Service Sector And Manufacturing Jobs Drop To 3 And 10 Year Lows (#GotBitcoin)

U.S., Eurozone Services Stumble Threatens Sharper Global Slowdown. Service Sector And Manufacturing Jobs Drop To 3 And 10 Year Lows (#GotBitcoin)

Economic indicators suggest a manufacturing downturn is spreading.

U.S. and eurozone services-sector activity softened in September, according to surveys of purchasing managers, suggesting a manufacturing downturn is spreading to other parts of the global economy.

Fresh signs of a world-wide economic slowdown have pushed down asset prices this week and raised expectations for further action by central banks to support growth.

In the U.S., two surveys of services activity continued to grow, but at a slower pace.

The Institute for Supply Management’s U.S. non-manufacturing index was 52.6 in September, the lowest reading since August 2016 and down from 56.4 in the prior month. Meanwhile, the IHS Markit services index was 50.9 in September.

For both surveys, a reading above 50 indicates an expansion in activity, while a reading below 50 indicates a contraction.

As the threat of a recession looms, the eurozone area faces the added headwind of new tariffs on its exports to the U.S. The U.S. plans to swiftly impose tariffs on $7.5 billion in aircraft, food products and other goods from the European Union after the World Trade Organization authorized the levies Wednesday, citing the EU’s subsidies to Airbus SE.

The September slowdown in services was sharpest in Germany, whose factory output has already fallen on cooling demand for its exports and problems in its key automobile sector.

Updated: 10-16-2019

U.S. Retail Sales Fell in September

Sales fell 0.3% from August in first monthly decline since February.

American shoppers pulled back on spending in September, signaling a key support for the U.S. economy this year could be softening amid a broader global economic slowdown.

Retail sales—a measure of purchases at stores, at restaurants and online—decreased a seasonally adjusted 0.3% in September from a month earlier, the first monthly decline since February, the Commerce Department said Wednesday. Excluding vehicles and gasoline, categories that can be volatile, September retail sales were flat.

Wednesday’s report suggested consumer spending was on less solid footing amid concerns that trade tensions are weighing on the global economy and dampening consumers’ outlook. Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output.

“This morning’s report forces eternal optimists to face the possibility household spending may be moderating along with a decline in fundamentals,” Lindsey Piegza, Stifel chief economist, wrote in a note to clients.

September’s decrease in retail sales was driven in part by a 0.9% decline in spending on vehicles, which reflects a pullback from a strong 1.9% gain in August. Lower fuel prices weighed on sales at gasoline stations, which fell 0.7%.

Some economists said the drop in vehicle and gasoline sales paints a more mixed picture than the decline in the headline retail sales number would suggest.

Lower gas prices “aren’t a negative for consumers. That’s actually positive,” said David Berson, chief economist at Nationwide.

He noted that unit vehicle sales rose in September, citing figures from Autodata, in contrast to the dollar decline in vehicle sales reflected in Wednesday’s report.

Sales at nonstore retailers—a proxy measure for online retail sales—fell 0.3% in September, the first decline since December 2018 and one that Mr. Berson characterized as rare.

He said he would need to see “a lot more than one month of data, particularly one month of data that has all these anomalies,” before becoming overly concerned about a slowdown in consumer spending.

Consumers have been buoyed by an unemployment rate at a half-century low and prices that have risen modestly despite a U.S.-China trade war that only recently showed signs of easing. The National Association of Home Builders said Wednesday its housing-market index rose three points in October, to 71 from a revised level of 68 in September, reflecting an increase in U.S. home-builder confidence.

Retail sales can be volatile from month to month, and the broader trend this year has shown steady growth. They rose in August by a revised 0.6%, more than previously estimated. Sales increased 1.5% in the July-through-September period compared with the previous three months.

Yet, September’s slowdown in retail sales followed recent data that have suggested uncertainties around trade are weighing on other parts of the global economy. Personal-consumption expenditures—a separate measure of U.S. consumer spending—slowed more than expected in August. Manufacturing- and service-sector activity in the U.S. and eurozone has also seen a slowdown.

Forecasting firm Macroeconomic Advisers predicted U.S. gross domestic product grew at a 1.3% seasonally adjusted annual pace in the third quarter, compared with a 2.0% annual rate in the second quarter and a 3.1% pace in the first.

Trey Kraus, owner and president at Carltons Men’s and Women’s Apparel in Rehoboth Beach, Del., said he raised prices on almost every item in his store because of U.S. tariffs placed on Chinese imports. The store carries upscale clothing, and Mr. Kraus said the higher prices have deterred some of his customers from buying multiple items at once.

“Even though our business is up year over year, without the [price] increases, I would’ve anticipated five to 10% more in volume than what we are experiencing,” Mr. Kraus said.

Still, he characterized the store’s foot traffic as strong and said he has an optimistic outlook into the first quarter of 2020.

“I believe consumer confidence is still high in spite of a lot of the news that’s out there,” he said. “I don’t know what the statistics say, but that’s what I’m experiencing.”

Updated: 10-27-2019

U.S. Factory Slump Shows Manufacturing Isn’t the Bellwether It Used To Be

Manufacturing firms make up a smaller share of the U.S. economy and labor market than they used to.

This has been a difficult year for American manufacturers, marked by trade war volleys and a global economy that is running out of steam. Output, investment and employment are down and firms are less optimistic.

The overall American economy, however, keeps powering along. The national unemployment rate is now down to 3.5%, a half-century low, and forecasters expect continued economic growth in the third quarter.

The fate of American factories is often viewed as a bellwether for the overall economy. Because factory production is volatile and sensitive to shifts in demand, it often starts to contract before the rest of the economy, the thinking goes. But that link may be weaker now that manufacturing firms make up a smaller share of the economy and the labor market, economists say. If that is the case, it means the U.S. economy may be big enough and diverse enough to keep expanding even if manufacturing suffers a downturn.

“Being less exposed to manufacturing and the global manufacturing cycle is providing some stability to the U.S. economy,” said Gus Faucher, chief economist at PNC Financial Services.

Whether or not manufacturing’s recent troubles will spill over into the rest of the economy is a top concern for Federal Reserve officials, who are likely to cut interest rates this week to cushion the economy from a variety of risks.

