ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the December 2023 Manufacturing ISM^® Report On Business^® emphasis mine.

The U.S. manufacturing sector contracted in December, as the Manufacturing PMI^® registered 47.4 percent in December, up 0.7 percentage point compared to November’s reading of 46.7 percent. “This is the 14th month of contraction. Four out of the five subindexes that directly factor into the Manufacturing PMI^® are in contraction territory, down from all five in November. The New Orders Index logged its 16th month in contraction territory at a faster rate in December. Of the six biggest manufacturing industries, none registered growth in December,” says Timothy R. Fiore, Chair of the Institute for Supply Management^®. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.

A Manufacturing PMI^® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the December Manufacturing PMI^® indicates the overall economy contracted for a third straight month after one month of growth preceded by nine consecutive months of contraction and 30 months of expansion from June 2020 to November 2022. “The past relationship between the Manufacturing PMI^® and the overall economy indicates that the December reading (47.4 percent) corresponds to a change of minus-0.5 percent in real gross domestic product (GDP) on an annualized basis,” says Fiore.

“None of the six biggest manufacturing industries registered growth in December. Demand remains soft, and production execution is stable compared to November, as panelists’ companies continue to manage outputs, material inputs and labor costs. Suppliers continue to have capacity. Eighty-four percent of manufacturing gross domestic product (GDP) contracted in December, up from 65 percent in November.

More importantly, the share of sector GDP registering a composite PMI^® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 48 percent in December, compared to 54 percent in November and 35 percent in October. Among the top six industries by contribution to manufacturing GDP, three (Machinery; Petroleum & Coal Products; and Computer & Electronic Products) had a PMI^® at or below 45 percent, the same number as the previous month,” says Fiore.

My Thoughts

• The numbers are skewed by the UAW strike and it ending.
• Overall, the report is weak but not abysmal.
• Despite the strike ending, employment is down for the third month.
• The backlog of orders surged six points but is still below 50. With backlogs and new orders negative for 15 and 15 months respectively, manufacturing employment rates to be weak.

Government, Social Assistance and Health Are Booming

Manufacturing isn’t booming but the welfare state sure is, especially in the sanctuary states.

(Click on image to enlarge)

For discussion, please see Government + Social Assistance and Health Is Over 100% of Job Creation in 3 States

In New York, Illinois, and Michigan, Government jobs plus Social Assistance/Health Care is over 100% of year-over-year job creation.

In Oregon, New Jersey, and California, Government jobs plus Social Assistance/Health Care is between 61% and 89% of year-over-year job creation.

See the above link for more discussion.

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