The Latest on Industrial Production

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest data on industrial production.

  • It’s a bit surprising that industrial production fell a notch (falling 0.1%) in the latest month, but is nothing to be worried about.  This series has generally been on an upward trajectory of 2 to 4 steps forward followed by one step back.  Industrial production is up 3.3 percent from one year ago.
  • Today’s data is essentially matching the prior cyclical peak activity right before the big recession in 2008-09.  It’s been a long and steady climb out from the hole but good progress has been made.  However, much of the production increases have been due, it appears, to improved automation and other labor-saving measures.  Jobs in the manufacturing sector are not climbing as fast as production.
  • Home sales have also been making progress but not to the degree of industrial production.  Home sales would need to rise by another 40 percent to get us back to the prior peak in 2005.  This will not happen for at least a decade because the 7 million existing home sales came about from lax credit conditions and fortunately we will not return to bubble lending conditions.
  • One long-term chart to be mindful of is the decline in manufacturing employment even with the rise in production.  Though very painful for the workers involved, it is also a measure of progress for the country.  Just as in agriculture, we have more food even with fewer farmers.  Many bright minds are getting employed in industries such as medical technology, software development, and other new product areas.  No one would have thought of carrying capabilities like watching TV, phone, Hollywood movies, library books, and picture albums on such a small device like an iPhone ten years ago.  But that is progress in life from more production at all levels in older industries with fewer workers.  That is why education and job training to satisfy new industries become ever more important.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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