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Manufacturing Peak?

Summary:
With trade volumes flat or trending down worldwide, what to make of US manufacturing? Figure 1: Manufacturing employment (blue), aggregate hours of production and nonsupervisory workers (red) and production (teal), in logs 2019M01=0. Source: BLS, Federal Reserve via FRED, and author’s calculations. Now, trade does not weigh on manufacturing equally. Durables are particularly worrisome — and here the drop (in production) is more pronounced than in manufacturing overall. Figure 2: Manufacturing production (blue), and durable manufacturing production in logs 2019M01=0. Light orange denotes Trump administration, orange denotes TCJA in effect. Source: Federal Reserve via FRED, and author’s calculations. Durable production is 2.6% down below peak, compared to 1.7% for overall. All this is

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With trade volumes flat or trending down worldwide, what to make of US manufacturing?

Manufacturing Peak?

Figure 1: Manufacturing employment (blue), aggregate hours of production and nonsupervisory workers (red) and production (teal), in logs 2019M01=0. Source: BLS, Federal Reserve via FRED, and author’s calculations.

Now, trade does not weigh on manufacturing equally. Durables are particularly worrisome — and here the drop (in production) is more pronounced than in manufacturing overall.

Manufacturing Peak?

Figure 2: Manufacturing production (blue), and durable manufacturing production in logs 2019M01=0. Light orange denotes Trump administration, orange denotes TCJA in effect. Source: Federal Reserve via FRED, and author’s calculations.

Durable production is 2.6% down below peak, compared to 1.7% for overall.

All this is why I (still) worry about an incipient recession.

Update:

Willie asks for a longer span of data. All series are on FRED, but here is my depiction (in growth rates, since all series look nonstationary with employment and hours on distinct downward trends. I had thought briefly of HP detrending, but thought better of it, given Jim’s admonition).

Manufacturing Peak?

Figure 3: Manufacturing employment (blue), aggregate hours of production and nonsupervisory workers (red) and production (teal), in 12 month growth rates calculated as 12 month log differences. NBER defined recession dates shaded gray. Source: BLS, Federal Reserve via FRED, NBER, and author’s calculations.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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