The March jobs report showed another month of healthy job creation in the United States as the economy added 215,000 jobs during the month, outpacing the 205,000 expectation.
Many sectors of the economy, including construction, government, education and health, added jobs in March, but manufacturing posted a steep loss of 29,000 jobs, compared to expectations for a pickup of 2,000.
By contrast, a closely-watched industry report from the Institute for Supply Management showed the overall U.S. manufacturing sector strengthened last month. The ISM gauge rose to 51.8 in March, out of contraction territory, from 49.5 in February. It also surpassed expectations for a reading of 50.7. Further, new orders also rose more than forecasted.
Danielle DiMartino Booth, former Dallas Fed advisor, who appeared on Cavuto Coast-to-Coast Friday afternoon, said the divergence of the two data points was a bit puzzling.
“[There were] a lot of mixed signals going on when you consider manufacturing lost jobs at the fastest pace, in this morning’s report, since 2009, and yet you saw manufacturing technically, by another gauge, go into a recovery mode,” she explained.
IHS Global Insight’s U.S. economist, Michael Montgomery, noted that it’s important for data watchers to keep in mind one month doesn’t make a trend for the ISM report.
“The gain has many of the hallmarks of a blip, since 60% of the 2.3 index point bounce came from the always-volatile orders component, and a good month for orders and shipments was barely large enough to keep backlogs climbing,” he explained.
He went on to say the “most telling indicator” that the “one month wonder” ISM report was more than likely a fluke, was the manufacturing total hours worked component of the Labor Department’s jobs report, which slid 0.4% during the month.
The pressure on the sector is twofold.
The strong U.S. dollar has made American-made goods increasingly more expensive for other nations, which has proved to be a drag on the U.S. sector. Additionally, less investment by the energy sector, which has struggled with multi-year low oil prices, has also weighed.
It’s also worth noting the factory sector accounts for about 12% of the nation’s GDP, according to the World Bank, as the U.S. is a more services-oriented economy. For context, in June 1979, there were 19.7 million factory jobs compared to today’s 12.3 million.
Booth argued that a big reason for the decline in manufacturing jobs is a lack of good wages.
“I think that the more wage pressures companies see, the more they’ll continue to push manufacturing jobs offshore, or increase productivity here by using robotics,” she said. “If you look closely at the jobs that have been created we’ve had 1.5 million manufacturing jobs lost, while we’ve created 1.6 million jobs for bartenders.”
To that point, the underemployment rate has been a sticking point for many who dig deep into the monthly jobs report figures. In March, the rate, which represents discouraged workers and those working part-time but seeking full-time work, climbed to 9.8% from 9.7% in February. Meanwhile, average hourly wages in March ticked up 0.3%, more than expected. On a year-over-year basis, wages were up 2.3%.