U.S. manufacturing activity grew, but at slightly slower rate in June

Growth in U.S. manufacturing slowed slightly in June, as supply chain problems persist and businesses say they are still struggling to find workers.

The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its index of manufacturing activity ticked down in June to a reading of 60.6 from 61.2 in May.

Any reading above 50 indicates manufacturing is expanding. June was the 13th consecutive month manufacturing has grown after contracting in April 2020, when coronavirus fears triggered business shutdowns across the country.

Production, which increased to a reading of 60.8 last month, might have seen an even stronger bump if not for raw materials shortages and labor issues, including absenteeism and turnover.

The employment index dipped into contraction territory, falling to 49.9 in June from 50.9 in May. An overwhelming majority of panelists surveyed said their companies are hiring or attempting to hire, with more than a third of them having difficulty filling positions. Panelists said employee turnover due to “wage dynamics” was a problem—in other words, workers leaving jobs for better pay.

Not coincidentally on Thursday, the Labor Department reported that the number of Americans applying for unemployment aid fell again last week to the lowest level since the pandemic struck last year. The rollout of vaccines has sharply reduced new COVID-19 cases, giving consumers the confidence to get out and spend money.

That pent-up spending has created a massive, almost overnight need for workers, and employers have been struggling to fill jobs and keep up with demand.