Minutes from the Fed’s meeting last month said officials cited manufacturing weakness as a factor that “could give rise to slower hiring, a development that would likely weigh on consumption and the overall economic outlook.”

But manufacturing’s recent softness could be a repeat of its performance in 2015 and 2016. Back then, factory output was down on a year-over-year basis for 18 straight months as firms suffered from weak demand overseas and a stronger dollar. Energy producers also suffered from low oil prices.

The overall economy, however, didn’t miss a beat. Aggregate output grew 2.9% in 2015 and 1.6% in 2016 and employers added more than five million jobs over those two years.

As the American economy has evolved, it has relied less on the production of goods. Manufacturing makes up roughly 11% of the country’s overall gross domestic product, down from about 16% 20 years ago. And factory workers now make up about 8.5% of the overall employed workforce, down from around 13% two decades ago. There are now more local government employees than factory workers.

But it would be a mistake to write off the entire sector as an anachronism, said Susan Houseman, research director at the Upjohn Institute for Employment Research, a think tank. Many service industries depend on manufacturing, like shipping and logistics, warehousing or firms that repair and service equipment, she said.

And contract workers in factories are counted as service employees because their employers are temporary staffing agencies rather than manufacturers, she said.

“Manufacturing is far from irrelevant but certainly it is the case that with a relatively smaller sector it’s going to have less influence and impact on the aggregate economy,” she said.

The fate of American factories started to diverge from that of the rest of the economy in the 1980s, Ms. Houseman said. During the recession of 2007 to 2009, factory output fell more rapidly than the economy’s total output and has struggled to recover. While the U.S. economy is now almost 20% larger—after adjusting for inflation than it was at the start of the downturn—manufacturing output has grown by less than 3% since then, the Commerce Department reported.

Data released earlier this month provided another example of this split. Manufacturing production was 0.8% lower in September than a year earlier, according to the Fed, the third straight month of year-over-year declines. Manufacturing employment also dipped slightly in September, according to the Labor Department.

Meanwhile, the rest of the economy seems relatively solid. Retail sales were up nearly 4% in September from a year earlier, the Commerce Department said Wednesday.

Macroeconomic Advisers, a forecasting firm, estimates the economy grew at an annualized rate of 1.3% in the third quarter, a slower pace than in the second quarter but enough to keep the expansion going.

Mr. Faucher warns against completely discounting the risks to the overall economy. The global slowdown and unresolved trade fears, which are now buffering American factories, could intensify and spread to other sectors of the economy, causing households to cut spending and businesses across all industries to pull back on investment, he said.

“Obviously if it becomes a more severe [manufacturing] contraction, that creates a more severe problem for the economy,” he said. “Risks are amplified now because of trade tensions, because of slower economic growth, because of business uncertainty.”

Still, Mr. Faucher doesn’t see a U.S. recession coming this year or in the first half of next year.

Updated: 11-7-2019

2019 On Pace To Be The Worst Year For Job Creation Since 2010

Employers added an average 167,000 jobs to payrolls each month this year, a slowdown from the monthly average of 223,000 last year.

Economists predicted average monthly payroll growth of about 144,000 jobs in this year’s fourth quarter, and they expected that will slow to just under 100,000 a month in the fourth quarter of next year.

Economists are roughly split over whether the recent hiring slowdown reflects primarily a shortage of workers or softening demand for labor, a sign of continuing uncertainty about the outlook.

Slightly more respondents cite shortage of workers than cite softening demand for labor.

In The Wall Street Journal’s latest survey of economists, 45.3% blamed the slowdown on the tight labor market, which has made it harder for many employers to find enough workers. An additional 37.7% of respondents said the issue was ebbing desire to expand payrolls.

The first explanation would suggest the economic expansion can continue at a solid pace if more potential workers can be drawn into the labor force from sidelines.

“Manufacturers have consistently cited an inability to find talent as a top concern, with some suggesting that a lack of sufficient workers has held back growth,” said economist Chad Moutray of the National Association of Manufacturers. “At the same time, hiring has weakened lately primarily due to global headwinds and ongoing trade uncertainties.”

The other explanation could indicate employers are becoming more cautious about hiring for a variety of reasons—perhaps because of slowing global growth or other uncertainties, or because they see weakening domestic demand for goods and services—which could portend a loss of U.S. economic momentum in the months ahead.

Economists are roughly split over whether the recent hiring slowdown reflects primarily a shortage of workers or softening demand for labor, a sign of continuing uncertainty about the outlook.

The first explanation would suggest the economic expansion can continue at a solid pace if more potential workers can be drawn into the labor force from sidelines.

“The slowdown in wages and rise in the labor-force participation rate strongly suggest that demand for workers is more of a problem than the supply of workers,” said Diane Swonk of Grant Thornton.

Some 17% of business and academic economists attributed the hiring slowdown to both an inadequate supply of some workers and a weakening demand for other workers, with the two sides about evenly balanced.

The share of Americans holding or seeking jobs rose last month. Among those in their prime working years, between 25 and 54, the rate touched a 10-year high as more Americans joined the labor force.

Still, the overall U.S. economic outlook has improved. In the November survey, economists on average assigned a 30.2% probability of a recession in the next 12 months, down from 34.2% in the October poll.

The dip came as trade tensions between the U.S. and China cooled and uncertainties over the U.K.’s exit from the European Union appeared to diminish. And a more than month-long strike at General Motors Co. recently ended.

Looking ahead, University of Central Florida economist Sean Snaith said a “strong labor market and consumers will outweigh political and trade uncertainty.”

Trade uncertainty is one reason Federal Reserve officials voted to cut short-term interest rates three times since July, most recently in October by one-quarter point to a range between 1.5% and 1.75%.

Half the survey respondents said the central bank provided about the right amount of stimulus, while 40.4% said the Fed provided more than was needed. Just 9.6% of economists said the Fed didn’t ease enough.

The survey of 57 business, financial and academic economists was conducted Nov. 1-5, although not every economist answered every question.

Some economic indicators suggest there is still slack in the labor market despite very low unemployment. Some economists in the survey pointed to weak wage growth as evidence that employers don’t have to pay much more to attract and retain workers. Annual gains in average hourly earnings have eased somewhat since a recent peak of 3.4% in February. On average, economists in the survey expected the unemployment rate will tick up to 3.7% in the middle of next year and to 3.9% in June 2021.

