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Management / Strategy

Economy: Mixed Signals Remain: HMA TrendTracker Report Update

By Art Raymond

At long last the U.S. economy is showing some signs of a real recovery. GDP in the 3Q2013 grew by 4.1 percent, its fastest pace in two years and marked only the second time since 2009 that the output of goods and services expanded by more than 4 percent. That’s good news.
Other indicators followed by TrendTracker also suggest that our economy may be strengthening at a rate that could begin curing the woes in the labor market:

  • Retail Sales: The December report shows a moderately healthy consumer sector, which accounts for roughly two-thirds of our economy. While auto sales slumped during December, total retail purchases finished the year up a solid 4 percent over 2012. This performance will boost 4Q2013 GDP.
  • Housing: December starts dropped nearly 10 percent most probably affected by bad winter weather. But following on November’s 23 percent surge, this sector continues to add to growth. For the year through December, starts grew by 18 percent to an estimated total of 923,400 homes and apartments. That figure is well above the 554,000 started in 2009 at the bottom of the downturn.

The weak spot remains the labor market. On the positive side, initial jobless claims are down to 326,000. Another healthy report comes from the Job Opening & Labor Turnover Survey (aka the JOLTS Report) which details three important metrics: (1) job openings for which employers are actively recruiting, (2) labor turnover including voluntary separations ie, quits, and involuntary ie, layoffs and terminations, and (3) the so-called quits rate which affords a measure of workers’ willingness or ability to leave jobs. Through November, JOLTS data were moderately positive.

On the other hand, with only 74,000 new jobs created in December, the employment report was disappointing. Yes, the employment rate dropped to 6.7 percent but primarily because 374,000 people quit seeking jobs. The workers-population ratio remained at 58.6 percent, well below the 59.4 percent reported in at the end of the recession in June 2009. Economists fear that the lack of job creation is a sign the U.S. may be developing a structural unemployment problem like Europe’s.

As TrendTracker has consistently mentioned, our economy will not build a steady recovery until strong demand for workers returns.

Bottom Line: On balance, the good news is that one month’s numbers don’t make a trend. Solid uptrends in the economy begin with choppy performance in the key data. Keep your fingers crossed for better jobs numbers.

Other Economic News

By Art Raymond

Two recent announcements by foreign-owned wood products companies suggest that the economics of manufacturing are shifting to the benefit of U.S. businesses and workers.

Foreign Firms Invest in the U.S.
A Chinese furniture manufacturer is establishing a subsidiary, New Ridge LLC, in Marion, VA, to produce components for the Chinese market and finished furniture for the European markets. In addition, the company will source and export lumber to China. The company is a major supplier of solid wood bedroom furniture to Ikea. The new operation will locate in an existing furniture production facility and will create 125 jobs. Incentives valued at $700,000 are being provided by Virginia and a local agency as part of the $2.1 million project cost.

Another supplier to Ikea, Vietnamese manufacturer of storage and kitchen cabinets, has announced the investment of $5 million in a new facility in Morrilton, AR. The operation, to be known as Vinh Long-Arkansas, will utilize a shuttered wood audio speaker plant and employ 75 workers when it begins production this summer.

Both companies were attracted to their new locations by the availability of competitively-priced labor with woodworking experience as well as the sustainable, local supplies of lumber.

A New Use for Wood
A collaborative effort by Ford and Weyerhaeuser will soon result in a tree-based alternative to fiberglass for use in auto parts. The new material, called cellulose reinforced polypropylene (CRP), uses wood fibers in place of conventional glass-based fibers to provide a lighter, greener fiberglass substitute.

CRP will be used in production of the 2014 model year Lincoln MKX. While utilized only in the car’s console, Ford aims to employ the material in larger parts in the future. Weighing 6 percent less than conventional fiberglass, CRP can provide significant weight reduction, which directly benefits fuel economy.

The news is another indication that wood is truly a diverse and valuable natural resource.

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