The Monday Economic Report for 3/15/2010

March 15, 2010

As opposed to the mixed bag last week, this week's economic report brings generally positive news. Three of the five major economic indicators that came out last week improved. Most surprising was the solid increase in retail sales last month. Given the severe winter weather as well as ongoing troubles in the auto sector, a slight decline was anticipated. (To see all of last week's indicators, see the Latest Economic Reports section below.)

Earlier this month, the Commerce Department released a new report on jobs supported by manufacturing exports in 2008. The report is available at www.census.gov/mcd/exports/

Prior reports cover the following years: 2006, 2005, 2003 and 2002.

An analysis of the 2003-2008 period shows that manufacturing export growth had a significant positive impact not only on manufacturing but on other sectors as well.

• From 2003 to 2008, total U.S. manufactured shipments rose  37 percent.
• Exports and export-supported shipments rose 70 percent.
• Other manufacturing shipments rose 30 percent.
• The increase in export-related activity accounted for one-third of the rise in manufacturing shipments between 2003 and 2008.
• As a result, the share of export-related activity rose from 17 percent to 22 percent of overall manufactured shipments -- a 25-percent increase in just 5 years.

Rising exports not only support manufacturing jobs, but jobs in other sectors as well.

In 2003, manufactured exports supported a total of 5 million jobs, roughly half (2.4 million) in manufacturing and half (2.6 million) in other sectors, like business services, transportation, wholesale trade and agriculture.

By 2008, manufactured exports supported close to 7 million jobs (6.8 million), a 34-percent increase in just 5 years (see chart above).

While exports created 446,000 new manufacturing jobs, three-quarters of the new jobs created by the rise in manufactured exports (1.3 million) were in sectors outside of manufacturing. This increase in employment from manufactured exports accounted for 28 percent of the 4.7 million increase in private sector employment (outside of manufacturing) during this time.

When these data are further analyzed, they will be incorporated into the state trade data pages on the NAM web site, located at State-Trade-Data

Dave Huether
Chief Economist
National Association of Manufacturers

Latest Economic Reports

Last Week’s Economic Indicators:

Color Code

Positive (improving)

Positive (slowing)

Unchanged

Negative (improving)

Negative (declining)

International Trade (January)

The trade deficit shrank $2.6 billion from December to $37.3 billion in January. Both exports and imports fell. Declines occurred in crude oil and motor vehicle trade. 

Exports and imports of capital goods also declined. The export drop-off was due to the volatile aircraft sector, and the import fall was due to computers and communications equipment. This signals that domestic business investment in the first quarter will be slower that last quarter, when companies took advantage of expiring pro-investment tax provisions.

Weekly Jobless Claims

Initial claims for unemployment insurance decreased by 6,000 to 462,000 for the week ending March 6, a move in line with expectations. Though still very high and consistent with job losses, initial claims have come down from their distorted highs in recent weeks.

Retail Sales (February)

Besting an anticipated 0.2-percent decline, retail sales actually increased by a strong 0.3 percent in February. Outside of autos, where sales fell by 2 percent, retail sales rose by 0.8 percent, the strongest gain in 3 months.

Given the severe winter weather last month, the strong showing in retail sales was a surprise and was driven by one of two factors. First, consumer spending is really on a faster trajectory than previously thought. Second, these preliminary data are not correct and will be revised downward. The initial retail sales report is based on a small sample, likely skewed toward larger retailers who may have been more likely to be able to remain open during the storms.

Consumer Sentiment (March)

The preliminary report by the University of Michigan showed that consumer sentiment slipped for a second straight month in March, putting confidence back at December's level.

Even with the recession over, consumer fundamentals remain weak. With confidence mainly driven by the labor and housing markets, which remain under stress, a significant rebound in confidence in the near term is unlikely.

Business Inventories (January)

Total business inventories were unchanged in January, against expectations for a 0.3 percent gain. The decline was led by a drop in wholesale and retail stockpiles, while manufacturers showed an inventory build.

The aggregate I/S ratio decreased yet again, now at 1.25 from 1.26 previously and a high of 1.46 a year ago. Inventories are becoming leaner, and with the recovery continuing, businesses soon may have to increase production to keep pace with demand.

{Back to top}

This Week’s Indicators:

Monday

NY Empire State Manufacturing Survey (March)

Industrial Production (February)

NAHB Housing Market Index (March)

Tuesday

Residential Construction (February)

Wednesday

 Producer Price Index (February)

 Thursday

 Consumer Price Index (February)

Weekly Jobless Claims

Philadelphia Fed Manufacturing Survey (March)

Questions or Comments?
Please contact Dave Huether atdhuether@nam.org

Copyright © 2010 National Association of Manufacturers

To unsubscribe to this communication, click here.