The combined findings of two monthly economic reports, released last week, point toward a continuing slowdown for the manufacturing industry.
Overall, the U.S. unemployment rate declined 0.2% to 3.5% in September, matching a 50-year low. Employers added 136,000 jobs during the month and the number of unemployed persons decreased by 275,000 to 5.8 million. However, the tightening labor market failed to lift wages; the 12-month growth rate fell to 2.9%, from 3.2% in August, according to U.S. Bureau of Labor Statistics Employment Situation Report.
In the manufacturing sector, manufacturers were adding as many as 25,000 jobs a month in the spring of 2018. Over the last year, the average job additions accounted for a few thousand positions a month, but in September the sector lost 2,000 jobs, primarily driven by a lack of demand. New orders, backlog, raw materials, inventories, exports and imports also contracted across the board last month, according to the Institute for Supply Management's ISM manufacturing index.
The monthly ISM U.S. manufacturing survey, Manufacturing ISM Report On Business, reported its lowest findings in a decade. In its second consecutive month of contraction, the U.S. manufacturing purchasing managers’ index was 47.8% for September, the lowest since June 2009. For reference, any figure below 50% signals a contraction, according to ISM.
Even with unemployment hitting a 50-year low and continuing job growth, the economy still lost some momentum in September. The new export orders index was 41%, the lowest level since March 2009, down from the August reading of 43.3%, according to ISM. Some analysts have speculated that the decline of the September export order could be driven by America's ongoing trade war with China.
“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” said ISM Chair Timothy Fiore, as the September numbers were released.
President Donald Trump blamed high interest rates and a strong dollar for the weakness in manufacturing, saying in a tweet last week that the Federal Reserve “allowed the Dollar to get so strong ... that our manufacturers are being negatively affected. Fed Rate too high.”