Manufacturing still doing well
There is good news in the Manufacturing Purchasing Managers’ Index. In today’s figures, manufacturing job creation is particularly strong – a record high for the Index – and the responses on production and order books are also good news.
The PMIs are compiled from monthly surveys of executives responsible for purchasing decisions, who are asked about how the current month compares with the previous one; the Indexes are a good measure of growth, and have the virtue of being very up to date. The manufacturing PMI dipped tremendously during the recession, but it has been positive for 19 successive months and the February figure matched January’s record high.
The PMI results follow yesterday’s publication of the Reed Job Index, which was also very hopeful. This index compares the number of jobs on offer with the number that were on offer the previous month. This month’s figure is up 8.5 per cent from last month’s – which had shown a decline from November.
This is a rather volatile measure, but it is useful in providing quite a detailed sectoral breakdown. Employment in the public sector is unsurprisingly subdued, up very slightly from last month but running at well below half the level of a year ago. On the other hand, the Reed Index shows a very strong improvement in manufacturing (up 16 per cent from last month and 24 per cent from a year ago) engineering (up 16 per cent from last month) human resources (up 21 per cent) and in admin and secretarial jobs (up 17 per cent). Of course, this Index is biased towards the sort of jobs advertised through employment agencies, but it is worth watching.
This is encouraging for the future because there are two important employment questions right now. One is whether there is a going to be another recession – probably not, but I’m less confident about that than I was three months ago and the recovery has always been a bit fragile for the government’s rough treatment. The other is whether, if the recovery is maintained, we’ll see employment growing in line with output. There’s always been a risk of ‘jobless recovery’, because many firms held on to workers during the recession – good news at the time, but it means they have less need to recruit now to meet extra demand. This has been a particularly acute worry over the past 12 months, because so much of the growth in jobs has been in ‘atypical’ employment: self-employment, part-time and temporary work. The number of involuntary part-time and temporary workers has been rising through most of the recovery.
These two indexes are just straws in the wind, and really we need strong job growth that goes beyond manufacturing. The Reed Jobs Index suggests broader employment growth, but it is, as I’ve said, a bit volatile. The PMI for the service sector will be out on Thursday, and that will be an important indicator to watch.