American Industry Picks Up Steam

American manufacturing has picked up pace over the last 12 months thanks to steady global economic growth, a rise in energy and other commodity prices, and increased business confidence.
 Although progress isn't being felt by all industries, makers of items ranging from bulldozers to semiconductors to food products are on the upswing as various measures of spending, sentiment and employment have climbed, while stock markets hit record highs.
 The sector “absolutely has improved relative to where we were a year ago,” said William Strauss, a manufacturing economist at the Federal Reserve Bank of Chicago, who described the growth as modest.
 Employment numbers point to the overall progress. The U.S. manufacturers have added 156,000 workers since Donald Trump was elected president in November 2016, according to government data.
 That is a clear turnaround from the loss of 16,000 such jobs during the final year of Barack Obama's administration, although the recent growth hasn't surpassed manufacturing payroll increases in 2011 and 2014, when the sector gained more than 200,000 jobs.
 Also, business investment has risen, a sign companies are spending to increase productivity. In the first quarter, investment in plants climbed a seasonally adjusted annual rate of 14.8%, the highest since early 2014. Investment in equipment climbed 8.8% in the second quarter, the highest in almost two years.
 A confluence of factors is helping manufacturing, according to Stanley Black & Decker Inc. Chief Executive James Loree, who cited a shrinking wage differential between U.S. and foreign workers and rapid technological advances. In his particular business, “end users love locally made products,” Mr. Loree added in an interview on Tuesday.
 “Global macroeconomic conditions are solid,” Rockwell Automation Inc. Chief Executive Blake Moret told analysts, citing “strong orders” and optimistic forecasts for global economic growth and industrial production.
 Milwaukee-based Rockwell, which sells factory hardware and software to myriad manufacturers around the world, said last week it expects organic sales growth as high as 6.5% in its 2018 fiscal year, with an additional 2.5% boost to its results coming from a weaker dollar.
 Global energy and commodity prices have rebounded amid growth in many economies around the world. That has boosted sales for Illinois-based manufacturing giant Caterpillar Inc. and other makers of heavy machinery used to extract natural resources.
 In the process, Caterpillar has increased its domestic workforce by 3,200 from the end of March to 49,700 at the end of September.
 “The overall environment is more business-friendly and we think that has created some business confidence,” Caterpillar finance chief Brad Halverson said in an interview.
 Part of the optimism stemmed from the election of a businessman as president last November and Mr. Trump's promise of reduced taxes and fewer regulations. The gains have happened even though important parts of Mr. Trump's manufacturing agenda haven't come to fruition, observers and business leaders say.
 Early in his term, Mr. Trump promised to punish American companies that shift production abroad, but such penalties haven't materialized.
 A big item, the overhaul of U.S. taxes, is being debated in Congress. But a $1 trillion infrastructure plan hasn't panned out. Nor has repeal of the Obama-era health-care law.
 “We believe the lack of progress over key elements of federal policies—specifically health care, tax reform, and infrastructure funding—continues to exert downward pressure on both public and private construction activity,” C. Howard Nye, chief executive of North Carolina based Martin Marietta Materials Inc. said in an analyst call on earlier this month.
 Gary Cohn, the president's top economic adviser, said Tuesday that a plan to overhaul the nation's infrastructure is “the next thing on our agenda.” Amid general improvement for manufacturing, some industries and companies have posted gains while others have continued to struggle.
 The performance of America's largest manufacturing companies also has been mixed. Of the 10 largest industrial companies in the S&P 500, only Caterpillar, Honeywell Inc. and 3M Co. recorded higher third quarter profit and earnings per share compared with a year earlier, according to data from Thomson Reuters I/B/E/S.
 Profit and earnings per share declined at General Electric Co., Boeing Co., United Technologies Corp., Lockheed Martin Corp. and General Dynamics Corp. Two companies—United Parcel Service Inc. and Union Pacific Corp.—posted a rise in pershare earnings while their overall profit slipped.
 To be sure, manufacturing growth could slow if the economy tips into recession or if there are disruptions in trade or other geopolitical problems. Also, a weaker dollar—which has boosted exports by making American goods cheaper abroad—could reverse direction.  

Winners and Losers
Changes in manufacturing jobs from October 2016 to September 2017

Source: Bureau of Labor Statistics



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