Payrolls Expand for the 86th Straight Month: December 4 – 8

Employers continued to expand their payrolls this fall. Here are the five things we learned from U.S. economic data released during the week ending December 8.

#1Hiring remained solid in November. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 228,000 during the month, following a gain of 244,000 during October. In all, payrolls have expanded by 2.071 million over the past year and have increased in each of the past 86 months. The goods-producing side of the economy added 62,000 jobs during November, led by manufacturing (+31,000) and construction (+24,000). The private service sector added 159,000 workers, with large increases seen in professional/business services (+46,000), health care/social assistance (+40,500), retail (+18,700), and leisure/hospitality (+14,000). The average workweek length increased by 1/10th of an hour to 34.5 hours (November 2016: 34.3 hours) while average weekly earnings grew by $4.38 to $915.98 (+3.1 percent versus November 2016).Payroll Gains 2011-2017 120817

Meanwhile, a separate household survey finds the unemployment rate held steady at its 17-year low of 4.1 percent (seasonally adjusted) The civilian labor force grew by 148,000, but the labor force participation rate remained at 62.7 percent. The labor force participation rate for adults aged 25 to 54 increased by 2/10ths of a percentage point to 81.8 percent (matching September as its highest point in nearly seven years). The median length of unemployment fell by 3/10ths of a week to 9.6 weeks (November 2016: 10.2 weeks) while the count of part-time workers seeking a full-time job grew slightly by 48,000 to 4.801 million (November 2016; 5.659 million). Finally, the broadest measure of labor underutilization (the U-6 series) inched up by 1/10th of a percentage point to 8.0 percent, just above its post-recession low.

#2Rising imports in October led to the largest trade deficit since January. Exports essentially held steady during the month at $195.9 billion (+5.6 percent versus October 2016) while imports jumped by $3.8 billion to $244.6 billion (+7.0 percent versus October 2016). As a result, the trade deficit expanded by $3.8 billion to -$48.7 billion according to the Census Bureau and Bureau of Economic Analysis. The goods deficit also grew by $3.8 billion to -$69.1 billion (+9.0 percent versus October 2016) while the services surplus held firm at +$20.3 billion (also virtually unchanged from a year earlier). In the case of the former, imports grew for crude oil (+$1.5 billion) and consumer goods (+$0.8 billion). Meanwhile, a $2.6 billion rise in industrial supplies/materials exports was counterbalanced by declining exports of soybeans (-$1.4 billion) and civilian aircraft (-$1.1 billion). The U.S. has its largest goods deficits with China (-$31.9 billion), the European Union (-$12.0 billion), Mexico (-$6.0 billion), and Japan (-$5.3 billion).

#3The service industry grew at a slower pace during November. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business slumped 2.7 points during the month to a reading of 57.4. Despite the decline, this was the 95th straight month in which the NMI was above a reading of 50.0 (indicative of a growing service sector). All four components of the measure fell during the month: new orders (-4.1 points), supplier deliveries (-4.0 points), employment (-2.2 points), and business activity/production (8/10ths of a point). Sixteen of 18 tracked service sector industries expanded during November, led by retail, wholesale trade, and utilities. The press release noted that survey respondents’ comments “indicate that the economy and sector will continue to grow for the remainder of the year.”

#4Factory orders sputtered in October. The Census Bureau reports that new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $479.6 billion. Even with the decline, this represented a 3.7 percent increase from the same month a year earlier. Transportation orders fell 4.2 percent as orders for civilian and defense aircraft slumped 18.5 percent and 7.6 percent, respectively. Net of transportation goods, orders jumped 0.8 percent for the month and was 6.8 percent ahead of year-ago levels. Growing for the month were new orders for machinery (+1.9 percent), electrical equipment/appliances (+0.8 percent), computers/electronics (+0.7 percent), and nondurable goods (+0.7 percent). New orders for nondefense capital goods net of aircraft (a proxy for business investment) gained 0.3 percent during October and has risen 9.6 percent over the past year. Shipments grew for the tenth time in 11 months with a 0.6 percent increase to $484.2 billion. Unfilled orders were essentially unchanged for the month at $1.135 trillion while inventories grew for the 11th time in 12 months with a 0.2 percent increase at $661.6 billion.

#5Q3 productivity growth remained solid after a revision The Bureau of Labor Statistics indicates nonfarm business sector productivity grew 3.0 percent during the quarter, matching the previous estimate of Q3 productivity reported a month earlier and the most significant gain in productivity since Q3 2014. This was the result of a 4.1 percent rise in output generated by a 1.1 percent gain in the number of hours worked during the quarter. Even with the bounce during the quarter, productivity has grown by a mere 1.5 percent over the past year. Manufacturing sector production fell 4.4 percent during the quarter, split by falls of -4.7 percent and -4.4 percent for durable and nondurable manufacturing, respectively. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 2, 2017, First-Time Claims, seasonally adjusted): 236,000 (-2,000 vs. previous week; -15,000 vs. the same week a year earlier). 4-week moving average: 241,500 (-3.4% vs. the same week a year earlier).
Consumer Credit (October 2017, Outstanding Consumer Credit Balances (net of mortgages and other real estate-backed loans), seasonally adjusted): $3.802 trillion (+$20.5 billion vs. September 2017 +5.4% vs. October 2016).
University of Michigan Consumer Sentiment (December 2017-preliminary, Index (1966Q1=100), seasonally adjusted): 96.8 (vs. November 2017: 98.5; vs. December 2016: 98.2).
Wholesale Inventories (October 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $605.3 billion (-0.5% vs. September 2017, +3.9% vs. October 2016).

