Economic Data and Growth

Which manufacturing sectors experienced the most growth in job openings over the past year? We used Lightcast™ to dive into the 789,969 unique job postings for the past 12 months (May 2022 to May 2023) and organized by North American Industrial Classification (NAICS) codes. In this case, we are better able to understand what sectors are experiencing the most growth. As a reminder, the data get more granular with increased digits.

The top manufacturing sectors over the past 12 months at the 3-digit NAICS level, ordered by the number of unique postings, were:

1. Computer and Electronic Products (NAICS 334) – 103,507 unique postings
2. Transportation Equipment (NAICS 336) – 93,075
3. Food Manufacturing (NAICS 311) – 78,397
4. Machinery (NAICS 333)– 74,193
5. Chemicals (NAICS 325) – 72,254

The top manufacturing sectors over the past 12 months at the 4-digit NAICS level, ordered by the number of unique postings:

1. Navigational, Measuring, Electromedical, and Control Instruments Manufacturing (NAICS 3345) – 66,411 unique postings
2. Beverage Manufacturing (NAICS 3121) – 54,837
3. Aerospace Products and Parts (NAICS 3364) – 40,541
4. Pharmaceuticals and Medicines (NAICS 3254) – 27,442
5. Motor Vehicle Manufacturing (NAICS 3361) – 25,006

➔   The takeaway: Though growth in manufacturing has been broad-based, many of the sectors leading job creation over the past year require advanced skills and yield high salaries. Looking at only the top five 4-digit NAICS manufacturing sectors list above, the median advertised salaries for those five sectors over the past 12 months was $36.12 per hour.  

* Lightcast™ data accessed on June 16, 2023.

Industrial production declined 0.5% in June for the second month in a row, the Federal Reserve reported today, according to Bloomberg (subscription).

What’s going on: “The June index of production at factories, mines and utilities decreased 0.5% for a second [consecutive] month, Federal Reserve data showed Tuesday. Manufacturing output declined 0.3% in June, the most in three months.”

• The central bank’s index of manufacturing output has dipped 0.3% from June 2022, with production hamstrung “by lackluster export markets, efforts to work down inventories and more limited consumer spending on merchandise.”

The details: Consumer goods output declined 1.3% in June, the biggest drop in more than two years and a reflection of decreased production across a wide swath of categories, including automotive vehicles, apparel and appliances.

• Materials output also declined, while production of business equipment was flat.

Some good news: “[M]anufacturing may benefit some in coming months as retailers get inventories more in line with sales and the pace of goods inflation slows. Separate data on Tuesday showed retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.”

The U.S. economy grew more robustly in Q1 of 2023 than previously calculated, according to a large upward revision from the Commerce Department on Thursday, CNBC reports.

What’s going on: “Gross domestic product increased at a 2% annualized pace for the January-through-March period, up from the previous estimate of 1.3% and ahead of the 1.4% Dow Jones consensus forecast. This was the third and final estimate for Q1 GDP. The growth rate was 2.6% in the fourth quarter.”

Why it’s important: The news may indicate that the U.S. is not headed toward economic recession.

• A separate report released this week shows that layoffs were below expected levels, “indicating that labor market strength has held up even in the face of the Federal Reserve’s 10 interest rate hikes totaling 5 percentage points.”
• Unemployment claims were down last week, too, according to the Labor Department.

The NAM says: “While the latest NAM Manufacturers’ Outlook Survey  revealed that most manufacturers predict a recession in the next 12 months, it is also possible that the U.S. economy could achieve the ‘soft landing’ that the Federal Reserve and other policymakers have been seeking,” said NAM Chief Economist Chad Moutray.

• “This is particularly true if the labor market remains solid and if spending continues to hold up. The current outlook is for the U.S. economy to expand 1.7% in 2023, with 1.2% growth in 2024.”

There was notable growth in energy-sector jobs last year, according to a new Department of Energy report cited by The Hill.

What’s going on: The number of positions in both traditional and renewable energy grew from 2021 to 2022.

• Jobs in renewables increased 3.9%, while conventional-energy jobs grew even more. Positions in natural-gas fuel rose 24%, those in coal fuel rose 22% and those in petroleum 13%
• “Overall, the energy sector grew by nearly 300,000 jobs, employing 7.8 million people in 2021 and more than 8.1 million in 2022.”

Outsize expansion: The energy sector’s job growth was more significant than that of jobs in general.

• “The report said jobs in the battery electric vehicle field had the most growth overall, expanding by 27 percent from 2021 to 2022.”

The NAM’s view: “The growth in energy-sector jobs demonstrates the strength of domestic energy production, but misguided regulations could undo all this momentum,” said NAM Vice President of Energy & Resources Policy Brandon Farris. “The NAM is working to achieve permitting reform and rein in unbalanced regulations so it doesn’t go to waste.”

The Federal Reserve will likely raise interest rates again in the near future, Chairman Jerome Powell said Wednesday, according to The Wall Street Journal (subscription).

What’s going on: Powell said that because the Fed lifted rates so quickly last year, the effects haven’t been fully realized yet.

• “‘Policy hasn’t been restrictive for very long … so we believe there’s more restriction coming,’ Powell said during a panel discussion with other central bankers at the European Central Bank’s annual symposium in Sintra, Portugal.”
• Core inflation will probably not reach the Fed’s target of 2% until 2025, Powell added.

The background: While central banks throughout the world have increased interest rates quickly in the past year in an effort to control inflation, they “have been astonished so far at the resilience of their economies to higher borrowing costs.”

