At $241 million and $249 billion, respectively, both are closing in on January 2019 highs.

By Manuel Gutierrez, Consulting Economist to NKBA

The manufacturing sector continues to recover sharply as new orders and shipments of Manufacturers’ Durable Goods each rose by 1.3% in October.

New orders grew to $241 billion for the month and have almost returned to year-ago levels. However, they still trail by $9 billion the $250 billion peak achieved in January 2019. Durable good shipments of $249 billion in October are also below their January 2019 high, but by a smaller $6 billion.

Durable Goods are products whose shelf life is generally at least three years. They account for half of total U.S. manufacturing. Durables include products like computers, electronic equipment, appliances and machinery. As the chart below demonstrates, with the exception of transportation equipment, which is essentially flat, each category is trending higher.

The other half of manufacturing production, Non-Durable Goods, includes food and beverages, petroleum and chemicals as their main components. They are goods that are used or consumed in a short period of time. Data for non-durable goods is generally available toward the end of the month.

A common misconception, especially in the political arena, is that increases in manufacturing production will lead to similar increases in employment. This is   often not the case though, since manufacturers may choose to substitute labor for capital for various reasons, such as to increase productivity or efficiency, improve a production process or reduce costs.

In 1984, there were over 18 million people employed in manufacturing, but over the following 25 years, these jobs steadily eroded, falling to 11.5 million by 2010. Manufacturing production had increased by 73% over this period but employment fell by 36%.

Although employment and production have each risen since 2010, the gain in production has been three times as large as that of employment.