Manufacturing Adds More Jobs Than Expected

By John S. McClenahen Employment in the manufacturing sector of the U.S. economy posted its fourth consecutive monthly gain in May and beat economists' expectations in the process. Manufacturing added 32,000 jobs last month, mostly among producers of durable goods, the U.S. Labor Department reported on June 4. Economists generally had been looking for 25,000 manufacturing jobs to be added to the nation's nonfarm payrolls. Since January, U.S. manufacturing has added 91,000 jobs to its payrolls. Between the summer of 2000 and yearend 2003, manufacturing lost about 3 million jobs. In May, producers of durable goods added 26,000 jobs, paced by 8,700 jobs in fabricated metal products. Only two categories -- transportation equipment, and furniture and related products -- lost jobs, Labor Department establishment data showed. Nondurable goods producers added 6,000 jobs last month. "To date, the recovery in manufacturing in employment is centering in the durable goods sector, where I expected it would," says Jerry J. Jasinowski, president of the National Association of Manufacturers, Washington, D.C. "Nearly half -- 47% -- of the new hires in manufacturing last month were in fabricated metals and computers. Since these two sectors alone accounted for more than a quarter of all manufacturing jobs lost since 2000, the fact that this is where the recovery is taking hold is especially encouraging." Total nonfarm employment in the U.S. increased by 248,000 jobs in May, not quite as many as the 353,000 jobs added in March and the 346,000 added in April, but more than the 93,000 added in February. The U.S. unemployment rate, based on different data, remained at 5.6% in May. An increase in short-term U.S. interest rates is likely to be one consequence of the basically bullish May employment data. "With inflation and wage gains edging higher, too, we believe the Fed will decide at its June 29-30 FOMC [Federal Open Market Committee] meeting to begin nudging the fed funds rate back toward neutrality," says UBS Investment Research, New York. It expects the FOMC to approve a 25-basis-point rise in the influential federal funds rate, the interest banks charge each other on overnight loans, to 1.25% from its current 1%.

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