Input Stories

In March, Texas factory activity rose after declining in February. The production index increased more than 15 points to 6, returning to growth. The new orders index improved 3.4 points to -0.1, indicating new orders were roughly stable from the prior month. The capacity utilization index remained negative but rose more than 6 points to -2.3, while the shipments index was little changed at 6.1.

Perceptions of manufacturing business conditions continued to worsen in March, with the general business activity index falling 8 points to -16.3, its lowest point since last July. Furthermore, the company outlook index fell 5.5 points to -10.7. Meanwhile, the outlook uncertainty index rose 7 points to 36.2, the highest reading since fall 2022, after surging in February.

Labor market indicators suggested a decrease in employment and slightly shorter workweeks in March, with the employment index slipping further into negative territory to -4.6, while the hours worked index soared 11.3 points but remained negative at -2.9. Nearly 12% of firms reported net hiring, while a higher percentage (16.4%) noted net layoffs. Upward pressure on input prices intensified in March, while wages and selling price increases remained relatively stable. The prices paid for raw materials index rose from 35.0 to 37.7, a multiyear high, while the prices paid for finished goods index decreased marginally, from 7.8 to 6.3. Meanwhile, the wages and benefits index edged down from 16.7 to 16.0.

The outlook for future manufacturing activity is now mixed. The future production index inched down less than a point to 27.6, with 43.3% of firms expecting increases in output in the next six months. Meanwhile, the future general business activity index plummeted more than 14 points to -6.6, the first negative reading since May 2024. Other future activity indexes remained positive but slipped below their averages.

New orders for manufactured goods rose 0.6% in February, building on January’s 1.8% gain. When excluding transportation, new orders edged up 0.4%. Orders for durable goods increased 1.0%, following a 3.4% surge in January. Year to date, durable goods orders are up 2.3%. Nondurable goods orders ticked up 0.3% in February, the same as the prior month. Nondurable goods orders are up 0.8% year to date.

New orders for mining, oil field and gas field machinery led the increase in durable goods, up 12.7%. In January, the largest monthly decrease occurred in ships and boats, which declined 15.9%, similar to the prior month. The largest over-the-year changes occurred in nondefense aircraft and parts (up 64.1%) and ships and boats (down 12.9%).

Factory shipments increased 0.7% in February, after rising 0.5% in January. Shipments excluding transportation edged up 0.4%, nearly the same as the previous month. Shipments for durable goods improved 1.2% in February, up from 0.7% in January and up 1.3% year to date. Meanwhile, nondurable goods shipments rose 0.3% in February and are up 0.8% year to date.

Unfilled orders for all manufacturing industries rose just 0.1% in February, following a 0.2% increase in January. Inventories advanced 0.1%, while the inventories-to-shipments ratio dipped to 1.45. The unfilled orders-to-shipments ratio for durable goods decreased to 6.81 in February from 6.84 the prior month.

Job openings for manufacturing dropped by 31,000 from an upwardly revised 513,000 in January to 482,000 in February. Durable goods job openings decreased by 21,000, while nondurable goods job openings declined by 11,000. The manufacturing job openings rate fell 0.3% to 3.6% in February and decreased from 4.2% the previous year. The rate for durable goods manufacturing similarly fell 0.3% to 4.2%, while it ticked down 0.2% to 2.7% for nondurable goods.

In the larger economy, the number of job openings fell to 7.6 million, a decrease of 194,000 from the previous month and 877,000 from the previous year. The job openings rate declined to 4.5%, down from 4.7% in January and from 5.1% last year. This data reflects an overall labor market that has eased back closer to pre-pandemic levels, but remains relatively tight from a historical perspective.

The number of hires in the overall economy inched up 25,000 to 5.4 million in February but dropped 268,000 from the previous year. The hires rate for the overall economy stayed the same in February at 3.4%. Meanwhile, the hires rate for manufacturing stayed the same at 2.6% from January. The hires rate for durable goods was unchanged at 2.5%, but edged down 0.1% to 2.7% for nondurable goods.

In the larger economy, total separations, which include quits, layoffs, discharges and other separations, fell 11,000 from January to 5.3 million and dropped 215,000 from the previous year. The total separations rate stayed the same at 3.3% for the overall economy but edged down 0.1% for manufacturing to 2.5%. Within that rate, layoffs and discharges declined by 12,000 in February for manufacturing, while quits decreased by 1,000. The quit and layoff rates continue to remain lower for manufacturing than the total nonfarm sector.

Nonfarm payroll employment increased by 228,000 in March, well above expectations. On the other hand, February and January’s job gains were each revised downward by 14,000. The 12-month average stands at 156,750 job gains per month. The unemployment rate ticked up 0.1% to 4.2%, while the labor force participation rate also inched up 0.1% to 62.5%.

