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The job market has been pretty decent lately unless you're in the business of making things—and that could be a bad sign for the trajectory of the economy.
The number of manufacturing jobs has been declining in the United States over the last year despite the expansion of the labor market. Manufacturing jobs fell from 13,2 million to 12,9 million workers in November. This is down from the 13 million that worked there in January 2024. Other measures of how well the nation's factories, such as the Institute of Supply Management's survey of purchasing managers, have been stuck in negative territory for months.
The job loss is just a half-percentage point but the trend is strong enough to be a warning for the health of the entire economy. Along with housing struggles, this decline could indicate that construction employment is also headed for trouble.
Although the overall job market continues to grow, Pantheon Macroeconomics economists have noted that manufacturing and construction declines often precede economic downturns.
"We think the economy is in a more fragile position than markets and the commentariat appreciate," Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a commentary along with Oliver Allen, senior U.S. economist at the firm.
Why is manufacturing and the homebuilding industry struggling? The economists pointed the finger at the Federal Reserve's policy of keeping the Fed funds rate at a two-decade high for more than a year leading up to September. The central bank’s interest rate reductions since September may not have been enough to restore manufacturing jobs, according to another economist.
"Steady growth in demand, which hasn't occurred in over two years, will be needed to help stabilize manufacturing employment," wrote Matthew Martin, Senior U.S. Oxford Economics economist.
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