Friday, December 15, 2017
Business

Jobs data show factories bearing brunt of global slowdown

WASHINGTON — Friday's Labor Department report showing that a disappointing 96,000 U.S. jobs were added in August — although the unemployment rate dipped to 8.1 percent from 8.3 percent — included the biggest decline in factory jobs in two years. That added to signs that manufacturing is bearing the brunt of the slowdown in global growth.

Factory payrolls declined by 15,000 workers last month, the biggest drop in two years. The Labor Department report also showed that the workweek shrank and that the share of industries hiring plunged to the lowest level in almost three years.

Combined with earlier reports showing less demand for capital equipment and growing pessimism among purchasing managers, Friday's figures show that manufacturing, which helped lead the United States out of the worst recession in the post-World War II era, is pulling back. Companies such as Intel are among those cutting forecasts as business investment cools and economies from Europe to Asia slow.

"There is a clear loss of momentum in manufacturing," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Mass. "I don't think manufacturing is going into reverse, but I think it's stagnating."

While the drop in factory hiring last month was magnified by changes in the annual shutdowns at auto plants, the decline extended beyond a single industry. Producers of wood products, fabricated metals, electrical equipment and semiconductors also reduced head counts in August, Friday's report from the Labor Department showed.

Intel, the world's largest semiconductor maker, slashed its third-quarter sales prediction amid declining demand for personal computers from corporate customers. Sales will be $12.9 billion to $13.5 billion, down from a prior projection of $13.8 billion to $14.8 billion, the company said.

The workweek for all factory employees fell to 40.5 hours on average in August, the lowest level since November and down from 40.7 hours in July, the figures showed. The number of hours had been as high as 40.9 in the first two months of 2012.

Makers of motor vehicles and parts cut staff by 7,500 workers last month, representing a partial payback from the 14,000 gain in July.

Friday's jobs report came on the heels of other data indicating that assembly lines were slowing. Manufacturing shrank for a third straight month in August in the longest decline since the recession ended in 2009, a report from the Institute for Supply Management showed this month. The group's factory index fell to 49.6, the lowest since July 2009. The ISM's gauge of factory employment decreased to the lowest level since November 2009.

Demand for U.S.-made capital goods such as machinery and communications gear dropped in July by the most in eight months, according to a report last month from the Commerce Department. Bookings for nondefense capital goods excluding aircraft are considered a proxy for future business investment.

"The manufacturing sector overall looks like it softened quite sharply," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, in a conference call Friday. "Manufacturing is going through an adjustment that is going to give us, at least for the month of August, but potentially for the next couple of months, flat to down readings on the production side."

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