U.S. manufacturers added more jobs last month than they had since February, but job gains in the sector continue to be below the expectations of some economists. And recent industry data from Sageworks, a financial information company, show that manufacturing sales growth is slowing, providing a possible justification for the disappointing hiring trends so far this year.
Manufacturers are growing sales at an annual rate of 2.3 percent, based on an analysis of private-company financial statements through September, compared with an increase of 10.5 percent in2012. Manufacturers' sales increased 15 percent in 2011, too, based on Sageworks' data, so the slower growth recently is notable. Manufacturers with annual sales below $5 million have seen an actual decline of about 3 percent in annual sales rates so far this year.
That's an even sharper slowdown than private companies have seen overall this year. Private companies across all industries have been growing sales at an annual rate of 3.8 percent, compared with nearly double-digit sales growth in 2012 and 2011, according to the Private Company Report from Sageworks. The smallest companies' average sales growth is about 1 percent.
"We're a little bit concerned, because privately held companies overall during this expansionary cycle have grown sales by about 10 percent a year for the past 3½ years or so, but over the past six to nine months, those growth rates have been going down." said Sageworks Chairman Brian Hamilton. "No one knows for sure why companies in aggregate slow down, why their sales growth rates start going down. This gets into the cyclical nature of the economy and so on. But remember, we have been in this expansionary cycle for about four years, and on average in the U.S., typically, our economy tends to slow down at that time, so we're a little concerned."
Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions, and aggregates the data at an approximate rate of 1,000 statements a day.
The Bureau of Labor Statistics last week said manufacturers added 19,000 net new jobs in October on a seasonally adjusted basis. Without the seasonal adjustment, they actually cut 4,000 jobs last month. Manufacturing employment is up less than 1 percent over the past 12 months.
Chad Moutray, chief economist for the National Association of Manufacturers said in a blog post Friday that while the October jobs number for manufacturing was better than recent figures, it remains clear that "hiring growth for the sector has been disappointingly slow" over the past year.
"Manufacturers contributed just 2.4 percent of all of the nonfarm payroll workers added over the past 12 months, a far cry from the nearly 9 percent of the workforce that they comprise," he wrote. "And, even in the larger economy, unemployment remains highly elevated, with net job gains still modest at best."
Sageworks, a financial information company, collects and analyzes data on the performance of privately held companies and provides accounting and audit solutions.