite the strong employment gains this year, wage growth has been kept suppressed by a seeming slack in the labor market, but there are signs this trend may finally buck. The labor force participation rate reversed the 0.1-point decline in September, returning to 62.8 percent, while the employment-to-population ratio rose to 59.2 percent after spending four months at 59.0; it is the highest ratio since July 2009. As opposed to the unemployment rate declining as a result of Americans abandoning the labor market, the rising ratio indicates a real turn for the jobless rate as more Americans return to work.
A broad measure of joblessness that includes the 9.2 million involuntary part-time workers and those who have given up searching for jobs -- known as marginally attached to the labor force -- fell three-tenths of a percentage point to a six-year low of 11.5 percent.
In October, manufacturing added 15,000 jobs, with 5,000 in machinery, 4,000 in furniture and related products, and 2,000 in semiconductors and electronic components. Manufacturing has added 170,000 jobs this year. Last month, transportation and warehousing added 13,000 to payrolls, while construction tacked on 12,000.
Employment among food and drink places and the retail trade jumped, indicating an early start in preparations for the holiday shopping season.
Demand for Robots Is Pacing at a New High This Year
Robot orders and shipments in North America set new records in the first nine months of 2014, according to trade group Robotic Industries Association (RIA).
A total of 21,235 robots, valued at $1.2 billion, were ordered from North American companies in the first nine months of 2014, a 35 percent increase in units and 22 percent improvement in dollars over the same period in 2013.
Robot shipments to North American customers through September totaled 18,490 robots valued at $1.1 billion, breaking the previous record set in 2013 by 5 percent in units and 2 percent in dollars.
Sales activity continued to be strong in the automotive industry, with year-to-date orders up 48 percent over 2013. Non-automotive industries, such as electronics, food and consumer goods, and metals, also posted double-digit growth in the first nine months of the year.
"The robotics industry in North America is having its best year ever in 2014," said Jeff Burnstein, president of RIA. "Along with record performance, we are seeing more interest in robotics and related technologies than ever before. Companies of all sizes continue to recognize that automation makes them stronger global competitors. It's also interesting to note that as robot sales boom, U.S. unemployment continues to fall, and is currently at its lowest level since July of 2008, further evidence that robotics helps save and create jobs."
The biggest application growth year over year has been in spot welding (76 percent), arc welding (39 percent), and assembly (29 percent). RIA estimates that some 230,000 robots are now at use in U.S. factories, placing the nation second only to Japan in robot use.
The record year for robot sales is also having a positive impact on Automate 2015
, which takes place March 23-26 at McCormick Place in Chicago. "With five months still to go, the exhibit floor at Automate 2015 is already over 40 percent larger than our 2013 event," Burnstein said. "We also expect a record number of attendees as companies all over the world will be coming to find new automation solutions." Automate 2015 will also feature the International Symposium on Robotics, which was last held in the U.S. in 2011.
Since 2010 the robotics market in North America has grown an average 26 percent per year.
Quarterly Manufacturing Index Slows with Anemic Capex
A quarterly measure of the U.S. manufacturing sector shows a third quarter that was less strong than the previous quarter, with orders stagnating and profitability slipping. Moreover, manufacturers anticipate slashing their capital expenditures (capex) in 2015.
The MAPI Foundation Business Outlook survey for October, conducted by the research affiliate of the Manufacturers Alliance for Productivity and Innovation, slipped to 67 from 71 in the July survey, ending a run of six quarters of incremental improvement. Still, it marked the 20th consecutive quarter the index has remained above the threshold of 50, the dividing line separating contraction and expansion.
"The third quarter was less robust than the second quarter for manufacturers, but the current index levels nonetheless indicate expansion for the sector," said the survey's coordinator, Donald A. Norman, MAPI Foundation's director of economic studies.
The index is based on a weighted sum of indexes covering prospective U.S. shipments, backlog orders, inventory, and profit margin. In the report, the views of 47 senior financial executives representing a broad range of manufacturing industries are segmented into 12 individual indexes split between current business conditions and forward-looking prospects. Of those 12 indexes, three increased, eight declined, and one stayed flat.
The Inventory Index, based on a comparison of inventory levels in the third quarter of 2014 with those in the third quarter of 2013, increased to 69 in October from 59 in July.
"Inventories are well above their level in the third quarter of 2013, thus raising the question as to whether inventories have been overbuilt," Norman said.
The Current Orders Index, which compares orders in the third quarter of 2014 with the third quarter of 2013, remained at 78 from the previous report. The Export Orders Index, which compares anticipated exports in the third quarter of 2014 with those of one year prior, fell to 65 from 67.
The Profit Margin Index decreased to 67 in October from 70 in July, and the Backlog Orders Index also dropped, from 72 to 69.
The Capacity Utilization Index, which measures the percentage of firms operating above 85% of capacity, fell to 26.7 percent in October from 30.0 percent in July. This index, which tends to be somewhat volatile, is below its long-term average of 32 percent.
Forward-looking indexes were mixed but still showed strength.
The Prospective U.S. Shipments Index, which reflects expectations for fourth-quarter 2014 shipments compared with those in the fourth quarter of 2013, decreased to 83 from 87 in July. The Prospective Non-U.S. Shipments Index, which measures expectations for shipments abroad by foreign affiliates of U.S. firms for the same period, fell to 72 in October from 76 in the previous report. Far above 50, both indexes are still performing "at impressive levels," according to MAPI.
The October report offers the initial look at expectations in a number of categories for 2015.
The Research and Development Spending Index, comparing anticipated spending in 2015 with 2014, improved to 70 from 67 in July. The Annual Orders Index, which is based on a comparison of expected orders for all of 2015 with orders in 2014, was 85, an increase from an already solid 81 in July.
The U.S. Investment Index, based on executives' expectations regarding domestic capital investment for 2015 compared with 2014, declined significantly, to 52 from 67 in the previous survey. The Non-U.S. Investment Index, which forecasts investment abroad, also showed a major decline, dropping to 48 from 64.
"The decline in the composite index and most of the individual indexes point to a slowing of the momentum the sector had coming out of the second quarter. With the exception of U.S. and non-U.S. investment, however, the indexes remain at relatively high levels and point to continued growth," Norman said.
Participants were queried on global risks to companies arising from conflicts and disease and what, if anything, firms are doing in response.
The region where respondents reported the greatest risk to operations is Ukraine and Russia. Other issues posing at least a slight risk to companies relate to Israel-Palestine, ISIS in Iraq, Syria, Ebola and terrorism in Africa, the military coup in Thailand, and the China-Japan island disputes.
In terms of geopolitical risks, 64 percent of the respondents indicated their companies are minimizing cash and financial assets that could be "trapped." Almost half reported they are providing enhanced security for employees.