U.S. Manufacturing Activity Wanes but Job Market Experiences a Strong Surge

Two surveys on U.S. manufacturing activity suggest a dramatic slowdown in the sector. HIS Markit’s manufacturing PMI revealed a subtle 1.5-point drop to a 15-month low, while the Institute for Supply Management’s PMI experienced a one-month decline of 5.2 points, the greatest in 10 years. Despite waning manufacturing activity, the job market experienced an unexpected surge as 312,000 jobs were added, 136,000 more than expected, while the unemployment rate rose slightly and wage gains posted a nine-year higher. 

• The December edition of IHS Markit’s U.S. Manufacturing Purchasing Managers Index was released last week, revealing a slowdown in manufacturing growth throughout the month. The PMI fell 1.5 points from November’s 55.3 to December’s 53.8. While representing a 15-month low, the Index signals weaker, but still strong, manufacturing growth. The employment component of the index had the greatest slowdown in growth, falling to an 18-month low. Further, a weaker rise in new orders led to a drop in business confidence among firms. Production growth remained strong, while input and output price inflation eased.

• The Institute for Supply Management released their Purchasing Managers Index, which also showed a large decrease in manufacturing activity across the U.S. The index registered a score of 54.1 during the month, a 5.2-point fall from November’s reading, which is the largest one-month drop since the end of 2008. Weaker global demand, trade concerns, and reduced fiscal stimulus have increased the risk for sharp declines in manufacturing activity, according to an economist at Oxford Economics.

• Job growth experienced a sudden surge in December, with 312,000 jobs added to the economy in the month. Economists were expected growth of 176,000, and the three-month average rose to 254,000 new jobs. Also, the unemployment rate floated slightly higher, settling at 3.9%, while wages grew at 3.2% year-on-year, tying October for the best month since April 2009. The report from the Department of Labor shows that despite the economic tightening suggested by other reports, the labor market remains quite hot.