Rex Nutting on MarketWatch offers this opinion: The jobs report shows a spike in auto jobs — and that doesn’t pass the smell test.
Motor Vehicle Production
Manufacturing payrolls increased by 36,000 in August, three times as many as usual, and matching the highest monthly gain in four years. Better yet, the number of production workers (counting only those directly engaged in production and excluding back-office and support personnel) increased by 50,000, the highest in nearly 20 years.
Hiring was particularly strong in the motor-vehicle sector, where employment rose by 13,700 on a seasonally adjusted basis, the most since February 2014.
August is always the strongest month for hiring in autos, as the plants resume full-scale production after a summer lull for retooling. On a not-seasonally adjusted basis, hiring in autos was 30,000 in August, the best since 2013.
But what doesn’t fit is the hiring spike in motor vehicles. Car and truck production has been trending lower, and inventories of unsold vehicles are high. Most of the auto makers have announced they will reduce production in the second half of the year in order to work down those inventories. Those production schedules could be upgraded now that hundreds of thousands of vehicles in the Houston area will need to be replaced, but the hurricane wasn’t on anyone’s mind in mid-August when the jobs survey was taken.
Auto sales have fallen in 11 of the past 12 months, and have dropped seven months in a row. Sales in August, which are being reported on Friday, were expected to show a slight increase — at least that was the assumption before Hurricane Harvey knocked out sales for several days in the fourth largest market in America.
If production and sales are trending lower, hiring more workers doesn’t make sense. And yet that is what the Bureau of Labor Statistics reported for August, based on its survey of businesses. Most likely, the data showing a spike in hiring is simply noise. It didn’t happen, and will probably be revised away.
Another Look at the Data
This seemingly makes little sense. But is it possible? I like to download the data myself. I could not find it on Fred, but I could find the data on the BLS website. Here are a couple of charts I produced.
Motor Vehicle Employment
Kudos to the productivity of motor vehicle workers producing record numbers of vehicles with far fewer employees than in 2007.
Change in Motor Vehicle Employment 2007-Present
Starting August 2009, the entire chart looks like random noise.
Change in Motor Vehicle Employment August 2009-Present
Does that hiring pass the smell test? It’s certainly possible. There was a long period of little or negative hiring with two years of record production.
Why hire now? What about coming changes in electrical vehicles and self-driving vehicles? Is all the hiring for the production line or something else?
I am not saying that is what’s happening but it could be. It could also be random noise.
Regardless, looking back beyond 2012 provides quite a bit of perspective the MarketWatch article missed.
Mike “Mish” Shedlock