Manufacturing Employment Up Big in October, Federal Reserve to Begin Tapering Asset Purchases

According to the National Association of Manufacturers’ (NAM) Monday Economic Report for this week, Manufacturing employment jumped by 60,000 in October, the strongest monthly gain since June 2020. In October, durable and nondurable goods employment rose by 41,000 and 19,000, respectively. More importantly, total employment in the sector has risen 298,000 YTD, putting it on track for the best annual job growth since 1997 (304,000), with 12,529,000 workers in October. With that said, manufacturers today employ 270,000 fewer employees relative to pre-pandemic levels, with 12,799,000 workers in the sector in February 2020.

Six major manufacturing sectors have exceeded their pre-pandemic levels of employment as of October: computer and electronic products (+11,700), miscellaneous nondurable goods (+11,700), chemicals (+10,100), plastics and rubber products (+10,000), miscellaneous durable goods (+9,200) and wood products (+600).

The Federal Open Market Committee (FOMC) will begin the process of tapering its asset purchases later this month. The Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities. It will make a similar reduction in December and is expected to continue this process until it ends these asset purchases entirely by mid-2022. The FOMC kept the federal funds range of zero to 25 basis points and is not likely to shift its interest rate policy until mid-2022. The timeline, however, will hinge on incoming economic data.

The Federal Reserve has been purchasing as much as $80 billion in Treasury securities and $40 billion in agency mortgage-backed securities each month. As a result of these purchases, which began at the start of the COVID-19 pandemic, the Federal Reserve’s balance sheet ballooned to nearly $8.6 trillion, more than doubling the pre-pandemic pace.