Updated: 11-22-2019

Slowing Business Activity Sounds Alarm For Global Economy

New ECB chief Lagarde warns that robust economic growth is ‘no longer an absolute certainty’.

Business activity in the U.S. is offering signs of a pickup in late 2019, contrasting with more sluggish economic performances in some of the world’s other largest economies.

Data company IHS Markit said Friday that its composite Purchasing Managers Index for the U.S., a measure of activity in businesses, posted a four-month high of 51.9 in November, up from 50.9 in October. A level above 50 points to growth in business activity, while a reading below that mark points to contraction.

“The worst of the economy’s recent soft patch may be behind us,” said Chris Williamson, chief business economist at IHS Markit, referring to the U.S. economy.

Still, U.S. business activity is muted compared with levels seen over the course of the economic expansion that began in mid-2009. That, in part, reflects heightened trade uncertainty that has delayed investments, particularly among manufacturers. Meanwhile, leading sectors such as automobiles and electronic components have faced specific challenges, such as tighter emissions standards.

Such factors have weighed more heavily on economies outside the U.S. IHS Markit’s composite PMI for the eurozone fell to 50.3 in November from 50.6 in October, indicating the currency area’s economy was close to stagnation.

A similar survey of Japanese businesses pointed to a decline in activity during November, which was partly due to severe weather and an October increase in the sales tax.

In her first speech as head of the European Central Bank, Christine Lagarde warned on Friday that a fracturing of the global economic system means that robust rates of economic growth “are no longer an absolute certainty.”

“Ongoing trade tensions and geopolitical uncertainties are contributing to a slowdown in world trade growth, which has more than halved since last year,” she said. “This has in turn depressed global growth to its lowest level since the great financial crisis.”

The Organization for Economic Cooperation and Development said Thursday it expects the eurozone economy to grow by 1.2% this year, and the Japanese economy to expand by 1%. It expects the U.S. economy to grow by 2.3%. All three are forecast to slow slightly in 2020.

The Paris-based research body, which represents 36 advanced economies, said those low rates of growth could become standard if governments don’t roll back newly erected obstacles to trade and take steps to boost investment.

Central banks have responded to the global slowdown and weakening manufacturing output by cutting interest rates. The U.S. Federal Reserve has lowered its key interest rate three times since July. The ECB cut its already negative interest rate in September and restarted a paused program of bond purchases this month.

In the eurozone, weakness in manufacturing showed signs of spilling over to the services sector. In the U.S., services have remained more resistant to such spillover, with much of the economic weakness this year contained to the relatively small manufacturing sector.

Business activity among service companies reached a four-month high in the U.S. in November, reflecting strengthening customer demand, Friday’s report showed.

U.S. consumer spending this year has helped offset faltering business investment. In the third quarter, investment in structures dropped sharply.

IHS Markit noted the upturn in service-sector activity was relatively muted, by historical standards, as U.S. businesses remain cautious about the outlook.

U.S. economic growth has slowed this year. In the third quarter, gross domestic product expanded at a 1.9% annual rate, down from 2% in the second quarter and 3.1% in the first. With no end to slowing global growth and trade tensions in sight, the pullback is expected to continue. Forecasting firm Macroeconomic Advisers projects economic growth at a 1.5% pace in the fourth quarter, which would be the slowest pace since the end of last year, when it was 1.1%.

Updated: 11-26-2019

U.S. Consumer Confidence Declined in November

Conference Board index drops for the fourth month in a row.

A measure of U.S. consumer confidence fell in November for the fourth month in a row, another sign that American households are pulling back amid a global slowdown and continued trade war fears.

The Conference Board, a private research group, said Tuesday its index of consumer confidence declined to 125.5 in November from 126.1 in October. Economists surveyed by The Wall Street Journal expected the index to rise to 126.8 this month.

An index measuring consumers’ assessment of current business and labor market conditions fell to 166.9 in November from 173.5 in October. An index tracking consumers’ outlook for future conditions rose to 97.9 from 94.5 in October.

Tuesday’s consumer-confidence results reflect households’ fears over a softening labor market, said Lynn Franco, senior director of economic indicators at The Conference Board. “Growth in early 2020 is likely to remain at around 2%,” she said. “Overall, confidence levels are still high and should support solid spending during this holiday season.”

A separate estimate of consumer sentiment produced by the University of Michigan and released last week found a slight improvement in consumers’ outlook for the economy.

Updated: 12-2-2019

U.S. Dominance in Global Services Economy Weakens

Some softness in demand reflects cyclical factors, such as slowing foreign economies, but other forces are weighing on exports and prompting Americans to buy more foreign services.

Over the past half-century, the U.S. has evolved from an industrial superpower into the undisputed champion of the global services economy.

From 2003 to 2015, the U.S. trade surplus in services such as medical care, higher education, royalties and payments processing nearly sextupled to $263.3 billion.

Growth has since stalled, however. Exports of services barely rose in the first nine months of 2019, while imports increased 5.5%. The services surplus, at $178.5 billion through September, was down 10% from a year earlier, on pace for its steepest annual decline since 2003.

Some of the softness in service exports likely reflects cyclical factors, such as a strong dollar or slowing foreign economies. But economists say the decline in the surplus is difficult to pin exclusively on such issues. They point to other forces—some political, others more tectonic—that are weighing on exports while prompting American consumers and companies to buy more foreign services.

Much rides on whether this trend continues or reverses. While trade surpluses or deficits aren’t intrinsically good or bad, they reflect a country’s comparative advantages in the global economy. The U.S.’s prowess in academia, tech, finance and consulting creates millions of jobs, often high-skilled, and effectively helps pay for imports of merchandise such as smartphones, cars and wine.

“It goes to the heart of what the U.S. is really good at,” said Michael Pearce, an economist at Capital Economics. “These are all areas in which the U.S. is a world leader, and it’s also what drives more fundamental, supply-side growth in the economy.”

Western Kentucky University provides a case in point. Between 2011 and 2015, its enrollment of international students more than doubled to above 1,500, each paying up to $40,000 in fees. They helped the school balance its budget while it built new dorms, renovated its student union and made other upgrades, even as the state legislature reduced appropriations for the university.

