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Blog: Economic reports show a mixed bag

Published 2/5/2013 8:33:34 AM

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By Jack Keough

A variety of economic reports were issued last Friday and, if anything, it showed that there is uncertainty as to the direction of future economic growth.

Manufacturing employment, for example, seems stuck in neutral. The Bureau of Labor Statistics reported that the manufacturing sector created only 4,000 jobs in January, down from 8,000 in December and 7,000 in November.

In fact, manufacturing employment has basically stalled since last June. Prior to that downturn, manufacturing had grown more than 200,000 jobs as it rebounded from the deep recession. Some of that increase was due to pent up demand as consumers and businesses finally started spending money again but the employment levels are still low.

Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents small and middle size manufacturers, writes, “Worse, manufacturing’s share of total U.S. jobs (8.86 percent) is back to its levels when industrial employment bottomed in January, 2010, and well below its 9.96 percent share when the recession began.”

Some economists speculated that Superstorm Sandy was one of reasons for the manufacturing slowdown as well as the uncertainty surround the so-called “fiscal cliff.” What is known is there has been a slowing down of demand for finished goods and exports have slowed.

In total exports, including manufactured goods as well as other commodities like agricultural products, the United States ranked second in the world in 2010, behind China but just ahead of Germany. For the first 10 months of 2011, Germany is slightly ahead of the United States, the New York Times reported.

But while some economic news was bad, there was also good news.

The ISM manufacturing index, which measures factory activity, registered 53.1. Any number above 50% shows expansion in factory production while below 50 shows contraction. It was the second consecutive month of expansion in manufacturing and the 44th straight month of growth in the overall economy. It was the highest level since April of last year.

Electrical equipment was one of 13 manufacturing sectors that showed growth, according to the ISM Index. That sector also showed an increase in employment. Electrical equipment was also one of only eight sectors that reported increased order backlogs.

The data presented for the ISM Index is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations.

Meanwhile, The Labor Department said in a separate report that construction employment grew by 28,000 in January. Nearly all of the job growth occurred in specialty trade contractors (+26,000), with the gain about equally split between residential and nonresidential specialty trade contractors.

However, the January 2013 level of construction employment remains about 2 million below its previous peak level in April 2006.

Construction spending picked up at the end of last year, rising 0.9% to an annualized rate of $885 billion, the Commerce Department reported.

November construction spending was upwardly revised to 0.1% growth from an initial read of a drop of 0.3%.

Also in the good news department, residential construction soared by 22.3% last year while construction spending grew 9.2%, the best increase in seven years.

It was the highest level since April of last year. The report showed the on sector has added construction for eight straight months’ jobs and that the pace of growth picked up substantially in October.

Alan Beaulieu, president of ITR Economics, told attendees at the annual meeting of the National Association of Wholesaler- Distributors that housing starts would grow a strong 8.9% this year compared to last year and then drop 6.9% next year. Housing would remain strong for 2015, 2016 and 2017, he said.

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Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com

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