Analysis: Trump’s 2020 bid may stumble on rust belt manufacturing recession

US president Donald Trump has been boasting about creating manufacturing jobs in states key to his re-election, but an emerging recession in the sector threatens to reverse that trend and imperil his message.

Analysis: Trump’s 2020 bid may stumble on rust belt manufacturing recession

US president Donald Trump has been boasting about creating manufacturing jobs in states key to his re-election, but an emerging recession in the sector threatens to reverse that trend and imperil his message.

A decline in manufacturing jobs in coming months could hurt Mr Trump in rust belt swing states such as Michigan, Ohio and Pennsylvania and could give Democrats a weapon against the president.

Mr Trump travelled to Pennsylvania, this week, to make his case.

“Factory floors across this land are once more crackling with life. Our steel mills are fired up and blazing bright. The assembly lines are roaring,” he told workers at a Royal Dutch Shell plant in Monaca, northwest of Pittsburgh.

However, Mr Trump faces US manufacturing output declining in consecutive quarters, the common definition of recession within the industry, the result of global weakness and a trade war between the US and China.

New figures show China’s economy stumbled more sharply than expected in July, with industrial output growth cooling to a more than 17-year low, as the intensifying US trade war took a heavier toll on businesses and consumers.

Chinese industrial output growth slowed markedly to 4.8% in July from a year earlier, data from the country’s National Bureau of Statistics showed, lower than forecasts and the weakest pace since February 2002.

So far, job growth has helped Mr Trump make his case.

Payrolls in manufacturing totalled about 12.9 million workers in July, the most since November 2008, according to US Bureau of Labour Statistics data. Since Mr Trump took office in 2017, factory employment has increased by about a half million workers after stagnating in the prior two years.

However, hiring momentum in the sector has started to fade. In the six months to July, 38,000 jobs have been added at factories, the fewest for a similar period since January 2017, when Mr Trump took office.

Mr Trump campaigned in 2016 on revamping trade deals to revive America’s industrial base which was a strategy that helped him pick off the historically Democratic states of Michigan, Pennsylvania and Wisconsin that Hillary Clinton took for granted. Democrats carried those three states in every election from 1992 to 2012 and they will likely need them to win in 2020.

Nationally, manufacturing jobs accounted for 11.9% of employment in counties Mr Trump carried in 2016 compared with 6.7% in counties Ms Clinton carried. In Pennsylvania, Michigan and Wisconsin, manufacturing’s share of employment averaged 17.9% in Trump counties versus 8.5% in Clinton counties, according to analysis.

The benefit Trump derives from the story in his campaign will depend on what happens with jobs if output continues to decline.

The Federal Reserve’s latest industrial production report last month showed US factory output declined at a 2.2% annualised pace in the second quarter after a 1.9% rate of decline in the previous three months.

Within specific industry groups, metals, machinery, textiles, paper and petroleum and coal were among those that experienced outright production downturns during both quarters.

Another gauge of US manufacturing activity fell in July to an almost three-year low, dragged down by slower production and shaky export markets that help explain the Federal Reserve’s decision to reduce interest rates last month.

While manufacturing makes up only about 11% of the US economy, the risk is that further weakness will extend to service providers and prompt those companies to reduce investment and limit hiring.

- Bloomberg and Reuters

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