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

Q3 GDP Growth Revised Upward: November 27 – December 1

The U.S. economy strengthened at its fastest rate in three years during Q3. Here are the five things we learned from U.S. economic data released during the week ending December 1.

#1Economic growth was more vigorous than previously believed during Q3. The Gross Domestic Product (GDP) grew 3.3 percent on a seasonally adjusted annualized rate (SAAR) during July, August, and September. This was an upward revision from the 3.0 percent annualized gain previously reported by the Bureau of Economic Analysis and the fastest pace of GDP growth since the third quarter of 2014. The revision was the result of higher than previous levels of nonresidential (business) fixed investment, state/local government spending, and private inventory accumulation. Following the revision, the largest positive contributors to Q3 economic growth were personal spending (adding 160-basis points to GDP growth), the change in private inventories (+80-basis points), nonresidential fixed investment (+58-basis points), net exports (+43-basis points), and government expenditures (+8-basis points). The only major component of GDP dragging down Q3 economic growth was residential fixed investment, which cost 20-basis points in economic growth during the quarter. The same report shows that business profits (based on current production) jumped 4.3 percent during Q3 to an annualized rate of $2.215 trillion, up 5.4 percent from the same quarter a year earlier. The BEA will revise its Q3 GDP estimate once again later this month.GDP CONTRIBUTORS Q32017-120117

#2Consumer spending barely budged in October. The Bureau of Economic Analysis reports that personal consumption expenditures (PCE) increased 0.3 percent during the month to a seasonally adjusted annualized rate (SAAR) of $13.557 trillion, up 0.3 percent from September. But after adjusting for inflation, “real” PCE grew only 0.1 percent during October following a 0.5 percent bounce in September (although some of September’s spending surge reflected hurricane-related automobile purchases). Real spending on goods grew 0.3 percent, split between a 0.5 percent gain in spending on nondurable goods and a 0.1 percent decline in durables expenditures. Spending on services held steady during the month. Over the past year, real spending has grown 2.6 percent, with 12-month comparables for spending on goods and services of +3.9 percent and +2.0 percent, respectively. The increased spending was funded by a 0.4 percent gain in personal income and a 0.5 percent increase in disposable income. Adjusted for inflation, “real” disposable income rose 0.3 percent during the month and was increased 1.6 percent over the past year. The savings rate improved by 2/10ths of a percentage point to +3.2 percent.

#3There was a second straight sharp monthly rise in new home sales during October. The Census Bureau estimates new home sales jumped 6.2 percent to a seasonally adjusted annualized rate (SAAR) of 685,000 units. This was up a robust 18.7 percent from a year earlier. Sales grew in all four Census regions on both a month-to-month and year-to-year basis, with the latter showing double-digit percentage gain in each region. Inventories of unsold new homes at the end of October was at 282,000 units, up 1.4 percent for the month and 13.7 percent from a year earlier. Nevertheless, this reflected a tight 4.9 month supply. The median sales price of new homes—$312,800—was 3.3 percent above the October 2016 median sales price.

#4Purchasing managers indicate slightly slower growth in manufacturing during November. The Purchasing Managers Index (PMI) from the Institute for Supply Management slipped by 5/10ths of a point to a seasonally adjusted reading of 58.2. Even with the decline, this was the 15th straight month in which the measure above a reading of 50.0, which is indicative of an expanding manufacturing sector. Two of the five components of the PMI grew during the month: production (up 2.9 points to 63.9) and new orders (up 6/10ths of a point to 64.0). Dropping were measures for supplier deliveries (down 4.9 points to 56.5), inventories (down a full point to 47.0), and employment (off 1/10th of a point to 59.7). Fourteen of 18 tracked manufacturing industries expanded during the month, led by paper products, machinery, and transportation equipment. 

#5A measure of consumer sentiment hit another 17-year high. The Conference Board’s Consumer Confidence Index added 3.3 points during November to a seasonally adjusted reading of 129.5 (1985=100). This was up 20.1 points from its November 2016 reading and represented the measure’s highest point since November 2000 (132.6). The present conditions index grew by 1.9 points to 152.0 while the expectations index gained 4.3 points to 113.3. 34.9 percent of survey respondents said that current economic conditions were “good” while only 12.7 percent indicated that conditions were “bad.” Similarly, 37.1 percent of consumers report that jobs were “plentiful” while only 16.9 percent said that they were “hard to get.” The press release noted that consumers were “entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 25, 2017, First-Time Claims, seasonally adjusted): 238,000 (-2,000 vs. previous week; -44,000 vs. the same week a year earlier). 4-week moving average: 242,250 (-3.0% vs. the same week a year earlier).
Construction Spending (October 2017, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.242 trillion (+1.4% vs. September 2017, +2.9% vs. October 2016).
Vehicle Sales (November 2017, Light Vehicle Retail Sales, seasonally adjusted annualized rate): 17.48 million vehicles (-3.4% vs. October 2017, -1.3% vs. November 2016).
Pending Home Sales (October 2017, Index (2001=100), seasonally adjusted): 109.3 (+3.5% vs. September 2017, -0.6% vs. October 2016).
Beige Book
FHFA House Price Index (September 2017, Purchase-Only Index, seasonally adjusted): +0.3% vs. August 2017, +6.3% vs. September 2016.
Case-Shiller Home Price Index (September 2017, 20-City Index, seasonally adjusted): +0.5% vs. August 2017, +6.2% vs. September 2016).

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