But since 2015, international enrollment has fallen by nearly half, squeezed by less-generous foreign-government subsidies, competition from other schools overseas, and a perception abroad that the U.S. has become less safe and welcoming. “It’s always been up, up, up,” said John Sunnygard, WKU’s associate provost for global learning and international affairs. “We never knew down. We started to see it, and we didn’t believe it.”

Services exports may be suffering from rising tensions between the U.S. and its trading partners. “The instability that’s been created in the trade world, in large part by tariff escalation but also just the U.S. approach to trade, has had a negative effect,” said Christine Bliss, who served as an assistant U.S. trade representative in the Obama administration.

The pending trade agreement among the U.S., Mexico and Canada includes strong services provisions, and the Trump administration has pressed for better intellectual-property protection in its negotiations with China. But progress toward large-scale trade agreements in services has been halting. In his policies and rhetoric, President Trump tends to focus on farm products and factory goods, seldom services.

The U.S.’s largest export isn’t cars or soybeans but travel services: spending by foreign visitors on food, lodging, tuition, health care and other items. These exports were down 0.6% in the first nine months of this year to $160.5 billion.

The trade war with China appears to be taking a toll. U.S. immigration officials have ramped up scrutiny of visa applications by Chinese students, tourists and even medical patients seeking treatment in American hospitals. Beijing this year advised its citizens to reconsider visiting or studying in the U.S. due to heightened scrutiny at the border and frequent “shootings, robberies and thefts” on American streets.

Exports of other services, such as intellectual property and transportation, are also down this year from last.

In September, FedEx Corp. reported a drop in revenue and profit, and disclosed plans to retire or idle dozens of cargo planes due to rising trade tensions and a slowdown in the global economy. “Weakening global trade and industrial production have resulted in less-than-expected demand for our most profitable Express package and freight services,” Chief Financial Officer Alan Graf said in a conference call. “Adverse changes in international trade policies and relations would likely drive additional weakness in our business.”

Chinese telecom giant Huawei Technologies Co. has scaled back its purchases of U.S. technology products and services this year, a company official told The Wall Street Journal. It is also developing an operating system that could eventually compete with Google’s Android and Apple’s iOS, which currently dominate the Chinese smartphone market. Huawei has also begun making smartphones without American chips.

Other countries are becoming more competitive in service industries that the U.S. has traditionally dominated. Since 2004, the number of U.S. universities ranked among the world’s top 200 has fallen to 46 from 62, according to the QS World University Rankings. China passed the U.S. as the top producer of scientific and technical articles in 2016 and leads the world in applications for patents, trademarks and industrial design.

“We’ve probably reached a point of diminishing returns,” said Chris Bakewell, head of the intellectual-property practice at consulting firm Duff & Phelps, of the U.S.’s global tech supremacy.

As foreign doctors—many trained at American medical schools—get better at treating cancer and heart disease, health experts say well-heeled citizens of other countries will have less reason to seek care at U.S. hospitals. Meanwhile, more Americans are seeking health care and college abroad to avoid the spiraling costs in the U.S. From 1999 and 2018, U.S. spending on education-related travel rose 379% and health-related travel soared 1,761%, albeit from low bases.

After breaking his collarbone in a cycling accident in July, 28-year-old Cale Green, who lacks health insurance, spent days on the phone in Anchorage, Alaska, trying to figure out the cost of surgery. An orthopedic practice quoted him $3,800 plus up to $6,000 for an anesthesiologist; the local hospital offered a base price of $28,000 for drugs and a couple of hours in an operating room. Others who had undergone the procedure told him to expect a final tab between $50,000 and $60,000.

Then Mr. Green connected via WhatsApp with a doctor his girlfriend’s family knew in La Paz, Mexico, where they owned a condo. His price: $5,800.

Two weeks after the accident, Mr. Green was en route to Mexico, where the doctor and a team of nurses operated on his shoulder in a pink-stucco hospital.

“Except for the food that they brought and the people speaking Spanish, everything felt similar…it was the same care,” Mr. Green said a couple of months later, well on his way to recovery. The surgery also came with a bonus that Mr. Green would be hard-pressed to find in the U.S.: The doctor invited him to a dinner of fresh-caught marlin after his procedure.

Updated: 12-4-2019

U.S. Private Sector Added 67,000 Jobs In November

ADP report falls short of economists’ expectations; large and midsize businesses post largest increase.

The U.S. nonfarm private sector added 67,000 jobs in November, missing economists’ expectations by a wide margin.

Economists polled by The Wall Street Journal were expecting the ADP National Employment Report to show an addition of 150,000 jobs.

Large and midsize businesses reported the largest increase in new jobs, adding 27,000 and 29,000 jobs, respectively. Small businesses, with 49 or less employees, added 11,000 jobs.

“The job market is losing its shine,” said Mark Zandi, chief economist at Moody’s Analytics, in prepared remarks. “Job openings are declining and if job growth slows any further unemployment will increase.”

The ADP Research Institute collaborates with Moody’s Analytics to produce the monthly report.

The job gains were all in the service-providing sector, which added 85,000 jobs. The education and health sector added 39,000 jobs, the most added in a category on the services side. The worst industry performer in the services group was trade, transportation and utilities, which lost 15,000 jobs.

The goods-producing sector lost 18,000 jobs, reporting job losses across the board in natural resources and mining, construction and manufacturing.

The U.S. Labor Department will release its U.S. employment numbers and unemployment rate for November on Friday.

Updated: 12-6-2019

Heavy-Duty Truck Orders Wane as Industrial Demand Declines

Orders fell by 39% last month as fleets extended a reversal in growth plans, slicing the backlog at production lines.

Order books for heavy-duty truck manufacturers are thinning out as a weaker U.S. industrial economy pushes fleet operators to put the brakes on plans to expand freight-carrying capacity.

Trucking companies in November ordered 17,300 Class 8 trucks, the big rigs used in highway transport, according to a preliminary estimate from industry data provider FTR. That was down 39% from November 2018 and a 21% decrease from October, providing a weak start for what is typically the busiest season for new-equipment orders.

The orders last month were the lowest for a November in four years, and analysts said they expect a backlog at factory production lines that has been dwindling this year to pull back even more. The October backlog was 129,000 units that were ordered but not yet built, according to FTR, less than half of last October’s record backlog of 304,500 units.

“We were living off this high backlog all year,” Don Ake, FTR’s vice president of commercial vehicles, said. “That’s why orders in 2019 were much lower” than last year, when fleets rushed to order new vehicles as freight volumes surged.

