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Manufacturing Recovery Will Create Jobs

By    |   Wednesday, 29 Jun 2011 08:43 AM

On Friday, the Commerce Department reported that durable-goods orders for May were up 1.9 percent compared to April. Durable goods include everything from appliances and industrial machinery to cars and trucks. Generally, anything expected to last more than a year can be thought as durable and included in this economic report.

Month-to-month changes in economic data are useful, but are prone to large distortions. Seasonal factors can have a large impact in some industries. The report shows growth is on track, but comparing orders with May 2010 removes seasonal factors.

Durable goods orders were up by 10.8 percent from a year ago, according to the latest data. This shows that the recovery in manufacturing is actually stronger than generally believed. In fact, it is 32 percent above the low reached in the spring of 2009.

Also underestimated is the depth of the recent recession. Orders for durable goods fell by 40 percent from peak to trough. That drop occurred over 16 months, which is longer than average for an economic decline.

Coming off such bad data, the recovery has been stronger than average, but also underappreciated. Perceptions are generally based on the most recent experience, and consumer was badly shaken in the severe and sharp recession.

Unemployment is still high, indicating the recovery is being driven by productivity gains rather than hiring more workers. President Barack Obama recently noted that we can’t cut our way to prosperity, and he is most likely correct that most of the cutting is behind us.

Manufacturers are using about three-quarters of the available capacity. New orders are showing that demand is near pre-recession levels. Friday’s report most likely showed that hiring will pick up soon, and economic data is likely to start surprising to the upside soon.

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MichaelCarr
On Friday, the Commerce Department reported that durable-goods orders for May were up 1.9 percent compared to April. Durable goods include everything from appliances and industrial machinery to cars and trucks. Generally, anything expected to last more than a year can be...
mike,carr,recovery,durable,goods,manufacturing,recession
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2011-43-29
Wednesday, 29 Jun 2011 08:43 AM
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