Payroll Growth Moderated: September 30 – October 4

The U.S. economy continued to create jobs in September, albeit at a more restrained rate. Here are the five things we learned from U.S. economic data released during the week ending October 4.

#1Job creation slowed, but the unemployment rate fell to a 50-year low in September. Nonfarm payrolls expanded by a seasonally adjusted 136,000 during the month, its smallest increase in four months and below 2018’s 223,000 average monthly job gain. The same Bureau of Economic Analysis report upwardly revised previously reported job gain estimates by 7,000 for July and 38,000 for August. The private sector added 114,000 workers in September, with all but 5,000 of the added job gains coming from the service sector. Industries added the most jobs were health care/social assistance (+41,400), professional/business service’s (+34,000), leisure/hospitality (+21,000), and transportation/warehousing (+15,700). Meanwhile, retailers shed 11,400 workers. Average weekly earnings of $966.30 were up 2.6 percent from a year earlier.

A separate household survey finds the unemployment rate falling by 2/10ths of a percentage point to 3.5 percent, its lowest reading since December 1969. 117,000 people entered the job market during the month, leading the labor force participation rate at 63.2 percent (the measure for adults 25 to 54 also held steady during the month at 82.6 percent). Also, mostly unchanged was the count of part-time workers seeking full-time work (4.350 million people) while the median length of unemployment grew by a half week to 9.4 weeks. Dropping to a data series low was the broadest measure of labor underutilization (the “U-6” series), shedding 3/10ths of a point to 6.9 percent.

#2Purchasing managers report that manufacturing contracted again in September while the service sector’s advance was less robust. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business failed to exceed 50.0—the threshold between an expanding and contracting manufacturing sector—for a second straight month. The PMI came in at 47.9, off 1.3 points from August as only one of five PMI components made a positive contribution (new orders). Dragging down the PMI were lower readings for inventories, production, employment, and supplier deliveries. Only three of 18-tracked manufacturing industries expanded in September: “miscellaneous” manufacturing, food/beverage/tobacco, and chemical products. The press release noted that “global trade remains the most significant issue” affecting manufacturing with sentiment being “cautious regarding near-term growth.”

The headline measure from the Non-Manufacturing Report on Business stayed above a reading of 50.0 as it has for the past 116 months. But the NMI slumped by 3.8 points to a reading of 52.6, its worst mark since August 2016. The supplier deliveries index was the only one of the four NMI components to make a positive contribution, as new orders, business activity/production, and employment lost ground in September. Thirteen of 18 tracked industries reported growth during the month, led by utilities, retail, construction. The press release noted that “respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

#3Factory orders edged down in August. The Census Bureau estimates new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $499.8 billion. New factory orders over the first eight months of 2019 also off 0.1 percent of that of the same period in 2018. Durable goods spending increased 0.2 percent during August but orders on nondurables pulled back 0.3 percent. Net of transportation goods, core factory orders held steady during the month while orders of core civilian nonaircraft capital goods—a proxy for business investment—declined 0.4 percent. Shipments fell for a second straight month, losing 0.1 percent to $503.0 billion. Unfilled orders, on the other hand, gained for a second consecutive month (+0.1 percent to $1.163 trillion). Inventories contracted by less than 0.1 percent to $695.9 billion.

#4The trade deficit widened in August. The Census Bureau and the Bureau of Economic Analysis reports that while exports grew 0.2 percent (to a seasonally adjusted $207.9 billion, virtually matching that of August 2018) during the month, imports bloomed 0.5 percent (to $262.8 billion, also essentially matching that of a year earlier). The resulting trade deficit of -$54.9 billion was 1.6 percent greater than that of July but equaled that of the same month a year ago. The goods deficit expanded by $0.8 billion to -$74.4 billion (2.7 percent versus August 2018) while the services surplus narrowed by less than $0.1 billion to +$19.5 billion (-9.6 percent versus August 2018). Rising were exports of fuel oil, nonmonetary gold, and soybeans, while civilian aircraft exports slowed. On the import side, there were increases for consumer goods (including cell phones) and capital goods but also a substantial decline for industrial supplies/materials.

#5Construction spending was soft in August. The Census Bureau places the seasonally adjusted annualized value of construction put into place during the month at $1.287 trillion, up 0.1 percent from July but 1.8 percent under the year-ago pace. Private sector spending mostly held steady in August at $955.0 billion (-4.0 percent versus August 2018), with residential sector spending rising 0.9 percent but nonresidential spending slumping 1.0 percent during the month. Public sector construction spending gained 0.4 percent in August to an annualized $332.3 billion, up 4.6 percent from a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 28, 2019, First-Time Claims, seasonally adjusted): 219,000 (+6,000 vs. previous week; +1,000 vs. the same week a year earlier). 4-week moving average: 212,500 (Unchanged vs. the same week a year earlier).

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

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