TheU.S. stock market has demonstrated signs of recovery, but the Midwest jobs market is in decline as the manufacturing sector struggles to rebound.
According to data from FRED, total nonfarm job openings in the Midwest census region have dropped to 2010 levels, a region that almost directly reflect the state of the US manufacturing industry.
Stock market remains vulnerable due to manufacturing
Based on the official informationpublished by the US Department of Laborand the Bureau of Labor Statistics, the unemployment rate in the state of Michigan has slightly increased since March 2019.
Nonfarm wage and salary employment, most of which are attributed to manufacturing-related jobs, has dropped from 0.8% to 0.4% in the past six months, since April.
Manufacturing, in particular, has seen salary employment plunge from 1.4% to an expected 0.3%, by more than three-fold in less than a year.
The US stock market has successfullymaintained its momentum since the beginning of 2019, and strategists generally anticipate the momentum to be carried out heading into 2020 as the Fed sustains an accommodative stance towards a low benchmark interest rate.
However, there are concerns that the US manufacturing sector is moving into a full recession territory that would require more than a partial trade deal with China for a swift short term recovery.
Up until 2018, the Midwesthad shown a strong growing labor force, supplementing the upside movement of the US stock market and the expansion of the U.S. economy.
At the time, despite the strength of the Midwest jobs market, analysts warned that the imposition of additional tariffs could place the growth of the entire region in jeopardy, presenting a roadblock in the Improving sentiment around the stock market.
Global manufacturing decline isn’t helping the US
Major markets like the UK, South Africa, and China have seen a steep contraction in their respective manufacturing sectors, with the UK seeing a surprising negative growth rate for October.
The U.K. Office for National Statistics has released monthly manufacturing growth data which showed that in October, the nation’smanufacturing industry declinedby 0.7%.
Europe has also touted the possibility of a new trade dispute with the US, which would apply significant pressure on both the UK and the U.S.
Bruno Le Maire, the Finance Minister of France, stated that Europewould retaliate against the US and respond with sanctionswithout a settlement, emphasizing that such an action is not in the interest of the U.S. and Europe.
“I’m still in favor of a settlement. But the American administration must be aware that if there is not a settlement, Europe will not have any other choice but to retaliate and to put sanctions. It’s not in the interest of Europe to enter into a trade war with the U.S. and I strongly believe too that it’s not in the interest of the US, ” stated Le Maire.
Uncertainty isn’t helping
Due to improved sentiment, the financial markets are reflecting the likelihood of a partial deal with China to be established by the month’s end.
However, Veda Partners director of economic policy Henrietta Treyz said that the US couldpotentially do far more than tariffsto achieve a deal it wants that includes restrictions on payment processors like AliPay .
If October ends without a partial deal, the manufacturing sector is likely to see further slowing of jobs growth that may build increasing sell pressure on the stock market.
This article was edited byGerelyn Terzo (***********************.
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