America’s factory activity contracted in October as orders and production dropped, fueling more headcount reductions.
The U.S. manufacturing sector shrank further in October, with declining new orders and production driving up job cuts, according to Nov. 1 reports from the Institute for Supply Management (ISM) and S&P Global, which highlight deepening challenges for American factories amid 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,” Timothy Fiore, chair of ISM’s manufacturing business committee, said in a statement.
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,” NFIB chief economist Bill Dunkelberg said in a statement.
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,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “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 continuing 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 putting forward plans to revive the sector.
Setting aside patches of weakness like manufacturing, the U.S. labor market has remained relatively resilient in the Fed-driven high-interest-rate environment that came in response to inflation soaring to multi-decade highs. Despite low unemployment at 4.1 percent, however, there are some signs of cooling in the job market.
For example, the latest Job Openings and Labor Turnover Summary
report showed that the number of job openings declined by 418,000 to 7.44 million in September, the lowest since January 2021. Also, the number of employees voluntarily quitting their jobs fell to its lowest point since August 2020, which suggests less confidence among workers in their ability to find a better job.
Some analysts
have suggested that the falling quits rate points to greater worker caution, which could weigh on consumer spending, which is a key driver of the U.S. economy and has held up despite headwinds from high interest rates and other factors.
