Several recent economic reports reflect a bounce back in manufacturing activity, which is encouraging and another sign that the worst of the downturn might be behind us, according to Chad Moutray, Ph.D., Chief Economist at the National Association of Manufacturers (NAM). However, the data also suggest that there is still a long way to go to get back to pre-recessionary levels.
For example, after declining 5.3 percent and 15.5 percent in March and April, respectively, manufacturing production rebounded somewhat, rising 3.8 percent in May. On a year-over-year basis, manufacturing production has declined 16.5 percent, with durable and nondurable goods output down 23.3 percent and 9.2 percent, respectively.
Manufacturing capacity utilization was 60 percent in April, the lowest rate in the data’s history, which dates to January 1948, and in May, it edged up to 62.2 percent. It was 75.1 percent in February.
Regional manufacturing surveys from the New York and Philadelphia Federal Reserve Banks reflect some stabilization in new orders and shipments in the sector after plummeting in the prior two months, even as hiring remained weak in both districts. Manufacturers feel optimistic for continued expansion over the next six months.
Consumer spending at retailers jumped 17.7 percent in May, rebounding strongly after declining 8.2 percent and 14.7 percent in March and April, respectively. This suggests that Americans returned to stores to make purchases after stay-at-home orders sent sales plummeting. Even with solid growth in May, retail sales have fallen 6.1 percent over the past 12 months, with a decline of 3.9 percent year-over-year excluding automobiles and gasoline.
The labor market has steadied somewhat, but the data continue to reflect significant economic hardships for many Americans, with historically elevated rates of unemployment nationally and in most states.
Initial unemployment claims decelerated for the 11th straight week, but with 1,508,000 claims for the week ending June 13, the pace remains frustratingly high. For the week ending June 6, there were 20,544,000 Americans receiving unemployment insurance, or 14.1 percent of the workforce.
With the motor vehicle sector coming back online, Michigan created the most net new manufacturing jobs in May, adding 33,700 workers. Yet, it was also among the states experiencing the greatest declines in manufacturing employment since the recession began in February.