• Earlier this month, the European Central Bank raised its rates a quarter percentage point. Last week, the Bank of England raised its key interest rate by a relatively aggressive half percentage point, citing a resilient economy, tight labor market and large pay increases for workers.
• At its meeting earlier this month, the Fed left the benchmark federal-funds rate at 5% to 5.25%, following 10 consecutive rate increases at prior meetings.

What it means: “Slowing down rate increases, including by possibly raising rates at every other meeting, represents an ‘effort to get more information from the data to see how much restraint is really coming,’ [Powell] said.”

What’s next: Most central banks—including the Bank of England—will probably raise rates again in the near future, according to the Journal.

Durable goods orders beat expectations in May, rising 1.7% to a record $288.2 billion from $283.2 billion in April, according to U.S. Census Bureau data.

• Excluding transportation equipment, orders for new durable goods increased 0.6% last month, to $185.62 billion from $184.54 billion in April.

Year over year: New durable goods orders have increased solidly on a year-over-year basis—5.4%—since May 2022.

• They have dipped 0.3% over the past 12 months when excluding transportation equipment, however.

Core capital goods: Orders for core capital goods, a proxy for capital spending in the U.S. economy, increased 0.7% in May, to $73.96 billion from $73.46 billion. That’s an all-time high.

What’s up: The following categories posted strong sales in May:

• Non-defense aircraft and parts (up 32.5%)
• Motor vehicles and parts (up 2.2%)
• Electrical equipment and appliances (up 1.7%)
• Machinery (up 1.0%)
• Other durable goods (up 0.6%)
• Primary metals (up 0.5%)

The NAM’s take: “Durable goods orders were stronger than expected in May, with continuing resilience despite a challenging economic environment amid an uncertain outlook,” said Moutray.

Consumer confidence hit its highest level in nearly a year-and-a-half in June, Reuters (subscription) reports.

What’s going on: “The Conference Board said its consumer confidence index rose to 109.7 this month, the highest reading since January 2022, from 102.5 in May. Economists polled by Reuters had expected the index to climb to 104.0.”

On jobs: The survey’s labor market differential, which comes from respondent views on the difficulty of getting jobs, increased to 34.4 in June from 30.7 in May—a sign that many still view the labor market as tight.

• This finding is in keeping with a key data point in the NAM’s Q2 Manufacturers’ Outlook Survey, in which the majority (74.4%) of manufacturers cited attracting and retaining a quality workforce as a top challenge.

What we’re saying: The latest consumer confidence index is good news, according to NAM Chief Economist Chad Moutray.

• “Americans felt more upbeat in their assessments of both current and future conditions, with improved prospects for jobs and a strengthened overall economic outlook, including for household finances,” he said.

In other good news: Sales of new homes increased to a 15-month high in May, up 20% from a year ago, bolstering hopes that the U.S. economy might avoid a recession.

Sales of existing homes inched up in May, according to the National Association of Realtors.

What’s going on: Existing home sales increased to 4.30 million units from 4.29 million units in April.

• Sales strengthened in the South and West but weakened in the Midwest and Northeast.
• The median sales price for existing homes was $396,100 in May, a decrease of 3.1% from a year ago.

By housing type: Single-family house sales edged down 0.3%, to 3.85 million units from April’s 3.86 million units.

• Meanwhile, sales of condominiums and co-ops increased 4.7%, to 450,000 units from 430,000 in April.

Unsold homes: The unsold inventory of existing homes on the market rose to 3.0 months from 2.9 in April but stayed near historic lows.

Overall: Home sales have declined 20.4% on a year-over-year basis, from 5.40 million units last May.

The NAM’s take: “The existing home market remained challenged by affordability and lack of inventory, although sales remained higher than the 4.00 million units in January,” said NAM Chief Economist Chad Moutray.
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Companies that provide services and goods to the oil and gas sector are repurposing some of their machinery for use in renewable energy technologies, according to The Wall Street Journal (subscription).

What’s going on: With investment in renewable energy sources expected to reach $1.74 trillion this year, oil-field-service firms including Baker Hughes are diversifying their portfolios to include investment in new energy segments.

• “Baker Hughes said orders in its new energy segment could reach $6 billion to $7 billion by 2030. At the midpoint, that represents about a fifth of the revenue that Wall Street expects it to generate that year.”
• In addition to maintaining its longstanding book of geothermal business, Baker Hughes is now “looking to do carbon capture and sequestration, which … requires geological knowledge” that the firm already has.

Making progress: “Orders in its new energy business were substantial enough to be noted on [the company’s] earnings calls. It booked more than $400 million of orders in the segment last year and said it is on track to exceed that amount this year.”

• Orders comprised carbon capture and sequestration equipment for a large Malaysia project.
• Some of the services can be a source of recurring revenue, as in the case of California direct air capture projects, which are required to monitor carbon dioxide levels underground for 100 years.

The fight to get inflation down to the Federal Reserve’s 2% target “has a long way to go,” Federal Reserve Chairman Jerome Powell said Wednesday, according to Reuters (subscription).

What’s going on: In testimony before the House Financial Services Committee, Powell said that “‘[i]nflation pressures continue to run high’” and “‘nearly all’ participants expect further rate increases will be appropriate by the end of the year.”

• Last week at its June meeting, the Fed kept the target federal funds rate unchanged at 5.00% to 5.25%, five times higher than it was in March 2022.
• Investors expect the central bank to raise rates next month.

Why it’s important: The Fed’s 10 consecutive interest-rate raises over the past 15 months have not had a large impact on the broader economy.

• “‘We have been seeing the effects of our policy tightening on demand in the most interest-rate-sensitive sectors of the economy,’” Powell said, citing housing as one example.
• “‘It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation,’” he continued.