Manufacturing employment ticked up by 1,000, but the February gain of 10,000 was revised downward by 2,000 jobs to an increase of 8,000. The most significant gains in manufacturing in March occurred in miscellaneous manufacturing, which added 2,100 jobs over the month, recovering some of the 2,900 jobs lost in February. Meanwhile, the most significant losses occurred in fabricated metal product manufacturing, which shed 1,600 jobs over the month.

The employment-population ratio stayed the same at 59.9% but is down 0.4 percentage points from a year ago. Employed persons who are part-time workers for economic reasons decreased by 157,000 to 4.78 million but are up from 4.31 million in March 2024. Native-born employment is up 329,000 over the month and 944,000 over the year. Meanwhile, foreign-born employment is up 538,000 over the month and 1,111,000 over the year.

Average hourly earnings for all private nonfarm payroll employees rose 0.3%, or 9 cents, reaching $36.00. Over the past year, earnings have grown 3.8%. The average workweek for all employees stayed the same at 34.2 hours but inched up 0.1 hour for manufacturing employees to 40.2 hours.

In March, U.S. manufacturing activity stalled after strong growth in February. The S&P Global U.S. Manufacturing PMI fell to 50.2 in March from 52.7 in February, remaining above the 50.0 no-change score. Production declined for the first time since December, even as new orders rose modestly and exports stabilized. Confidence softened amid uncertainty over federal policies, specifically tariff implementation.

After February’s fastest rise in production in three years, March’s fall in production is due partially to fewer instances of front-running output before tariff implementation. Employment numbers were also weighed down by future uncertainty, remaining unchanged after four months of growth. Input costs continued to rise, reaching the highest level in two-and-a-half years as suppliers start adjusting prices in response to tariffs. In response, output charges rose for the fourth consecutive month to a 25-month high.

New orders growth was modest, and new export orders have increased from clients in Asia, Canada and Europe. Backlogs declined at the fastest rate since December. Firms signaled a preference to utilize existing inputs wherever possible, recording a drop in stocks of inputs.

In March, the global manufacturing sector expanded at a slower pace, falling to 50.3 from 50.6 in February. Four of the five PMI components had either a negative or less positive impact on the overall level, as output and new orders grew at a slower rate, while employment and stocks of purchases fell slightly. On the other hand, supplier delivery times continued to decline, providing a somewhat stronger positive contribution.

India, Greece, Australia and Brazil had the highest PMI readings in March, while the Eurozone and China’s PMI also improved. On the other hand, the contraction in Japan and the U.K. deepened. The lackluster conditions, driven by rising concerns about the geopolitical situation, high costs and potential disruption to global trade flows, led confidence to fall to a three-month low. Output expanded for the third consecutive month, driven by intermediate goods and consumer goods, but at the weakest pace during that period. Meanwhile, investment goods fell for the ninth time in the past 10 months. The lackluster conditions for output were mirrored for new orders, with the rate of new order growth being meager. On the other hand, international trade volumes stabilized, with new exports exhibiting a minor increase.

In March, manufacturing employment declined for the eighth consecutive month but at a slower rate than the prior month. Employment losses in the Eurozone and the U.K. were offset only partially by growth in China and Japan, while U.S. staffing levels stayed the same. Input costs rose at nearly as high of a rate as February, while the rate of increase in selling prices was the highest since June 2024.

In March, the U.S. manufacturing sector fell back into contraction territory after two consecutive months of growth, with the ISM Manufacturing^® PMI decreasing to 49.0% from 50.3% the prior month. Customer demand and output weakened, while inputs strengthened further as a temporary move to head off increased tariff rates. The New Orders and Employment Indexes fell further into contraction territory, declining to 45.2% and 44.7%, respectively. Production contracted after two consecutive months of expansion, weakening to 48.3%, 2.4 percentage points lower than February. Meanwhile, inventories (53.4%) grew at a faster pace in March, which is not a positive sign amid slowing demand.

The New Orders Index contracted for the second consecutive month and at a faster pace than the prior month, a 3.4 percentage point drop from February. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022, and respondents noted a clear decline in demand from February, with three of the six major sectors—machinery, transportation equipment and chemical products—reporting a decline in new orders.

The New Export Orders Index dropped back into contraction territory to 49.6% after two consecutive months of expansion, 1.8 percentage points lower than February. Panelists commented on Canadians’ lack of desire to purchase U.S. goods as one of the reasons for contraction. Meanwhile, the Imports Index exhibited growth for a third consecutive month but at a slower pace than February, dropping 2.5 percentage points to 50.1% in March. Buyers continued to pull forward deliveries as much as possible to get ahead of tariffs.