Truck-equipment makers have started scaling back production and laying off workers this year as demand for new trucks has weakened.

Daimler Trucks North America LLC said in October it planned to lay off about 900 workers at two North Carolina Freightliner plants as “the market is now clearly returning to normal market levels.”

Engine-maker Cummins Inc. cut its annual revenue forecast in October and the company last month said it plans to lay off about 2,000 workers early next year. “Demand has deteriorated even faster than expected, and we need to adjust to reduce costs,” the Columbus, Ind.-based manufacturer said in a statement.

Transportation data provider ACT Research, which reported similar figures for heavy-duty truck orders, said the November data “show that Class 8 net orders failed to sustain October’s encouraging start to the order season,” when truckers ordered 22,100 units, up 74% from September.

Weakness in the industrial economy and global trade tensions are weighing on transportation demand. U.S. factory activity contracted in November for the fourth straight month, according to the Institute for Supply Management.

Freight volumes and trucking prices have been on the decline. U.S. domestic freight shipments fell 5.9% in October compared with the same month last year, while truckload linehaul rates were down 2.5% year-over-year, according to Cass Information Systems Inc., which handles freight payments for companies.

“Right now the environment is highly uncertain, and fleets are being cautious,” Mr. Ake said. “Instead of placing big orders for the entire year they’re placing small orders for the first quarter.”

Updated: 12-27-2019

Global Bank Job Cuts Tops 75,000 This Year

UniCredit SpA’s plan to eliminate 8,000 jobs is pushing cuts announced by banks this year past 75,000, almost all of them in Europe, where negative interest rates and a slowing economy force lenders to slash costs.

Chief Executive Officer Jean Pierre Mustier on Tuesday announced the measures as part of the next, four-year chapter in his overhaul of Italy’s largest bank. They bring the total job cuts disclosed by banks around the world to 75,700, with 83% of that in Europe.

The figures underscore the weakness of European banks as the region’s export-oriented economy is rocked by international trade disputes while negative interest rates eat further into lending revenue. Unlike in the U.S., where government programs and rising rates helped lenders rebound quickly after the financial crisis, banks in Europe are still struggling to regain their footing. Many are firing staff and selling businesses to shore up profitability. UniCredit says its next round of job cuts will help eliminate 1 billion euros ($1.11 billion) of gross expenses.

Banks from Germany, the most-fragmented major banking market in Europe, top the list of job cuts. Deutsche Bank AG is planning to get rid of 18,000 employees through 2022 as it retreats from a big part of its investment banking business. UniCredit’s announcement adds to the thousands of positions that will go at banks from other European countries as they seek to shore up profitability.

But European banks aren’t alone in firing staff to bolster returns. Bank of Montreal said on Tuesday that it’s cutting 5% of its workforce, or about 2,300 positions. The most dramatic job cuts by a Canadian bank in more than 15 years are part of efforts to improve operating efficiency, according to CEO Darryl White.

It isn’t all gloom, though, as firms seek to add jobs to update their technology and improve compliance. UniCredit says it will spend 9.4 billion euros on its information technology over the coming four years, including on human resources.

Updated: 1-3-2020

U.S. Factory Sector Contracts For Fifth Straight Month

The ISM manufacturing index in December registers its lowest level in over 10 years.

The U.S. factory sector contracted for the fifth consecutive month in December as trade tensions continued to pressure manufacturers.

The Institute for Supply Management said on Friday its manufacturing index fell to 47.2 in December from 48.1 in November. Readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 signal contraction.

Economists surveyed by The Wall Street Journal had expected a reading of 49.0.

Friday’s data, compiled from a monthly survey of purchasing and supply executives across the U.S., was the lowest reading since June 2009.

“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” Tim Fiore, who oversees the ISM survey of factory purchasing and supply managers, said in a statement.

1-17-2020

U.S. Industrial Production Fell 0.3% in December

Gain in manufacturing output countered by 5.6% decline in utilities output brought by unseasonably warm weather.

U.S. industrial production decreased in December, as a sharp drop in utilities output offset a slight gain in factory production.

Industrial production, a measure of factory, mining and utility output, fell a seasonally adjusted 0.3% in December from the prior month, the Federal Reserve said Friday, in line with expectations of economists surveyed by The Wall Street Journal.

Manufacturing output, the biggest component of industrial production, increased 0.2% in December from the previous month. But that gain was countered by a 5.6% decline in utilities output because of lower demand for heating due to unseasonably warm December weather, the Fed said.

The drop in overall industrial production came during a month when U.S. and China officials agreed to the first phase of a trade deal, a truce in a dispute that weighed on the global manufacturing sector for much of 2019. U.S. industrial production was down 1% in December from a year earlier.

Excluding motor vehicles and parts, industrial production advanced 0.6% in December from November. Meanwhile, mining production increased 1.3%.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, decreased by 0.4 percentage point to 77% in December, matching economists’ expectations.

November’s industrial production was revised down to a 0.8% rise, compared with an earlier estimate of a 1.1% increase.

Friday’s report comes amid signs that U.S. factories are heading into 2020 on uneven footing. The Institute for Supply Management reported earlier this month that manufacturing activity contracted in December for the fifth straight month, while data firm IHS Markit also said factory activity slowed last month.

Still, the U.S. and China on Wednesday signed the phase one trade agreement, which includes commitments by Beijing to step up purchases of U.S. manufactured goods by around $80 billion, a development that could bode well for factory output this year.

Updated: 1-18-2020

Employers Pull Back on Posting New Jobs

Other data show unseasonably warm weather affected December home building, utilities output.

Job openings declined sharply in November, a sign of weakening employer demand that could restrain job growth in 2020.

Job openings fell 10.8% in November from a year earlier to 6.8 million, the Labor Department said Friday. That marked the sixth straight month of annual declines and was the steepest fall since December 2009, when openings dropped 18.7% from a year earlier.

“Pullback in employer demand is leading to a leveling off of momentum in the labor market and also in the bargaining power for job seekers,” Nick Bunker, economist at Indeed, said.

Separate economic data on industrial production and housing starts released Friday shed light on other parts of the U.S. economy affected by unseasonably warm weather.

