Recent turbulence in the stock market is a wake-up call to manufacturers, and to all businesses. The measurable rise in the yield on the 10-year Treasury note, now at the highest level in four years, has arguably been the primary catalyst for the equity market rout. This rise spurred to some extent by credible hints that long-dormant inflation might be on the cusp of increasing, has been a signal that financial conditions will eventually, and perhaps quickly, tighten to more normal levels.
In spite of the tumult of a reawakening global economy whose U.S. benefits were constrained by escalating political uncertainty, two destructive hurricanes, and an alarming confrontation with North Korea, U.S. manufacturing managed a rather bland but steady growth performance during 2017. The Federal Reserve reported that after two difficult years of essentially zero output gains, growth in the factory sector logged 1.3% during 2017.
Global Economy, Competitiveness, Government Policy
It’s a fitting time of year for miracles, and the Tax Cuts and Jobs Act, passed by Congress today fits that description. Granted, the first major tax overhaul in more than three decades is not a panacea. It’s come under an increasing amount of criticism from many factions.
No one should be concerned that the Purchasing Managers’ Index (PMI) pulled back from an unrealistic 60.8% in September to a still strong 58.7% in October. The September reading from the Institute for Supply Management (ISM) has to be treated as an outlier and interpreted against the inevitable data distortions created by two devastating hurricanes. Hurricane Harvey, in particular, ravaged a manufacturing epicenter at a time when energy-related output is growing as a share of U.S. industrial output. ISM survey respondents in October noted weak business conditions and raw material shortages due to the hurricanes. The aftermath of these terrible storms is going to linger in the manufacturing picture for a while.
With whistleblower suits on the rise, increased CEO firings over ethical lapses, and National Whistleblower Appreciation Day falling on July 30, it’s an important time for companies to think about their corporate governance structures, whistleblower systems, and whistleblower investigation processes. Instead of looking at whistleblowing as harmful, companies should consider whistleblowing a safety valve and a sign of an engaged, ethical culture.
As has often been the case in recent years, the monthly U.S. employment report provides a glimmer of light in a gray picture. A net gain of 222,000 payroll jobs in June markedly exceeded the expectations of analysts who projected that slow economic growth would have some impact on employment gains.
I’m not sure I would call it fireworks, but the June manufacturing report from the Institute for Supply Management (ISM) certainly contains some buoyant signs for the U.S. factory sector. The overall Purchasing Mangers’ Index rose by nearly three percentage points to 57.8%, its highest level of what has been an impressive post-August 2016 run.
Yet again, the labor market is the one strong player in an otherwise lackluster economic expansion. After a slowdown in the latter months of 2016, total net new job growth registered an unexpectedly strong 227,000 in January. With the current unemployment rate at 4.8%, this has provoked debates as to whether we have hit a level below which inflation and other expansion-threatening instabilities begin to appear.