Longer term trends since early 1990s have shipments doubling, but industry jobs contracting

By Manuel Gutierrez, NKBA Consulting Economist

Shipments from U.S. manufacturers were virtually unchanged in August, rising by just 0.3% to $481 billion for the month. New orders for manufactured goods rose a bit higher, up 0.7% to $470 billion.

August’s gain follows three months of consecutive growth after the sharp drop due to the pandemic shutdown, affecting both orders and shipments. Despite the 19% surge since the April lows, they have yet to return to pre-pandemic levels.

The largest manufacturing industry segment is Transportation Equipment, which includes higher priced items such as aircraft, ships, automobiles, etc. It amounted to $82 billion in August, or 17% of total shipments. It fell by 1.7% in August.

Food products is third highest, with $67 billion in shipments for August, although it declined by 0.6% for the month. Food currently accounts for one in seven dollars of total shipments (14%).

More in line with our industry, Construction Materials & Supplies accounted for over one in ten shipment dollars (10.9%) in August, generating slightly over $52 billion for the month. This includes shipments of HVAC and Electrical Lighting equipment, which supplies both the residential and non-residential segments. It also includes manufacturing of products for asphalt and paving that are mostly used in non-residential applications such as roads.

The chart below displays shipments of the largest eight industries for the last twelve months through August of this year. The figures within parenthesis are the percent change between July and August. Most of the patterns are remarkably similar, with essentially a plunge followed by a V-shaped recovery.

For two categories, Computers & Electronics (labeled “Computers”) and  Appliances, August shipment volume exceeded pre-pandemic levels. Computer shipments, at $29.8 billion for the month, are 4% higher than their previous peak in January.

Household Appliances, with $2.0 billion of shipments in August, tally 10% above their corresponding January level.

Manufacturing Shipments & Employment

Increased manufacturing activity, as shown by a rise in shipments, might be expected to lead to an increase in manufacturing jobs. But that is not necessarily the case for a number of reasons.

For one thing, on a short-term basis, manufacturers are able to increase production and shipments by increasing the number of hours worked using their current labor force. On at longer term basis, manufacturers can substitute capital equipment for labor in order to reduce costs.

It should also be noted that in many instances manufacturers have reduced their employee count by outsourcing some of the jobs that may not be critical to the manufacturing process. Jobs such as office cleaning and maintenance work do not need to be filled as in-house positions.

Historically, between 1992 and 2008, total U.S. manufacturing shipments rose by 88%. They almost doubled in value from that period, from $2.9 trillion in 1992 to $5.4 trillion. However, manufacturing employment over the same period fell by 3.4 million jobs, a 20% decline from the 16.8 million  employed in the initial year.

Over the full 28 years shown in the chart above, shipments today are more than double their earlier volume (+111%), but employment is actually 28% below its January 1992 level. It is debatable whether efforts to bring manufacturing back will result in significant employment gains.

Note: The U.S. Department of Commerce releases data on manufacturers’ shipments and new orders twice each month. Late in a given month, it releases advanced data estimates for manufacturers’ Durable Goods for the previous month. Durables are products such as computers, vehicles, metals, etc.

Towards the middle of the following month the Commerce Department releases all data, including Nondurables such as food or petroleum products, but these data are two months behind.

This report includes the latest data for all product categories.

Manuel Gutierrez, Consulting Economist to NKBA