June's most critical business reports for manufacturers continue to reveal a significantly challenging environment for U.S. companies. Get the latest on labor, manufacturing output and capacity utilization, prices, optimism, regional performance and more in our monthly roundup.
Executive Summary
• The number of unfilled manufacturing jobs nationally has hit an all-time high, skirting the one-million mark.
• May was the slowest month of 2022 for manufacturing job creation.
• The PPI for final demand goods rose 1.4% in May, with the majority of the increase attributable to a spike in final demand energy.
• Manufacturing capacity utilization eased off April’s 15-year high, but is still 1% above its long-run average.
• Regional surveys showed significantly muted growth in some states, with the New York and Mid-Atlantic region slowing sharply.
• 92% of manufacturers in the Plains states report being impacted by rising materials prices, with 87% expecting to be affected for more than 6 months.
• Optimism among manufacturers remains subdued in most regions, with optimism among Texas manufacturers hitting a 2-year low.
Manufacturing Output Holds Steady
U.S. manufacturing production inched down 0.1% in May, following three months of growth, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released June 17th. Meanwhile, the indexes for mining and utilities rose 1%.
Manufacturing capacity utilization decreased 1% in May, after hitting a 15-year high in April, although the current manufacturing capacity utilization reading of 79.1% is one percentage point above its long-run average.
Manufacturing sectors that saw the sharpest decline in capacity utilization included machinery, electrical equipment, and wood products. Sectors increasing capacity utilization over the month included petroleum and coal products, miscellaneous manufacturing, primary metals, and nonmetallic mineral products.
Taking a longer look, manufacturing output has increased 4.8% over the past twelve months.
May’s output gains in manufacturing were strongest in petroleum and coal products, up 2.5% in May and 4.8% year-over-year. Nonmetallic mineral products also came in strong, up 1.8% in May and 10.3% year-over-year. Output declines were seen across many other sectors, with losses sharpest in wood products, machinery, and electrical equipment.
Hiring in U.S Manufacturing Wanes as Unfilled Positions Hit All-Time High
U.S. manufacturers added 18,000 jobs in May, continuing an ongoing hiring trend, but falling short of the 55,000 new positions added in April, according to the latest from the Bureau of Labor Statistics.
Meanwhile, the U.S. economy as a whole added 390,000 positions, while the unemployment rate remained steady at 3.6%.
In May, employment gains were strongest in fabricated metals (+7,100 jobs), food manufacturing (+6,100 jobs), computer and electronic products (+4,400 jobs), and wood products (+3,800 jobs), chemicals (+3,700 jobs) and electronic instruments (+3,400).
Gains were offset by losses in motor vehicles (-7,900), as well as machinery (-3,200), and miscellaneous nondurable goods manufacturing (-2,900).
Meanwhile, unfilled jobs in manufacturing hit an all-time high of 982,000 in April, according to the latest JOLTS (Job Openings and Labor Turnover Survey) provided by the BLS on June 1st. The nearly one million job openings in the sector represents a 13% increase from May 2022. Unfilled jobs in the manufacturing sector decreased slightly at the start of the year after hitting a high of 944,000 jobs in September of 2021.
Manufacturing Activity Rebounds in May, but Challanges Remain
April’s increase in manufacturing job openings was reflected in last month’s Institute for Supply Management’s report on manufacturing activity, which found manufacturers reporting a higher number of quits than usual.
May’s report on U.S. manufacturing activity from the ISM, however, finds manufacturers reporting fewer quits compared to April, despite the Employment Index falling into contraction.
The ISM also reported manufacturing activity overall rebounded in May, after slowing in April. The ISM reported its index rose 0.7% to a reading of 56.1%, with strong growth in new orders, output, and exports.
Seventeen of fifteen of eighteen industries surveyed by the ISM reported growth in May, led by apparel, leather & allied products, printing and related support activities, and machinery.
Meanwhile, prices paid by manufacturers eased further in May but remain at historic highs, according to the ISM. This trend was reflected in the Labor Department’s Producer Price Index released June 14th, which found the PPI for final demand goods rose 1.4% in May. The PPI reported roughly 70% of May’s price increase for final demand goods is attributable to a 5% increase in final demand energy.
Regional Surveys Show Waning Optimism, Declining Orders
Empire State Manufacturing Survey: Following a sharp decline into negative territory in May, manufacturing activity in the New York region recovered slightly in June, though activity still remains in contraction. Manufacturing activity in the New York region increased 10 points in June to a reading of -1.2, according to the Empire State Manufacturing Survey.
In June, both new orders and shipments increased, while unfilled orders declined for the first time in more than a year. Inventories posted a significant increase, as did employment. The Fed reports optimism among executives remains subdued, with the index for future business conditions falling four points to a reading of 14. Other outlook metrics found that delivery times are expected to fall within the next six months, along with unfilled orders. Executives expect higher prices and increased hiring as well.
Richmond Fed Manufacturing Survey: Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, declined sharply in May, falling from a reading of 14 in April to -9 in May.
The decline was led by the shipments and volume of new order indices, which fell into negative territory, with shipments falling to -16 and new orders falling to -15. The employment component of the survey also fell but remains in growth territory at a reading of 8.
Texas Manufacturing Outlook Survey: Meanwhile, Texas manufacturing activity expanded rapidly in May, with the survey’s production index rising from 10.8 in April to 18.8 this month.
However, other metrics showed mixed results, with capacity utilization, shipments, and employment expanding, while new orders fell 9 points to a reading of 3.2, and the growth rate of orders index fell into contraction at a reading of -5.3.
Prices continue to be high, with the raw materials index twice its average of 27.8, this month coming in at a reading of 61.8.
Manufacturers in the Texas region were generally less optimistic compared to previous months, with the future general business activity index falling 8 points to -6.5. This is the first time the index has landed in negative territory in 2 years.
Kansas City February Manufacturing Survey: Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) slowed slightly in May, easing from a reading of 25 in April to 23 in May.
Industries that performed well the Kansas City survey in April included transportation equipment, electrical equipment, and furniture manufacturing. Indexes for new orders, employment, and backlogs rose at an accelerated pace compared to April.
This month, the 10th district included a special survey on prices, disruptions/shortages, and employment and the results found that 92% of respondents reported being impacted by rising materials prices and 87% expect this trend to continue for 6 months or longer.
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