Job openings peaked at 7.6 million in November 2018 and have declined about 800,000 since then. They remain elevated compared with pre-2018 years. Many businesses cite widespread labor shortages as a factor holding back job growth, according to the Federal’s “beige book,” a collection of anecdotal reports from businesses around the country.

The job market broadly remains in solid shape. Openings continued to run higher than the number of unemployed workers for the 21st straight month in November. Further, the U.S. labor market is still adding jobs at a steady pace and the unemployment rate is at a half-century low of 3.5%. One missing piece has been wages, which grew 2.9% in December from a year earlier, the smallest gain since July 2018.

Still, economists surveyed by The Wall Street Journal expect payroll gains to slow in 2020 as the pace of hiring eases. Economists expect monthly nonfarm-payroll gains to average 116,650 in the fourth quarter of 2020, down from the fourth quarter of 2019.

The rate at which workers are quitting their jobs isn’t budging, a possible explanation for sluggish pay growth. Workers tend to command higher pay when they move from one job to another. The so-called quits rate logged in at 2.3% in November for the ninth time in 2019.

In 2019, the U.S. labor market was a source of strength while manufacturing activity at home and abroad faltered.

In December, there were signs of reversal in the goods-producing sector. Manufacturing output crept up, according to a Federal Reserve report. That could reflect early reaction to the agreement between U.S. and Chinese officials to the first phase of a trade deal, a truce in a dispute that weighed on global manufacturing for much of last year.

Separately, utilities production declined by 5.6% because of lower demand for heating due to unseasonably warm December weather, the Federal Reserve said.

Mild winter weather also helped boost housing starts in December, analysts noted. U.S. housing starts increased to a seasonally adjusted annual rate of 1.608 million in December, the highest level since December 2006, Friday’s Commerce Department report showed.

Starts have increased the past three months, suggesting historically low mortgage rates coupled with a favorable U.S. economy are supporting the U.S. housing market.

Updated: 5-6-2020

US Private Payrolls Drop By 20.2 Million In April, The Worst Job Loss In The History Of ADP Report

Private payrolls hemorrhaged more than 20 million jobs in April as companies sliced workers amid a coronavirus-induced shutdown that took most of the U.S. economy offline, according to a report Wednesday from ADP.

In all, the decline totaled 20,236,000 — easily the worst loss in the survey’s history going back to 2002 but not as bad as the 22 million that economists surveyed by Dow Jones had been expecting. The previous record was 834,665 in February 2009 amid the financial crisis and accompanying Great Recession.

“Job losses of this scale are unprecedented,” said Ahu Yildirmaz, co-head of the ADP Research Institute, which compiles the report in conjunction with Moody’s Analytics. “The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession.”

The report likely still understates the actual damage done during the implementation of social distancing measures. ADP used the week of April 12 as its sample period, similar to the method the Labor Department uses for its official nonfarm payrolls count. The subsequent weeks in the month saw some 8.3 million more Americans file for unemployment benefits and economists expect another 3 million last week.

In all, more than 30 million have filed claims over the past six weeks.

The April total comes after a drop of 149,000 in March, revised lower from the initially reported 26,594.

The only bright spot from the report may be a signal that the worst is behind as more states curb or end restrictions put into place from coronavirus containment efforts.

“The worst of it is at hand,” said Mark Zandi, chief economist at Moody’s Analytics. “We should see a turn here relatively soon in the job statistics. At least for the next few months, I would anticipate some big, positive numbers.”

Service Industries Hit Hardest

As expected, job losses were most profound in the services and hospitality sector, as bars and restaurants had to close during the pandemic with virtually no eat-in dining allowed. In all, the sector saw 8.6 million furloughs even as some establishments tried to make up for lost business with curbside and delivery services.

Trade, transportation and utilities was the next hardest-hit sector, losing 3.44 million, while construction dropped 2.48 million. Other big losses came in manufacturing (1.67 million), the other services category (1.3 million), and professional and business services (1.17 million). Health care and social assistance plunged by 999,000, information services fell by 309,000 and financial services had 216,000 layoffs.

The only areas reporting gains were education, with 28,000, and management of companies and enterprises, at 6,000.

Broadly speaking, service-related industries fell by just over 16 million, while goods producers declined by 4.3 million.

Big businesses, with more than 500 employees, were hit hardest, losing just shy of 9 million jobs. Companies with fewer than 50 workers were down by just over 6 million and medium-sized firms saw 5.27 million layoffs.

The steep job losses come amid trillions of dollars in rescue programs from Congress and the Federal Reserve that, in part, sought to encourage companies to continue paying workers during the shutdown. Fed Vice Chairman Richard Clarida told CNBC on Tuesday that while he sees a rebound coming in the second half of the year, he envisions policymakers having to do more to keep the economy afloat.

St. Louis Fed President James Bullard told CNBC on Wednesday that the sharp jump in jobless is not surprising and he expects the situation to turn around considerably before the end of the year.

“It’s not surprising. It’s a pandemic, it’s a shutdown situation,” Bullard said on “Squawk Box.” “We need to get the pandemic under control. Then of course you have to help these workers.”

The ADP report precedes Friday’s release from the Bureau of Labor Statistics, which is expected to show that nonfarm payrolls fell by 21.5 million in April, from March’s 701,000 drop, with the unemployment rate climbing to 16% from 4.4%.

Updated: 5-12-2020

Technology Sector Shed Record Number of Jobs In April

Steep decline dashes hopes that enterprise IT would be a bright spot in an economy battered by the coronavirus pandemic.

Employers in the U.S. information technology sector shed a record 112,000 jobs in April, erasing a year’s worth of hiring gains, IT trade group CompTIA reported Friday.

The results are based on Labor Department data released Friday, which reported a historic 20.5 million jobs cuts for all occupations in the U.S. in April and a record 14.7% unemployment rate.

The losses in the IT sector come despite strong demand for tech support as companies race to deploy remote-working tools to cope with lockdowns triggered by the Covid-19 outbreak, dashing hopes that enterprise IT might be a bright spot in a battered labor market.

Many companies are putting long-term technology projects on hold as they channel resources into business-continuity efforts, said Tim Herbert, CompTIA’s executive vice president for research and market intelligence.

“The hardest hit industries are in survival mode and we can assume that all IT resources will be devoted to emergency needs,” Mr. Herbert said.

