Navigating economic uncertainty on multiple fronts, Americans may be suffering from a bias toward expecting bad news. Buried among mixed signals are indicators that our Great American Bread Machine is getting ready to produce more prosperity. No, things aren’t all roses, but at least some cautious optimism is in order.
The Bureau of Labor Statistics’ June employment report offers one example of muddled signals. It indicates that 147,000 workers were added to the nation’s payrolls last month, slightly more than the average for the previous year. This, along with upward revisions for May and April, appears to be good news. Yet, some analysts note that most of the new hires were in state and local governments and healthcare, undermining the idea of a private-sector boom.
It’s hard to fault anyone for well-informed pessimism. After all, there is background chatter about the possibility of a recession. (Isn’t there always?) For six months, we’ve seen destabilizing tariffs, government layoffs, deported workers and a loss of clean-energy subsidies. Making employment matters worse are reports of robots replacing warehouse workers and AI threatening to displace massive numbers of white-collar workers.
Consider manufacturing employment, President Trump’s most politically highlighted sector and another mixed bag of news and data. The president regularly reminds us that his tariff, tax and regulatory policies will bring a renewed Rust Belt and a new golden age built partly on manufacturing and a reshoring of factory jobs.
It’s unclear why manufacturing jobs are considered superior to service jobs. The average hourly wages in manufacturing in June stood at $35.19, while the wage rate in services was $36.13. Some argue that it’s more desirable to be the nation that invents new chips and designs AI applications (which fall into the services category) than to be another of the world’s high-volume producers of chips and hardware.
It will take years, if ever, to know the cumulative result of Trump’s latest manufacturing push. For now, we understand that a BLS metric called the 30-day manufacturing employment diffusion index — which summarizes how 72 individual manufacturing sectors are expanding, holding still or contracting — suggests new life. A value larger than 50 means more are growing than shrinking, and vice versa. It just hit 52.1 after registering a losing 40.3 in May and 37.5 in April.
On the other hand, from January through June 1, manufacturing employment fell by 5,000 workers while services added 532,000 jobs, casting doubt on the notion that manufacturing is destined to be the high-employment sector.
Turning to manufacturing production, the Federal Reserve’s most recent industrial production diffusion index, which provides a reading on manufacturing, mining and public utilities for 296 distinct sectors across six months, is at its highest value in a year.
For a cleaner batch of good news, look beyond manufacturing.
Each month, the Federal Reserve Bank of Philadelphia produces a map showing the economic growth of individual states. Indicators are based on data like employment and building permits. By comparing a series of these maps, one can quickly determine whether things are improving or deteriorating, and where geographic prosperity appears to be increasing.
The most recent map reported six negative-growth states: Connecticut, Delaware, Iowa, Massachusetts, Minnesota and Missouri. Two showed zero growth: Alaska and Maryland. However, one can also see a 14-state band of robust growth starting at the country’s midpoint and reaching west. By comparison, the March map showed a similar number of zero- and negative-growth states, but fewer high-growth states and no compelling pattern behind them.
In short, the state economies in which we primarily reside have a healthier glow than just a few months ago.
Yes, by some measures, things are looking better, and sometimes we must accept the good news that’s offered to us. It’s still wise to be cautious. As always, the story is a work in progress.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of Clemson University’s College of Business & Behavioral Science. He wrote this for InsideSources.com.