Thursday, August 1, 2019

If you make stuff in America, things are likely stalling out for you

One of the few things keeping Donald Trump's approval from slipping below the Point of No Return for his presidency is continual reports that the US economy is allegedly in great shape. And MSNBC's Chris Hayes observed last night that maybe Dems shouldn't accept that framing.

Corporate media might not be noticing it as a whole, but Hayes seems to have a point that is especially relevant in our part of the country. We found out yesterday from the Institute of Supply Management (ISM) that Midwest manufacturing is now at multi-year lows.
The Chicago Business BarometerTM, produced with MNI, eased further to 44.4 in July from 49.7 last month, the second sub-50 reading in 30 months.

The Production indicator fell 22% on the month to hit a 10-year low. Demand remained muted, highlighted by the New Orders indicator that subsided further into contraction.

Order Backlogs remained below 50 for the third consecutive month, although it rose slightly on June’s reading.

Firms continued to accumulate inventories amid longer lead times and economic uncertainty.

Weaker demand and production led firms to adjust their workforce. The Employment indicator fell into contraction for the first time since October 2017 and hit the lowest level since October 2009.
And while manufacturing in the Midwest is doing especially poorly, US manufacturing as a whole isn’t doing much better.
Manufacturing expanded in July, as the PMI® registered 51.2 percent, a decrease of 0.5 percentage point from the June reading of 51.7 percent. This is the lowest reading since August 2016, when the index registered 49.6 percent. “This indicates growth in manufacturing for the 35th consecutive month. The PMI® continued a period of expansion softening, with four straight months of expansion decline. Softening this month was primarily due to slower growth in demand and consumption, indicated by the New Orders, Production and Employment indexes. Four of the six big industries expanded, as was the case in June, but at lower levels,” says [ISM Manufacturing Business Survey Committee Chair Timothy] Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting…

ISM®’s Employment Index registered 51.7 percent in July, a decrease of 2.8 percentage points when compared to the June reading of 54.5 percent. This indicates growth in employment in July for the 34th consecutive month. “Employment continued to expand slightly compared to June. Comments were generally ‘pro hire,’ but there is a growing reluctance to replace unplanned exits and retirements,” says Fiore. An Employment Index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment…

The Inventories Index registered 49.5 percent in July, an increase of 0.4 percentage point from the 49.1 percent reported for June. “The index contracted for the second straight month. Inventories were again depleted relative to production, due to production-output strength. Many respondents noted that they continue to watch inventories closely to align with softening demand,” says Fiore. An Inventories Index greater than 44.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars)….

The ISM® Prices Index registered 45.1 percent in July, a decrease of 2.8 percentage points from the June reading of 47.9 percent, indicating raw materials prices decreased for the second month in a row. “Prices contracted in July at higher rates compared to June. Respondents reported a large-scale decrease in prices for aluminum, copper, corrugate, computer memory and steel products,” says Fiore. A Prices Index above 52.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

And this softening was before “Tariff Man” reappeared today to tank the stock market. Ruh roh.

Looking back to the end of the 2nd Quarter, we got numbers out today that indicates things were slowing down in on another blue-collar industry.
Total Construction
Construction spending during June 2019 was estimated at a seasonally adjusted annual rate of $1,287.0 billion, 1.3 percent (±1.2 percent) below the revised May estimate of $1,303.4 billion. The June figure is 2.1 percent (±1.6 percent) below the June 2018 estimate of $1,314.8 billion.

During the first six months of this year, construction spending amounted to $615.8 billion, 0.5 percent (±1.2 percent)* below the $619.0 billion for the same period in 2018.
And not only did total construction spending drop in the first 6 months of the year, the month-vs-month drop over the last 12 months is even worse.

Construction, annual rate, June 2019 vs June 2018
All construction -2.1%
Private sector construction -4.6%
Residential construction -8.1%
Public construction +6.1%

Which goes with my theory that deficit spending by government is a big reason why the economy seems to be OK on the surface. But even that public sector construction amount declined by a total of $16.6 billion in May and June 2019, and there can’t be a continual slowdown in construction and manufacturing without job losses picking up in the near future.

This might help explain why Mitch McConnell and President Trump heavily lobbied in favor of increasing the debt ceiling and budget caps, which passed the Senate on Thursday. With significant parts of the private sector slowing down to a point near recession, GOPs can’t afford to cut off the public sector as well.

When you look at these reports, it sure seems like Dems could start telling voters that the Trump/GOP policies aren't working out as planned for people with jobs that don't involve paper-trading, and prime people to know who to lay the blame on as the economy turns south over the next year. And that's especially true in the industrial Midwestern states that Trump can't afford to lose in 2020.


  1. Construction is down.

    Good thing Donny knows how to build things.

  2. Wait, Mexico is paying AMERICAN construction workers to build that wall?Oh, the greatness of disaster capitalism. I genuflect to the oligarchs...