The Manufacturing Slowdown is Here

On July 22, I wrote a blog with the title, “Has the Industrial Recession Already Started?”  Freight companies started warning about a slowdown. 

Recent data from the ISM (Institute for Supply Chain Managers) US manufacturing purchasing managers’ index indicates manufacturing contracted in August and September.  These are the lowest readings of this index since June 2009.  Tariffs matter.  When costs go up, people buy less.  While manufacturing is a small part of the overall US economy, do not underestimate how closely tied many service industries are to manufacturing.  Expect the service sector to see a slowdown soon. 

Job creation has slowed.  During the last three months, an average of 145,000 new private sector jobs have been created in the US versus 214,000 per month in the same period last year.  To continue expanding (absorbing new entrants into the workforce, it is estimated the US needs to create 150,000 jobs per month.  Also, job growth statistics have been revised down for two of the last three months.  On a positive note, labor force participation continues to edge up, indicating more people currently outside of the workforce are looking for jobs. 

Bill Belichick, the incredible coach of the New England Patriots has a few sayings I like.  The first is, “I can only go by what I see.”  The numbers are reality.  The economy is slowing.  I don’t expect a protracted or terrible recession, especially compared to 2008 – 2009, but the economy has slowed.  The second “Belichikism” I love is, “Do your job.”  None of us can control the macro economy.  We do have some control over our own micro-economies.  Focus on doing your job and you’ll be fine.

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