Job Openings Shrink, Hiring Picks Up: November 4 – 8

Job openings, factory orders, and trade activity all declined in September. Here are the five things we learned from U.S. economic data released during the week ending November 8.

#1The number of job openings fell, but hiring increased in September. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.024 million jobs on the final day of September, down 277,000 for the month and 5.0 percent from a year earlier. (It is worth noting that this is still a large number of available jobs by historical standards.) Private-sector job openings were 7.0 percent below that from a year earlier, with substantial year-to-year percentage declines in retail (-27.0 percent), accommodation/food services (-15.7 percent), health care (-11.2 percent), and wholesale trade (-11.0 percent). Meanwhile, hiring grew by 50,000 during the month to 5.934 million, up 4.7 percent from a year earlier. Private-sector hiring outpaced September 2018 levels by 4.5 percent. 5.808 million people left their jobs in September, up 76,000 for the month and 4.5 percent over the past year. Fewer people voluntarily departed their jobs in September, down 103,000 from August to 3.498 million (+3.1 percent versus September 2018). On the other hand, layoffs jumped by 152,000 to 1.964 million (+8.0 percent versus September 2018).JOLTS 110819

#2Factory orders slowed in September. The Census Bureau estimates new orders for manufactured goods declined 0.6 percent during the month to a seasonally adjusted $496.7 billion. Durable goods orders slumped 1.2 percent while orders for nondurable edged up 0.1 percent. Civilian capital goods orders net of aircraft—a proxy for business investment—slowed 0.6 percent in September. Shipments fell for the third straight month, shedding 0.2 percent to $501.1 billion. Unfilled orders slightly lost ground (-$0.1 billion) after two monthly gains (to $1.163 trillion). Inventories expanded 0.3 percent to $697.9 billion. 

#3Exports and imports decelerated in September. The Census Bureau and the Bureau of Economic Analysis report that exports declined by $1.8 billion during the month to $206.0 billion (-1.8 percent versus September 2018) while imports fell by $4.4 billion to $258.4 billion (-2.8 percent versus September 2018). As a result, the trade deficit narrowed by $2.6 billion in September to -$52.5 billion, down 6.5 percent from a year earlier. The goods deficit contracted by $2.7 billion to -$71.7 billion (-7.2 percent versus September 2018), while the services surplus declined by $0.1 billion to +$19.3 billion (-9.0 percent). The former included the impact of declining exports of both food (soybeans) and automobiles and lower imports of consumer goods (including cell phones, toys, and artwork), capital goods, and automotive vehicles.

#4Service sector activity picked up in October. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, added 2.1 points during the month. The resulting reading of 54.7 signaled the 117th straight month of service sector growth. All four NMI components improved in October: employment (up 3.3 points), new orders (up 1.9 points), business activity/production (up 1.8 points), and supplier deliveries (up 1.5 points). Thirteen of 18 nonmanufacturing industries expanded during the month, led by agriculture, utilities, and professional/scientific/technical services. The press release noted that survey respondents “continue to be concerned about tariffs, labor resources and the geopolitical climate.”

#5Productivity sputtered during the summer. The Bureau of Labor Statistics finds nonfarm business labor production declined 0.3 percent on a seasonally adjusted basis during Q3, after having grown 2.3 percent during the prior quarter. Nonfarm output rose 2.1 percent, with the number of hours worked gained 2.4 percent. Productivity has risen 1.4 percent over the past year. Manufacturing sector production inched down 0.1 percent during Q3, with a 1.1 percent increase in manufacturing output and a 1.3 percent gain in hours worked. Durable goods manufacturing productivity gained 1.2 percent during the quarter while that for nondurables manufacturing contracted 1.5 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 2, 2019, First-Time Claims, seasonally adjusted): 211,000 (-8,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,250 (-0.9% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (November 2019-preliminary, Index (1966Q1=100), seasonally adjusted): 95.7 (vs. October 2019: 95.5, vs. November 2018: 97.5).
Consumer Credit (September 2019, Outstanding Consumer Credit Balances, net of mortgages and other real estate-backed mortgages, seasonally adjusted): $4.193 trillion (+$9.5 billion vs. August 2019, +4.9% vs. September 2018).
Wholesale Trade (September 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $676.7 billion (-0.4% vs. August 2019, +4.8% vs. September 2018).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Job Creation and Economic Expansion Trudge Along: October 28 – November 1

October employment and Q3 GDP data show growth, albeit at a tempered rate. Here are the five things we learned from U.S. economic data released during the week ending November 1.