Roughly half of the nation’s 12 million technology workers are employed in the enterprise tech sector, with the rest in IT-related jobs at companies spread across the economy. Together they represent roughly 8% of the U.S. workforce, according to CompTIA.

Its analysis of tech-sector employment includes positions such as sales, marketing and operations, as well as core technology workers.

Enterprise IT hiring by nontech companies was more resilient, growing by 80,000 new jobs in April, following two months of declines, but the gains were offset by total job losses for IT professionals, the CompTIA report said.

Monthly job postings for core IT positions also fell, by 90,000, to 270,000 in April, the report said.

“Given the uncertainty, we are being very conservative so we don’t get ahead of our skis and can focus on existing employees,” said Paul Chapman, chief information officer at online storage file-sharing service Box Inc. He said the company plans to continue hiring for critical business roles, including compliance and security teams, and business system analysis and engineering teams.

The Labor Department data showed employment falling in all business sectors, with the sharpest declines in leisure and hospitality, retail, health-care, education and professional services, the agency said.

A similar analysis of the agency’s data by consulting firm Janco Associates Inc. put net job losses last month for IT workers at more than 100,000. Victor Janulaitis, the firm’s chief executive officer, said many jobless enterprise-tech professionals are having trouble finding contract work.

All hiring is down, including IT, said Martha Heller, CEO of tech executive recruiting firm Heller Search Associates.

She said in other areas, such as food and beverage, consumer packaged goods and health insurance, chief information officers are taking advantage of the softer labor market to pick up hard-to-fill roles, including cybersecurity, systems architecture and advanced software developers.

In the near term many companies are pulling back on current and planned IT projects, such as more complex deployments of artificial intelligence or automation, as they grapple with the economic fallout from the coronavirus pandemic, according to a report by market research firm Canalys.

The pullback is in stark contrast to a year ago, when demand was soaring for workers with advanced skills in areas such as data analytics and artificial intelligence, pushing down the U.S. unemployment rate for IT occupations to 1.3%, a 20-year low, CompTIA reported in May last year.

“Tech has held up a bit better than other areas, as IT professionals were integral in supporting the transition to a remote workforce,” said Ryan Sutton, a district president for staffing firm Robert Half International Inc. “However, many IT initiatives are dependent on funding, which is likely on hold, at least temporarily,” Mr. Sutton said.

Research group International Data Corp. on Monday revised its global IT spending forecast downward, projecting a decline of 5.1% this year to $2.25 trillion.

Tom Gimbel, CEO of LaSalle Network Inc., a technology staffing and recruiting firm, said that once the crisis fades he expects a rebound in tech hiring as businesses seek out technology tools to cut costs and eke out efficiencies during a prolonged economic recovery.

“While new product implementations will slow down, we will see strong hiring of corporate IT, infrastructure, development and security roles,” Mr. Gimbel said.

Updated: 3-3-2021

U.S. Service Industries Expand At Slowest Pace In Nine Months

Growth at U.S. service providers slowed to a nine-month low in February as companies grappled with logistical challenges and rising prices at the same time a stretch of severe winter weather gripped much of the nation.

The Institute for Supply Management’s services index fell to 55.3 during the month from an almost two-year high of 58.7 in January, according to data released Wednesday. Readings above 50 signal growth and the February figure was weaker than the most pessimistic forecast in a Bloomberg survey of economists.

The group’s measures of orders and business activity also plummeted to the lowest levels since May. While many service providers remain constrained by the pandemic, the setback in February included an arctic blast that disrupted supply chains, caused blackouts and impeded commerce in some areas.

“Respondents are mostly optimistic about business recovery and the economy. Production-capacity constraints, material shortages and challenges in logistics and human resources are impacting the supply chain,” Anthony Nieves, chair of the ISM Services Business Survey Committee, said in statement.

The polar vortex brought record-cold temperatures to more than 9,000 U.S. cities. The most severe case occurred in Texas, where the state’s power grid was overwhelmed and millions of residences went without lights, heat and water.

The weather “one of the variables for sure one of the factors in there but not the big one. The big one I feel right now has to do with capacity constraints due to increased demand and not having the output, coupled with the logistics issues,” Nieves said on a conference call with reporters.

Seventeen service industries reported growth during the month, led by accommodation and food services, wholesale trade, transportation and warehousing, and construction.

Backlogs Rise

In a sign the slowdown in services activity is temporary, the ISM index of order backlogs rose to a six-month high of 55.2, while a gauge of export demand was the strongest since June.

The services figures also showed prices paid for materials jumped to 71.8 in February, the highest since September 2008. Delivery times also lengthened. The group’s manufacturing data, released Monday, showed input costs for factories were also the highest since 2008.

Both reports indicate that supply shortages and labor constraints remain obstacles across a broad swath of industries.

Select ISM Industry Comments

“Suppliers are taking the opportunity with the commodity-price increases in the last few months to propose price increases that are above and beyond normal expectations, causing significant concern. “ – Accommodation & Food Services

“Sales of residential real estate continue to be strong, even outstripping supply. Cost inflation in building materials seen as shortages develop from sporadic Covid-19 closures at manufacturing facilities.” – Construction

“Supplier deliveries continue to be an issue as well as lead-times. Additionally, price increases are occurring with more frequency for products containing raw materials such as copper and steel.” – Retail Trade

“We are seeing an ongoing influx of price increases due to raw-material shortages, labor shortages, and transportation delays.” – Wholesale Trade

“Many materials have inconsistent lead times or are facing delivery delays.” – Utilities

The ISM’s index of services employment indicated slower growth in February, falling to 52.7 from 55.2. Another report on Wednesday from the ADP Research Institute showed companies added fewer workers during the month than forecast.

U.S. Private Payrolls Increased By ‘Sluggish’ 117,000 In February, ADP Says

Gain Well Below Economist Forecasts Of 225,000 Gain.

The Numbers: The U.S. private-sector added jobs in February at a slower pace than in the prior month, according to the ADP National Employment Report released Wednesday.

Private payrolls rose by 117,000 jobs in February after adding a revised 195,000 in the prior month. This was a larger job gain in January than the initial estimate of an increase of 174,000. Economists polled by the Wall Street Journal forecast a gain of 225,000 private sector jobs in February. The ADP report is produced with Moody’s Analytics.