The Employment Index contracted for the second consecutive month and at a faster pace than the prior month, a 2.9 percentage point drop from February. Of the six largest manufacturing sectors, none reported increased employment. Companies primarily reduced headcounts through attrition and hiring freezes, rather than layoffs.

The Prices Index rose 7 percentage points to 69.4%, indicating raw materials prices increased for the sixth straight month in March to its highest reading since June 2022, driven by the dramatic rise in commodity prices as a result of recently imposed tariffs. Steel, aluminum, copper, corrugate and plastic resins registered increases. Forty-six percent of companies reported paying higher prices, up from more than 31% in February and nearly 21% in January.

The U.S. stock market saw its worst day yesterday since the early days of the pandemic, following President Trump’s latest round of tariffs. These tariffs, when combined with other U.S. tariffs in 2025, make the U.S. average effective tariff rate 22.5%—the highest rate since 1909, according to The Budget Lab at Yale.

Manufacturers already had record-high concerns about trade uncertainties before this latest announcement, as the NAM’s Q1 Manufacturers’ Outlook Survey found.  Now, the uncertainty and instability have only increased, reminding observers the last time the U.S. imposed sweeping tariffs—with disastrous consequences.

Back then: The Tariff Act of 1930, also known as the Smoot-Hawley Act, was signed into law by President Herbert Hoover. Originally intended to protect the U.S. agricultural industry, it was later expanded to cover a broad swath of the U.S. economy, as CNBC recounts.

• The Smoot-Hawley Act imposed tariffs on approximately 25% of all imports to the U.S., according to Santa Clara University economic historian Kris James Mitchener.
• Some sounded the alarm at the time. Before signing the law in June 1930, President Hoover received “a petition signed by more than 1,000 economists asking him to veto the bill.”

A spiral: “Smoot-Hawley raised the average tariff on dutiable imports to 47% from 40%, [Dartmouth economist Doug] Irwin said. Depression-era price deflation ultimately helped push that average to almost 60% in 1932, he added.”

• Compare that to now: the latest tariff rates will be higher than the Smoot-Hawley levels, as reported by CNBC .

Manufacturers hurt: Following the passage of Smoot-Hawley, Argentina, Australia, Canada, Cuba, France, Italy, Mexico, Spain and Switzerland all responded with retaliatory tariffs on U.S. goods.  These tariffs often fell on manufactured products, weakening the sector amid the economic catastrophe of the Depression.

• For example, France, Spain, Italy and Switzerland increased tariffs on American cars, effectively closing off those markets to major American exports.
• In all, “U.S. exports to retaliating nations fell by about 28% to 32%, said Mitchener. Further, nations that protested Smoot-Hawley also reduced their U.S. imports by 15% to 23%.”

Long-lasting pain: The Dow Jones Industrial Average slid following the imposition of the tariffs, bottoming out in July 1932.

History lesson: Smoot-Hawley has long been condemned by American leaders of both parties as a mistake that severely damaged the American economy.

• Before taking office, Roosevelt denounced the Smoot-Hawley Act, saying it “compelled the world to build tariff fences so high that world trade is decreasing to vanishing point.” He would sign the Reciprocal Trade Agreements Act, which reduced tariffs with trading partners on a reciprocal basis, in 1934.
• When President Ronald Reagan spoke to the NAM’s Annual Meeting in 1986, he said, “I well remember the antitrade frenzy in the late twenties that produced the Smoot-Hawley tariffs, greasing the skids for our descent into the Great Depression and the most destructive war this world has ever seen. That’s one episode of history I’m determined we will never repeat.”

Modern realities:  President Trump has insisted that “we’re bringing wealth back to America” through these sweeping tariffs (CNBC). But manufacturers are urging caution, especially when future tax policy is so uncertain.

• One family-owned U.S. textile manufacturer, founded in 1887, warns that tariffs will dramatically raise the prices of its components, such as fabric, thread, yarn and fiber—none of which it can source in the U.S. “Tariffs would force us to curtail employment or close facilities if our customers would not accept higher prices,” the company said.
• Another manufacturer, an employee-owned firm, makes products and systems that control, monitor and protect utility and industrial electric power systems—which is critical for the coming buildout of new power generators and the electrical grid to meet the demand for AI datacenters. Tariffs will materially harm its ability to enable this essential economic growth.
• A third manufacturing company, a 100-year-old Wisconsin company specializing in custom-designed thermal solutions and large-scale HVAC cooling systems used in agriculture, mining, oil and gas and more, says that “tariffs on Canada and Mexico could cause us to take cost-cutting measures, including workforce reductions.”
• Last, a manufacturer that has made chemicals in the U.S. since the late 1800s reports that tariffs may set back its plans for expansion in North America, “which is already five times more expensive for us than in Asia and three times more expensive than in Europe.” The company will be less able to support crucial semiconductor manufacturing, and may even have to close low-margin business lines in the U.S.

