Factory output grows while jobs disappear
U.S. manufacturers are reporting stronger activity in June, but are cutting workers at a pace last seen around the global financial crisis, excluding the initial COVID shock. S&P Global’s flash manufacturing PMI at 55.7 shows the sector expanding faster than economists expected, helped by companies rebuilding inventories amid worries about future supply.
At the same time, factories are shedding staff. S&P’s separate employment gauge for manufacturing fell to 47.0, the lowest since May 2020, signaling contraction in factory payrolls. Chris Williamson, S&P Global Market Intelligence’s chief business economist, said factory job cuts are running at their highest level since 2009 if the pandemic is excluded, with companies citing rising raw material costs and doubts about how long current demand will last.
Demand now, uncertainty later. New factory orders have jumped to a more than four-year high, with S&P saying businesses are front-loading purchases to get ahead of potential shortages and price hikes. That has pushed stock purchases to their highest level in 13 months and lengthened supplier delivery times to levels last seen in August 2022.
The backdrop is a Middle East conflict that has strained global supply chains and driven up prices for commodities tied to crude oil, aluminum and fertilizers. While an interim U.S.–Iran agreement and softer oil prices have taken some edge off input costs, survey measures show factory-gate prices and overall business input prices remain elevated.
For the broader economy, S&P’s composite output index, which blends manufacturing and services, is in modest growth territory. But the mix is unusual: solid reported activity paired with subdued private-sector hiring and factory layoffs. That comes as the Federal Reserve holds rates at 3.50% to 3.75% and signals it still expects to raise borrowing costs later this year.
