The Federal Reserve cited a strong recovery in its decision to raise interest rates. But the good news hasn't been heard on the factory floor.
Remember “reshoring” and the promised manufacturing revival in America? It hasn’t happened in any substantial way. No wonder manufacturing, which is essential to high-wage jobs and export power, wasn’t mentioned in the Federal Reserve’s statement Wednesday justifying its interest rate increase.
The PMI Manufacturing Index came out the same day, falling to the lowest reading in more than three years. New orders were the softest is more than six years.
Manufacturing employment has risen much more slowly than most other sectors this year. At 12.3 million, it stands 2 million jobs below where it was in the mid-2000s and more than 5 million below its level in the late 1990s. Capacity utilization, which tracks how much productive capacity is actually being employed to produce things, has fallen much of the year and stands well below any recovery since the measure began being tracked in 1967.
Meanwhile, the regional manufacturing survey from the Federal Reserve Bank of Philadelphia fell again this month. Along with a similar report from the New York Fed, it essentially shows a sector in contraction (some say recession).
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Washington has done better than many states, with 290,000 manufacturing employees, but this has been steady-to-slightly-declining all year and hasn’t recovered its pre-recession level. As of the end of November, Boeing employed 79,334 in the state, compared with 80,199 at the end of January.
“Reshoring” was always overhyped; job gains would be tempered because of automation. But the two biggest problems are slow growth worldwide, especially in China, and slowing demand domestically. The latter is especially pronounced in energy, which has been hard hit by low oil price.
Now the Fed’s move to steadily raise rates will be one more boulder to push up the hillside.
Today’s Econ Haiku:
The chicken coop’s fox
State auditor indicted
What are we? Wall Street