The last word: “[M]anufacturers are scrambling to determine the exact implications for their operations [of the April 2 tariffs],” NAM President and CEO Jay Timmons said on Wednesday. “The stakes for manufacturers could not be higher. Many manufacturers in the United States already operate with thin margins. The high costs of new tariffs threaten investment, jobs, supply chains and, in turn, America’s ability to outcompete other nations and lead as the preeminent manufacturing superpower.”

Across the country, manufacturers are telling their stories of shop floor operations under U.S. tariffs, the first of which went into effect March 13. The consensus: tariffs have made things harder all around

• Jeremy Rosenbeck is president of Cincinnati, Ohio–area manufacturer Republic Wire, Inc., which makes copper wire products for the construction industry. In anticipation of tariffs, Rosenbeck “over the winter [ordered] an extra two months’ worth of copper rod (worth tens of millions) to give him enough tariff-free raw material for his business if a new trade agreement isn’t quickly worked out” (Cincinnati Enquirer).
• Republic Wire has nearly 200 employees and each year does approximately $500 million in sales. About 10% of that is outside the U.S.
• Rosenbeck, who says he “understand[s] what they’re trying to do with the tariffs,” nonetheless told the Enquirer that spring is a bad time for uncertainty in the construction sector, as it’s when builders make their plans for the rest of the year. “Higher prices on materials could mean fewer construction projects, which could mean a slowdown for the industry, fewer jobs and a drag on the economy as a whole,” the outlet notes.

Where the burden falls: Chuck Dardas, president and chief operating officer of 67-year-old Michigan automotive manufacturing firm AlphaUSA, wrote in a recent op-ed for The Detroit News that while the Trump administration says tariffs will rebalance the scales, “the truth is that the burden falls squarely on American manufacturers and, ultimately, the American consumer.”

• For AlphaUSA, that’s because “as an S Corporation, our net income flows directly to our tax returns,” Dardas wrote. “If tariffs wipe out our income, it’s akin to a 100% income tax. There’s no profit, no reinvestment and no sustainability. This isn’t just a theoretical concern—it’s a very real possibility. If our paycheck goes to zero, how do we pay our bills? How do we reinvest in our business? How do we survive?”
• The sticker prices of vehicles are too high already, “and these tariffs will only push them higher. Inflationary pressures are mounting, and the Federal Reserve’s decision to hold off on rate changes underscores the precariousness of the situation.”
• Opposition to the tariffs, Dardas continued, “is not about politics. It’s about facts.” Manufacturers that rely on foreign imports cannot simply make the change to domestic sourcing with the flip of a switch. “[E]ven if we could pivot back to American manufacturers for … particular components, that’s not saying that they’re going to be less expensive” domestically, he said this week on radio show “All Talk with Kevin Dietz .” “They could be even more than the tariffs we could very well be faced with still buying the parts from Canada.”

“An existential threat”: If the tariffs remain in place long term, small manufacturers might not be able to hold out long enough to see their promised benefit, either, Dardas told the BBC’s “World Business Report” late last month.

• “If these go on for a long period of time, it’s an existential threat to companies our size,” he said. “We’re not that big, and there [are] a lot of us [smaller manufacturers] out here as well.”

In January, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 4.1% annual gain, up from 4.0% in December. The 10-City Composite saw an annual increase of 5.3% in January, up from 5.2% the previous month, while the 20-City Composite rose 4.7% year-over-year, up from 4.5%. Among the 20 cities, New York again posted the highest annual gain at 7.7%, followed by Chicago at 7.5% and Boston at 6.6%. Tampa again exhibited the lowest annual return, with prices falling 1.5%.

On a month-over-month basis, both the U.S. National Index and 20-City Composite improved 0.1% before seasonal adjustment, and the 10-City Composite rose 0.2% pre-adjustment. Meanwhile, the 10-City and the 20-City Composites increased 0.5% after adjustment, while the U.S. National Index improved 0.6%. In 2024, the U.S. National Index advanced 4.1%, with the bulk of appreciation occurring in the first six months. Prices fell 0.7% in the second half of 2024 due to high mortgage rates and constraints on affordability. Of the cities tracked by the 20-City Composite Index, only four (New York, Chicago, Phoenix and Boston) showed price increases in the second half of the year, revealing broad cooling to prices.

Buyers and sellers are exercising more caution as affordability reaches multidecade lows in many regions, led by elevated monthly payment burdens amid already high home prices. Inventory also continues to be a challenge, especially in legacy metro areas where limited new construction constricts supply.