Cautious Optimism About The Economy
Randy Wolken, President & CEO

So far, the recession has failed to materialize, and inflation shows signs of weakening. With this, manufacturers and businesses grow less wary about the economy. Recent data suggests that the bright spots may win the day despite continuing risks. GDP grew at a 2.4% annual rate in the second quarter of 2023. This number is notably higher than the 2.0% growth that analysts had expected for the quarter.

And the overall employment rate sits at a meager 3.6%. This has defied expectations that the Fed’s inflation-reduction moves might create a surge in unemployment. Inflation has been a significant pain point for manufacturers, but it now seems to be moderating. According to the latest Consumer Price Index data, inflation rose 3% in June from a year earlier—a significant drop from the 9.1% annual inflation rate in June 2022.

The phrase “historically low unemployment” often describes our current job market. It has become almost a cliché, losing its oomph through overuse. Still, with joblessness at 3.6%, it’s worth recognizing how unusually low the numbers have been. This spring, 12 states were at their lowest unemployment levels since 1976, and all but Nevada were below the 5% rate that economists say represents “full employment”. These lows have fueled strong consumer spending and pay increases driving inflation. But recent history may explain why they don’t translate into greater optimism. Barely three years ago, 45 states hit record highs in unemployment due to pandemic-induced shutdowns whose disruptions still haunt us. So, think of this divergent understanding as an illustration of economic whiplash.

At the same time that overall economic strength is growing, the United States is also seeing positive signs in closing the gap in wage inequality, with average income for the lowest-earning 50% of Americans increasing faster than all other population groups except for the ultra-wealthy. A particularly encouraging development has been an increase in women in manufacturing. According to NAM Chief Economist, Chad Moutray, manufacturing had about 3,786,000 female employees in June, meaning that women made up 29.1% of the industry’s workforce. That number is slightly lower than the 3,788,000 found in May, the highest number of female workers in manufacturing since September 2009.

Last quarter, business investment accelerated after almost stalling in the January-March period as spending on equipment rebounded after two straight quarterly declines. There were increased outlays on equipment like aircraft, trucks, buses, and truck trailers. Efforts by the Biden Administration to bring semiconductor manufacturing back to the United States are boosting factory construction. Investment in nonresidential structures like factories remained robust last quarter.

We are hearing similar sentiments from our members. Please get in touch with us and let us know how you are doing and what you are experiencing. We are always here to help you. Finally, thanks for all you do to spur our local economy.