What Happened: By company size, small businesses added 32,000 private-sector jobs in February while large businesses added only 28,000. Medium-sized businesses, defined as firms with 50 to 499 employees, added 57,000 jobs.

Service sector providers added 131,000 jobs in February. Meanwhile goods producers lost 14,000 jobs. Manufacturing also shed 14,000 jobs.

Big Picture: The data may give a preview of the Labor Department’s monthly employment report to be released Friday. Economists are forecasting the labor market strengthened last month with a gain of 210,000 jobs after a 49,000 gain in January. The unemployment rate is expected to remain steady at 6.3%.

What ADP Reported: “The labor market continues to post a sluggish recovery across the board,” said Nela Richardson, chief economist, ADP. ” With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence,” she added.

What Outside Economists Said: “Overall, this report left cause for concern as the recovery remains tepid in the labor market,” said TJ Connelly, head of research at Contingent Macro.

Market Reaction: Stocks were mixed at the opening, having lost some of their early momentum after the ADP data was released. The Dow Jones Industrial Average was up 115 points in early trading while the S&P 500 index was slightly lower.

Updated: 7-23-2021

Growth Softens At U.S. Service Firms On Capacity Constraints

A measure of activity at U.S. service providers settled back in July to a five-month low, reflecting businesses’ persistent struggle to fill positions and stock shelves.

The IHS Markit flash index of purchasing managers in the service sector slipped to 59.8 from 64.6 a month earlier, the group reported Friday. While the gauge has softened since soaring to a record in May, it remains historically elevated. Readings above 50 indicate growth.

A measure of services employment cooled to a four-month low, with companies indicating that the inability to lure workers was holding back activity. Combined with still-elevated measures of input costs and selling prices, the lack of available labor led to weaker business expectations.

At the same time, the IHS Markit U.S. manufacturing purchasing managers’ index advanced to a fresh record of 63.1 from 62.1 a month earlier. The group’s price measures also climbed to the highest readings in data back to 2007.

“While the second quarter may therefore represent a peaking in the pace of economic growth according to the PMI, the third quarter is still looking encouragingly strong,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

“Short-term capacity issues remain a concern, constraining output in many manufacturing and service sector companies while simultaneously pushing prices higher as demand exceeds supply,” Williamson said.

Order backlogs at U.S. manufacturers were the second-highest on record, according to the group’s measure.

The composite index, measuring output at both manufacturers and service providers, slipped to a four-month low.

Updated: 8-23-2021

Growth At U.S. Services, Factories Slows To An Eight-Month Low

U.S. business activity continues to downshift, with growth slowing to an eight-month low in August against a backdrop of materials shortages, a lack of labor and an upswing in coronavirus infections.

The IHS Markit flash August composite index of purchasing managers at services and manufacturers dropped to 55.4 from 59.9 a month earlier, the group reported Monday. Readings above 50 indicate growth and the gauge has decreased each month since hitting a record 68.7 in May.

The pullback this month underscores the extent to which supply chain disruptions are hammering firms already struggling to meet demand. Service providers and manufacturers continue to face challenges attracting workers and obtaining the supplies they need.

At factories, for instance, an IHS gauge of supplier deliveries showed the longest lead times in records back to 2007.

“Not only have supply chain delays hit a new survey record high, but the August survey saw increasing frustrations in relation to hiring,” Chris Williamson, chief business economist at IHS Markit, said in a statement. “Jobs growth waned to the lowest since July of last year as companies either failed to find suitable staff or existing workers switched jobs.”

Limited capacity is translating into sustained inflationary pressures as well. The group’s composite index of input prices increased in August to the second-highest reading in data back to 2009. A measure of prices received also advanced, indicating companies are having some success passing along higher costs.

The IHS Markit index of services activity declined to show the slowest pace of growth since December, while a measure of new business dropped to a one-year low.

The U.S. services data stand in contrast to developments in Europe. The group’s euro-area PMI showed growth at services exceeding the expansion at factories for the first time since the pandemic began.

The group’s gauge of U.S. manufacturing activity reached a four-month low as output, factory employment and orders cooled. Indexes of both input and output prices climbed to the highest in survey history.

Updated: 9-3-2021

U.S. Service Industry Expansion Cools From Month-Earlier Record

U.S. service providers expanded at a robust pace in August, though a step slower than the record rate seen a month earlier as a gauge of business activity moderated.

The Institute for Supply Management’s services index fell to 61.7 last month from 64.1 in July. Readings above 50 indicate expansion.

The figures suggest that concerns about the highly contagious delta variant are cooling demand for some services like dining out, leisure and travel. The ISM gauge of business activity, which parallels the group’s factory production measure, fell to six-month low of 60.1.

Service providers are also facing many of the same supply and labor constraints as manufacturers. Inventories contracted further in August, falling to the lowest level in a year, while a measure of services employment eased slightly.

“The tight labor market, materials shortages, inflation and logistics issues continue to cause capacity constraints,” Anthony Nieves, chair of the ISM services business survey committee, said in a statement.

Figures earlier from the Labor Department showed hiring downshifted abruptly in August with the smallest jobs gain in seven months. Employment in leisure and hospitality, which has posted strong gains recently, was flat amid the spreading delta variant and persistent hiring challenges.

The report did, however, offer some indication that the recent build-up in inflationary pressures is moderating. The ISM’s prices paid index fell to the lowest since March after hitting an almost 16-year high in July. Meantime, supplier delivery times and order backlogs indexes eased.

Industry Comments

“Supply chain disruptions — including manufacturing-labor shortages, logistics delays and lack of material to make products — are significantly disrupting our business.” – Accommodation & Food Services

“Material and labor shortages continue to hinder productivity. Price increases are ever-present and repetitive.” – Construction

“Supplies are tight in technology hardware.” – Information

“Temporary labor continues to be in short supply. Transportation costs are inflating prices on all products.” – Management of Companies

“A limited supply of critical items has caused us to expand our line of products and our supplier base.” – Retail Trade

“Steel shortages continue. Labor constraints at suppliers continue to push delivery dates out. Logistics issues (are also ongoing), as container space, truck drivers and the like remain difficult to obtain.” – Wholesale Trade

The report follows the ISM’s report on factory activity, which showed manufacturing expanded at a stronger-than-expected pace in August, reflecting faster orders and production growth as well as rising backlogs consistent with global supply chain challenges.

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