NAM: Monday Economic Report

  • Job openings in the manufacturing sector pulled lower in August, even as postings in the sector remained elevated. Manufacturing job openings have pulled back from the all-time high in June for the second straight month, but there was another record figure in postings for durable goods manufacturers. Despite that volatility, manufacturing job openings have averaged a robust 485,000 per month over the past 12 months, and firms continue to cite the inability to find talent as a top concern.
  • With that said, softening economic conditions in the manufacturing sector have started to result in weaker hiring growth. Hiring and separations each decreased to their lowest levels in nearly two years in August, but there was net hiring of 19,000.
  • For the 17th straight month, the U.S. economy reported more job openings (7,051,000) than the number of people looking for work (6,044,000 in August). That statistic suggests there were roughly 1 million more job postings than there were unemployed people to fill them.
  • The National Federation of Independent Business reported that the Small Business Optimism Index fell from 103.1 in August to 101.8 in September, a six-month low, with owners reacting to signs of slowing in the global economy and ongoing trade uncertainties. Yet, index readings greater than 100 would indicate that small businesses remain upbeat overall. The inability to find sufficient workers remained the top challenge.
  • The minutes of the Sept. 17–18 meeting of the Federal Open Market Committee noted disagreements about the direction of monetary policy, much as was seen in the statement released at the time. There was a general observation, however, that manufacturing production has weakened year to date, largely due to the “ongoing global slowdown and trade uncertainty.”
  • Several FOMC participants felt there could be one more cut in short-term rates this year, with others not feeling that such an action was warranted, especially given strengths in consumer spending and the labor market. I continue to expect the Federal Reserve will cut the federal funds rate by 25 basis points—for the third time this year—at its Oct. 29–30 meeting.
  • The Federal Reserve has likely been comforted by decelerated pricing pressures, including the latest data on consumer and producer prices.
  • Meanwhile, there was mixed news on the consumer front. On the one hand, the Index of Consumer Sentiment increased for the second straight month, according to preliminary data from the University of Michigan and Thomson Reuters, on an improved outlook for income growth. Yet, U.S. consumer credit outstanding slowed in August, largely on declines in Americans’ willingness to incur more credit card debt. However, nonrevolving debt rose strongly.