#1Job creation slowed in October, hurt by a now-settled strike. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 128,000 during the month, down from the 180,000 created jobs in September. This report also includes substantial upward revisions to August and September payrolls totaling a combined 95,000 jobs. Weighing on the headline October number was the 41,600 decline in motor vehicle manufacturing jobs resulting from the now-settled General Motors strike. Private-sector employers added 131,000 workers, split between 157,000 added in the service sector and a drop in 26,000 jobs in the goods-producing side of the economy. Among the industries adding the most positions during the month were leisure/hospitality (+61,000), health care/social assistance (+34,200), and professional/business services (+22,000). Average weekly earnings of $969.39 represented a 2.7 percent gain over the past year.

A separate survey of households places the unemployment rate of 3.6 percent, up 1/10th of a point from September but still near a 50-year low. 325,000 people entered the labor force, leading to the labor force participation rate edging up 1/10th of a point to 63.3 percent. The same measure for adults aged 25 to 54 added 2/10ths of a point to 82.8 percent, its highest reading since August 2009. The median length of unemployment slipped 1/10th of a week to 9.3 weeks (October 2018: 9.4 weeks), but the count of part-time workers seeking a full-time job grew by 88,000 to 4.438 million (October 2018: 4.630 million). The U-6 series—the broadest measure of labor underutilization—inched up by 1/10th of a percentage point to 7.0 percent (October 2018: 7.5 percent).Unemployment Rate 2004-2019 110119

#2Economic growth slowed slightly during the summer. The Bureau of Economic Analysis’ first estimate of Gross Domestic Product (GDP) says the U.S. economy expanded at a seasonally adjusted annualized rate of 1.9 percent, just below Q2’s 2.0 percent growth rate. Pulling down Q3 economic activity were smaller increases in personal spending, government expenditures, and business investment. Contributing to Q3 GDP growth were, in declining order, personal spending (adding 193 basis points to GDP growth), government spending (+35 basis points), and residential fixed investment (+18 basis points). Dragging down economic activity, however, were business investment (costing 22 basis points in GDP growth), net exports (-8 basis points), and the change in private inventories (-5 basis points). The BEA will revise its Q3 GDP estimate twice over the next two months. 

#3A third (and probably final) rate cut by the Fed in 2019. The policy statement released following the past week’s Federal Open Market Committee meeting continued to characterize economic activity growing “at a moderate rate” and that the labor market “remains strong.” It also retained the observation that consumer spending was growing “at a strong pace” but also noted that exports and business investment were “weak.” As a result, a divided FOMC voted to cut the fed funds target rate by a quarter-point to a range between 1.5 and 1.75 percent. But it appears that the committee believes this is the final rate cut for now. Why? The statement no longer includes the line that the Fed would “act as appropriate to sustain” the economic expansion. Instead, it now says the FOMC would “continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.”

#4Personal spending grew moderately in September. The Bureau of Economic Analysis indicates that real personal consumption expenditures (PCE) increased 0.2 percent on a seasonally adjusted basis during the month, matching August’s gain. Spending on goods grew 0.4 percent, split between a 0.6 percent rise for durable goods and a 0.3 percent bounce for nondurables. Spending on services edged up 0.1 percent. Nominal PCE also grew 0.2 during September, funded by 0.3 percent increases for nominal personal income and both nominal and real disposable income. The savings rate rose by 2/10ths of a percentage point to +8.3 percent. Over the past year, real PCE has risen 2.6 percent, funded by 3.5 percent growth in real disposable income.

