Manufacturing activity in the northeast region of the country firmed in March, according to new data from the Federal Reserve Bank of New York. Specifically, the general business conditions index jumped from 13.1 to 22.5 this month, significantly better than anticipated and the highest headline reading since October. Under the hood, measures of new orders, shipments, unfilled orders (capacity constraints), and hours worked all increased in March, but margins remained under pressure as the gap between prices paid and price received continued to widen. Forward-looking (six months ahead) activity gauges generally cooled in March, but overall surveyed manufacturers are still signaling greater confidence in the future compared to pre-election levels.
Similarly, manufacturing activity in the Mid-Atlantic region of the country continued to expand at an elevated pace this month, according to a new report from the Federal Reserve Bank of Philadelphia (FRBP). Specifically, the general business conditions index slid from 25.8 to 22.3 in March, slightly worse than expected but still historically high. Current measures of new orders and shipments improved considerably this month, but forward-looking gauges generally softened. Manufacturers in the March survey were also asked a few special questions about labor market conditions, and roughly two-thirds of respondents complained about both labor shortages and skills mismatches. In fact, nearly half of manufacturers said that they have job openings going unfilled for more than three months, and only 1.5 percent of respondents were able to say that “we are hiring and receive a sufficient number of qualified applicants to fill open positions.” When asked how they are addressing the labor shortage, the most common responses were increasing recruitment efforts, providing additional training to existing staff, and increasing wages. The latter is great news for American workers but also suggests inflation pressures will continue to rise, something officials at the Federal Reserve will be monitoring closely during the rest of 2018.
Sources: Econoday, FRBNY, FRBP, FRBSLPost author: Charles Couch