Manufacturing, construction, and job openings all show an economy under stress
Manufacturing, construction, and job openings all show an economy under stress
– by New Deal democrat
As usual, we begin another month with important manufacturing and construction data. Additionally, the JOLTS report for September was also released.
The ISM manufacturing index has a very long and reliable history. Going back almost 75 years, the new orders index has always fallen below 50 within 6 months before a recession, and in three cases did not actually cross the line until the first month of the recession itself – although the recession did not begin until after the total index fell below 50, and in fact usually below 48.
In September the overall index declined once again to 50.2 – the lowest reading since May 2020), while the more leading new orders index, which has been in slight contraction beginning in June, rose from its September low of 47.1 to 49.2:
This remains consistent with readings right before the onset of the Great Recession, but also with several slowdowns that did not quite turn into recessions.
Meanwhile construction spending, both in total and residential, rose slightly nominally, although both are below their July and May peaks, respectively:
Interestingly, adjusting for the cost of construction materials, both have risen significantly since the beginning of this year:
Here is a comparison of residential construction spending (blue) with houses under construction from the permits and starts report (red):
The two have tended to move in tandem for the past 20 years. The former has peaked, while the latter appears to be in the process of peaking now. Since construction and its attendant spending is the “real” economic activity of new housing, a decline in the two is a negative sign for the economy going forward.
Finally, I’ll write a more comprehensive update on the JOLTS report tomorrow. The most important news is in job openings, which improved this month, but only because last month’s were revised even lower. The sharp downward trend remains clear:
All three of these reports show an economy under stress, although not yet in recession.
“September manufacturing new orders and August construction spending both turn down,” Angry Bear
Hi Angry Bear
Sonoma County (N. CA.) cabinet maker here – super busy w/ highend work – whole house packages mostly $250,000+ ( 1/2 new construction) order book full till June/July at least.
The precontract pipe looks full also, thank goodness for construction loan slowness.
Can’t find an apprentice for $25 per hour – that # gets you misspelled applications.
Material costs shot up 150% say January 21′ and have settled in around up 30% compared to Jan 20′.
Stocking up on European hardware – drawer slides were notoriously hard to find.
Cheers
Tom
TBone:
Hi, Bill here or run75441. I am approving your comment. I looked at it and initially thought “spammer.”
Worked with my dad rigging scaffolds, mixing mud (mortar) for him and the other tuckpointers (according to moisture [as told]). At 16 and older till going into the service, it was not an easy job and I kept my mouth shut as my education was superior to theirs. I already knew how to house frame and measure angles using an “L.”
I was fortunate in many ways as I had a dad who taught me and I went to a high school in Chicago which offered house framing, architectual drafting, electric classes, etc. In the Corp, I was bored stateside, so I went to night school and learned surveying.
They do not teach this stuff in high schools anymore. Everything is computer driven making my square and angles obsolete. At least, I don’t need batteries. And I can still draw a house plan to scale using a scale and with my dad’s old drafting tools.
I remember my dad telling me the crew would harass me. Just take it. They knew who I was. At 16 and skinny there wasn’t much I could do until I was back from the service. Then they left me alone that way and just talked while we drank a beer.
If you want a good apprentice, you are going to have to teach him yourself. They do not teach what I learned in high school anymore. Most don’t have dads who did this type of work mechanically. I am a dinosaur now with a Masters and several other degrees. My Econ Prof. and I still talk as we are not far apart in age. While I did not become the Prof. he wanted me to become, he acknowledges my understanding of economics.
Would it be that difficult to train someone? You will have to start with the basics. I taught my sons the knots and how to splice rope. Like my fathers, much of my manual and mechanical knowledge will go to the grave with me.
PS: The housing construction manager does not care for me. All 21 issues with our home were fixed. I explained the Uniform Commercial Code to him and what a “reasonable man” would expect. The fixes were obvious stuff too.
Hi Bill
I left the academic track in 1990 on the advise of my father – a professor himself.
Tenure in history was going to be difficult.
Cabinet maker since 1991 don’t own a shop anymore and am just a bench carpenter – paid pretty ok.
I have a very unique set of skills that I would love to pass on i.e. Japanese saw and chisel joinery that is fairly useless – read way to expensive to sell- here. But nonetheless very personally satisfying.
Have a look:
http://www.tozaidesign.com
Instagram: Tozai Design
Some sad videos on YouTube under tozai design also.
In my first post I neglected to mention that it seems like 2007/08 all over again.
Lots of jobsite managers promoted beyond their competence and not enough backs.
Have a feeling this will correct soon.
Cheers
Tom
IBone:
After the pandemic, it is very much like 2008/9 with Wall Street sacking the peasants. Few recognize the similarity in that respect. The difference between the two years being Bidens packages which lifted the bottom 50% of the population in wealth by doubling it from 2% to 4%. Such did not happen in 2008. Neither was healthcare including maternal care extended, loans given to businesses and forgiven, additional payment for families with children, etc. Supply chain issues are poor business practices. I was chasing semiconductors in 2008 because automotive did not maintain their orders whether new or old product. Rent taking by energy coporations and other industries drives inflation.
Your link is kool. However, we do not allow advertising here. Just so you know. Just leave it for now. You are welcome to converse here. Just stick to the topic of the post.
Thank you.
Tom:
I know at least one higher end furniture place in Gilbert, AZ. Our middle-class furniture comes from there. Do you care if I give them your information. I think it is unique and interesting.
I am a former global traveler. Japan was getting stuck in Narita because they got 2-3 inches of snow. My fellow traveler and I slept on the airport seats stretched out under the arms rests.
Next morning off to Thailand and then China.
I do like the lamps. By the way, you were already noticed.
Bill
Bill
Thank you so much for those kind words.
Please share my info – again thanks.
Good luck travelling.
My in-laws are in Tokyo, wish we could be there also.
Tom
TBone:
My traveling days of long distances and hours in a plane to Thailand, China, Philippines, Malaysia, and Europe for work have passed into history. I was fortunate to see the many things set in pictures, written about, and work with different cultures and people of those countries. The people were always kind to me and spent much time sharing their food and presence.
I traveled overseas shortly after 911 and many expressed their sympathy. I was very fortunate to have a glimpse of what the world was about. I learned much from them.
If this old Marine Sergeant can help you, he will do so. Safe travels.