#5Manufacturing activity slowed in October. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added a half-point during the month to a reading of 48.3. This was the third straight month in which the PMI was below 50.0, indicating a contraction in manufacturing sector economic activity. Three of five PMI components improved during the month: inventories (up 2.0 points), new orders (up 1.8 points), and employment (up 1.4 points). Losing ground were components tied to supplier deliveries (off 1.6 points) and production (off 1.1 points). Only five of 18-tracked manufacturing industries expanded in October, led by furniture, printing, and food/beverage/tobacco. The press release noted that “global trade remains the most significant cross-industry issue.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 26, 2019, First-Time Claims, seasonally adjusted): 218,000 (-5,000 vs. previous week; -1,000 vs. the same week a year earlier). 4-week moving average: 214,750 (-0.6% vs. the same week a year earlier).
Chicago Fed National Activity Index (September 2019, Index (0.00=Historical Economic Growth), seasonally adjusted): -0.45 (vs. August 2019: +0.15; September 2018: +0.06).
Conference Board Consumer Confidence (October 2019, Index (1985=100), seasonally adjusted): 125.9 (vs. September 2019: 126.3).
Construction Spending (September 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.294 trillion (+0.5% vs. August 2019, -2.0% vs. September 2018.
Bankruptcies (12-month Period Ending September 30, 2019, Number of Business and Nonbusiness Filings): 776,674 (+0.4% vs. 12-month period ending September 30, 2018).
Case-Shiller Home Price Index (August 2019, 20-City Index, seasonally adjusted): Unchanged vs. July 2019, +2.0% vs. August 2018.
Agricultural Prices (September 2019, Prices Received by Farmers, not seasonally adjusted): -3.9% vs. August 2019, -1.6% vs. September 2018.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Home Sales Slow, the Federal Budget Deficit Widens: October 21 – 25

Home sales and durable goods orders each mellowed in September. Here are the five things we learned from U.S. economic data released during the week ending October 25.

#1Existing home sales pulled back in September. The National Association of Realtors reports that sales of previously owned homes slowed 2.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.38 million units. Sales declined in all four Census regions: Midwest (-3.1 percent), Northeast (-2.8 percent), South (-2.1 percent), and West (-0.9 percent). Even with the drop, existing home sales were up 3.9 percent from a year earlier, with positive 12-month comparables in three of four Census regions (sales in the Midwest matched that of a year earlier). Holding steady were inventories of unsold homes, with the 1.83 million available homes translating into a tight 4.1 month supply. The median sales price of $272,100 was up 5.9 percent from a year earlier. The press release says home prices are “rising too rapidly” because of “the housing shortage.”

#2…As had transactions of new homes. Sales of newly constructed single-family homes decreased 0.7 percent during September to a seasonally adjusted annualized rate of 701,000 units. The Census Bureau metric fell in three of four regions—West, Northeast, and South—but grew in the Midwest. Despite September’s decline, new home sales were 15.5 percent ahead of year-ago levels, with only the Midwest experiencing a negative year-to-year comparable. There was a 5.5 month supply of new homes on the market at the end of the month, equaling 321,000 units.

#3Durable goods orders fell in September. The Census Bureau estimates new orders fell 1.1 percent to a seasonally adjusted $248.2 billion. Transportation orders plummeted 2.7 percent, pulled down by slumps for civilian aircraft (-11.8 percent) and motor vehicles (-1.6 percent). Net of transportation goods, core durable goods fell 0.3 percent. Orders improved for electrical equipment/appliances (+0.9 percent), primary metals (+0.3 percent), and machinery (+0.2 percent). Declining were orders for fabricated metal orders (-1.5 percent), computer/electronics (-0.9 percent), and civilian non-aircraft capital goods (-0.5 percent).

#4Consumer sentiment stabilized in October. The Index for Consumer Sentiment, from the University of Michigan, added 3.3 points during the month to a seasonally adjusted 95.5 (1966Q1=100). This was the measure’s best reading since July, although it was a half-point below the preliminary October reading reported a few weeks ago. The advance during the month was primarily the product of an improved view of current conditions, adding 4.7 points to 113.2. The expectations index grew by a smaller 8/10ths of a point to 84.2. The press release noted fewer survey respondents included tariffs in their comments (27 percent of October survey respondents versus 36 percent in September).

#5The federal budget deficit soared in FY2019. The Bureau of the Fiscal Service reports that the U.S. government raised $3.462 trillion in revenue during the just-completed fiscal year, up 4.0 percent from FY2018. But expenses rose 8.2 percent during the same 12-month period to $4.447 trillion. The resulting budget deficit of -$984.4 billion was up 26.4 percent from a year earlier and its highest point in seven years. On the revenue side, personal tax receipts increased 2.0 percent, corporate tax collections grew 12.5 percent, and tariff duties jumped 71.4 percent. On the expense side, substantially growing line items included those tied to the military, education, health and human services, and debt service.deficits 2005-2019 102519

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 19, 2019, First-Time Claims, seasonally adjusted): 212,000 (-6,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,000 (-0.1% vs. the same week a year earlier).
FHFA House Price Index (August 2019, Purchase-Only Index, seasonally adjusted): +0.2% vs. July 2019, +4.6% vs. August 2018.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.