Decline in US Manufacturing Continues with Further Job Cuts and Decrease in New Orders

November 1, 2024 TruthUSA

America’s factory activity contracted in October as orders and production dropped, leading to more headcount reductions.

The U.S. manufacturing sector shrank further in October, with declining new orders and production resulting in increased job cuts, according to reports released on Nov. 1 by the Institute for Supply Management (ISM) and S&P Global. These reports highlight the deepening challenges faced by American factories amidst economic concerns central to the 2024 presidential race.

The ISM Manufacturing Purchasing Managers’ Index fell to 46.5 in October, down from 47.2 in September, marking the lowest reading this year and deepening the sector’s seven-month contraction streak. The data reflected widespread declines, with production dropping significantly, new orders remaining weak, and employment shrinking as manufacturers adjusted workforce levels to align with lower demand forecasts.

“Demand remains subdued, as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties,” said Timothy Fiore, chair of ISM’s manufacturing business committee.

Inflation anxiety has shaped the public’s perception of the economy in the current election cycle, with various polls showing that cost-of-living concerns have been top of mind for voters. Businesses, too, have been squeezed by inflation. The latest small business optimism report from the National Federation of Independent Business (NFIB) shows inflation as the top concern and uncertainty surging to a record high.

“Uncertainty makes owners hesitant to invest in capital spending and inventory, especially as inflation and financing costs continue to put pressure on their bottom lines,” said NFIB chief economist Bill Dunkelberg.

S&P Global’s Purchasing Managers’ Index also showed America’s manufacturing sector in contraction, albeit at a slower rate, with a reading of 48.5. Like the ISM data, the report from S&P Global highlights declining employment and production as companies reduce headcount, partly in response to sluggish demand and partly due to uncertainty, including around the fast-approaching presidential election.

“Orders for investment goods such as plant and machinery have fallen especially sharply in recent months,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “Headcounts have also been cut for a third straight month, underscoring the reluctance among firms to expand in the face of heightened geopolitical uncertainty, with firms citing tensions around the US election as well as intensifying international conflicts.”

Recent employment reports—one from payroll processor ADP and another from the Bureau of Labor Statistics—showed job cuts in America’s factories in October.

The ADP report, which provides a snapshot of the private sector labor market based on the payroll data of some 25 million U.S. employees, showed 7,000 manufacturing jobs disappearing last month. The Bureau’s non-farm payrolls data, meanwhile, showed 46,000 manufacturing jobs eliminated.

Other recent data reinforces the view that America’s factories are struggling. Reports from the Federal Reserve and the U.S. Census Bureau showed a bigger-than-expected drop in factory orders, while most of the Federal Reserve’s 12 districts reported declining manufacturing activity and industrial output falling more sharply than forecasters predicted.

The ongoing slump in U.S. manufacturing has become a key issue on the presidential campaign trail, with both former President Donald Trump and Vice President Kamala Harris proposing plans to revitalize the sector.

Despite areas of weakness like manufacturing, the U.S. labor market has remained relatively stable in the face of high interest rates driven by the Fed in response to soaring inflation. However, with unemployment at 4.1 percent, there are indications of a slowdown in job market momentum.

For instance, the latest Job Openings and Labor Turnover Summary report showed a decline of 418,000 job openings to 7.44 million in September, the lowest since January 2021. Additionally, the number of employees voluntarily leaving their jobs decreased to its lowest level since August 2020, indicating reduced confidence among workers in finding better job opportunities.

Some analysts have suggested that the declining quits rate reflects heightened worker caution, which may impact consumer spending—a crucial driver of the U.S. economy that has remained resilient despite challenges from high interest rates and other factors.

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