Job Creation Solid, If Slower: December 3 – 7

Job creation mellowed a bit in November while the trade deficit widened again in October. Here are the five things we learned from U.S. economic data released during the week ending December 7.

#1Job creation slowed in November, but wage growth held firm. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 155,000 workers during the month, down from the 237,000 added in October and below the 211,000 average of the past 12 months. The private sector added 161,000 workers during the month while government employment contracted by 6,000. Industries expanding their payrolls the most include health care/social assistance (+40,100), professional/business services (+32,000), manufacturing (+27,000), transportation/warehousing (+25,400), retail (+18,200), and leisure/hospitality (+15,000). Average hourly wages have grown 3.1 percent over the past year to $27.35 with average weekly earnings increased a more modest 2.8 percent because the average workweek slipped by 1/10th of an hour to 34.4 hours.

Based on a separate survey of households, the unemployment rate held steady at its post-recession low of 3.7 percent. 133,000 people entered the labor force during the month, but the labor force participation rate remained at 62.9 percent. The labor force participation rate for adults aged 25 to 54 edged down by 1/10th of a percentage point to 82.4 percent. While just off its post-recession high, this measure remained its peak during the previous business cycle (October 2000: 83.4 percent). The median length of unemployment dropped by a half week to a post-recession low of 8.9 weeks while the count of part-time workers seeking a full-time job (“involuntary part-time workers”) grew by 181,000 to 4.802 million.  The broadest measure of labor underutilization by the BLS (the U-6 series) inched up 2/10ths of a percentage point to 7.6 percent.Unemployment Rate 2008-2018 120718

#2The U.S. trade deficit widened once again in October. The Census Bureau and Bureau of Economic Analysis report that exports slowed $0.3 billion during the month to a seasonally adjusted $211.0 billion (+6.3 percent versus a year earlier) while imports grew by $0.6 billion to $266.5 billion (+8.5 percent versus a year earlier). As a result, the U.S. goods and services deficit expanded by $0.9 billion to -$54.6 billion. The deficit was 18.1 percent larger than that of the year earlier and was its largest reading since October 2008. The goods deficit expanded by $0.9 billion to -$78.1 billion while the surplus on services shrank a modest $0.1 billion to +$22.6 billion. The former was hurt by a decline in exports of soybeans and civilian aircraft/engines and increased imports of pharmaceutical preparations and automotive vehicles/engines. The U.S. had its biggest trade deficits in goods with China (-$38.2 billion), the European Union (-$15.1 billion), and Mexico (-$6.4 billion).

#3October factory orders were soft. The Census Bureau indicates new orders for manufactured goods dropped by $10.5 billion during the month to a seasonally adjusted $502.7 billion. New orders for transportation goods fell 12.0 percent, pulled down by massive declines in orders for defense (-59.3 percent) and civilian (-22.2 percent) aircraft (both of which tend to be volatile month-to-month). Net of transportation goods, new orders increased 0.3 percent. Durable goods orders slumped 4.3 percent while nondurable orders gained 0.3 percent. Unchanged were orders for civilian capital goods net of aircraft (a proxy of business investment). Shipments slipped 0.1 percent to $508.4 billion, its first drop after 15 consecutive monthly increases, with unfilled orders also contracting by 0.1 percent to $1.184 trillion. Inventories expanded for the 24th straight month with a $0.9 billion gain to $681.7 billion.

#4Purchasing managers say business activity accelerated in November. The headline index from the Institute for Supply Management’s Manufacturing Report on Business, the PMI, added 1.6 points during the month to a seasonally adjusted 59.3. This was the PMI’s 27th consecutive month above a reading of 50.0, indicative of an expanding manufacturing sector. Four of five PMI components improved from their October readings: new orders (up 4.7 points), inventories (up 2.2 points), employment (1.6 points) and production (up 7/10ths of a point). The measure tracking supplier deliveries lost 1.3 points. Thirteen of 18 tracked manufacturing industries reported growth during the month, led by computers/electronics, plastics/rubber product, and paper products. Survey respondents’ comments stated that “[d]emand remains strong” but noted many detrimental impacts of tariffs (both current and pending).

The NMI, the headline index from ISM’s Non-Manufacturing Report on Business, has been above a reading of 50.0 for 106 straight months. In November, the NMI edged up by 4/10ths of a point to 60.7. Only two of the NMI’s four components improved during the month:  business activity/production (up 2.7 points) and new orders (up a full point). Slipping were components tracking employment (off 1.3 points) and supplier deliveries (down a full point). Seventeen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, professional/scientific/technical services, and health care/social assistance. The press release stated that survey respondents “remain positive about current business conditions and the direction of the economy.”

#5Construction spending sputtered again in October. The Census Bureau estimates the value of construction put in place edged down 0.1 percent during the month to a seasonally adjusted annualized rate (SAAR) of $1.309 trillion, its third monthly decline. Construction spending has grown 4.9 percent over the past 12 months. Private sector spending decreased 0.4 percent to $998.7 billion (SAAR), up 3.9 percent from October 2017. Residential private sector spending dropped 0.5 percent while the nonresidential private sector measure shrank more slowly (-0.3 percent). Public sector construction gained 0.8 percent to an annualized $304.2 billion, up 8.8 percent from a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 1, 2018, First-Time Claims, seasonally adjusted): 231,000 (-3,000 vs. previous week; -4,000 vs. the same week a year earlier). 4-week moving average: 228,000 (-5.3% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (December 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 97.5 (vs. November 2018: 97.5; vs. December 2017: 95.9).
Productivity (2018 Q3-revision, Nonfarm Labor Productivity, seasonally adjusted annual rate): +2.3% vs. 2018 Q2, +1.3% vs. 2017 Q3.
Beige Book

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

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