Empire State Manufacturing Survey Gained Slightly in December, But Labor Remained Weak

The Empire State Manufacturing Survey, a gauge of regional factory activity conducted by the New York Federal Reserve, rose in December more than expected. Empire State manufacturing increased to 9.00, up from a reading of 1.50 in November.

The median forecast had called for a reading to 4.00. Readings above 0 point to expansion, while those below indicate contraction.

Despite the more modest-than-expected gain, labor market conditions remained weak and manufacturers reported declines in both employment and hours worked, as was the case in November. The index for number of employees remained unchanged at -12.2, indicating employment levels continued to weaken. The average workweek index, which clocked in at -7.0, pointed to a decline in hours worked that will bode poorly for wages in the future.

The prices paid index rose seven points to 22.6, suggesting input price increases accelerated, and the prices received index held steady at 3.5, signaling another small increase in selling prices this month.

While current conditions are unimpressive, as we’ve seen in other sectors and indicators, more respondents have been more optimistic about the future since Donald J. Trump defeated Hillary Clinton in the November election. Indexes for the six-month outlook gained even more, indicating respondents are very optimistic about the future. The index for future business conditions skyrocketed by twenty points to 50.2, which is its highest level in nearly five years. Sixty-one (61%) percent of respondents expect conditions to improve in the months ahead.

The index for future new orders climbed eighteen points to 46.7, and the index for future shipments increased fourteen points to 40.1. The index for future employment indicated that firms expected to expand employment significantly. The capital expenditures index climbed nine points to 21.7, and the technology spending index rose four points to 12.2.