Job Creation Surprises to the Upside: December 2 – 6

Job creation accelerated in November while trade activity slackened in October. Here are the five things we learned from U.S. economic data released during the week ending December 6.

#1Employers added more workers in November than in any other month since January. Nonfarm payrolls expanded by a seasonally adjusted 266,000 workers during the month, up from the 193,000 added in September and October’s 156,000 gain. The now-settled General Motors strike held down job creation during those two months—employment in motor vehicles/parts rose by 41,300 in November as strikers returned to their jobs. The Bureau of Labor Statistics has private-sector employment blooming by 254,000 workers, split between gains of 206,000 in the service sector and 48,000 in the goods-producing side of the U.S. economy. Industries reporting the biggest job gains included health care/social assistance (+60,200), manufacturing (+54,000), leisure/hospitality (+45,000), and professional/business services (+38,000). Average weekly earnings have risen 3.1 percent over the past year to $973.18.Nonfarm payrolls November 2018 - November 2019

A separate survey of households has the unemployment rate falling back to a multi-decade low of 3.5 percent (it also was at 3.5 percent in September). A modest 40,000 people entered the labor force during November while the labor force participation rate slipped 1/10th of a point to 63.2 percent. The labor force participation rate for adults 25 to 54 held steady at 82.8 percent. The median length of unemployment crept up by 1/10th of a week to 9.4 weeks (November 2018: 9.0 weeks), while the count of part-time workers mostly held steady at 4.322 million workers (although down 9.6 percent from a year earlier). The BLS’s broadest measure of labor underutilization (the “U-6” series) slipped by 1/10th of a point to 6.9 percent, matching the multi-decade low achieved in September.

#2The trade deficit narrowed significantly in October as overall trade activity slowed. The Census Bureau and the Bureau of Economic Analysis indicate that imports fell by $4.3 billion during the month to a seasonally adjusted $254.3 billion (-4.7 percent versus a year earlier) while exports slipped $0.4 billion to $207.1 billion (-1.4 percent versus the previous year). The resulting trade deficit of -$47.2 billion was $3.9 billion smaller than the prior month and off 16.7 percent from a year earlier. The goods deficit contracted by $3.7 billion to -$68.0 billion (October 2018: -$77.3 billion) while the services surplus grew by $0.2 billion to +20.8 billion (October 2018: +$20.6 billion). The former not only included sharp declines in imports of both consumer goods and automobiles, but also fewer exports of cars and both consumer and capital goods. The U.S. had its biggest goods deficits with China (-$27.8 billion), the European Union (-$14.3 billion), and Mexico (-$7.8 billion).

#3Factory orders and shipments showed some life in October. The Census Bureau reports that new orders for manufactured goods grew 0.3 percent during the month to a seasonally adjusted $497.0 billion (-0.4 percent versus October 2018). Durable goods orders jumped 0.5 percent (helped by a 0.7 percent bounce in transportation orders) while nondurable goods orders held steady. Also stemming a decline were shipments, which grew by less than 0.1 percent to $500.2 billion (+0.8 percent versus October 2018). Unfilled orders inched up 0.1 percent to $1.164 trillion (-1.6 percent versus October 2018), while inventories expanded 0.1 percent to $698.8 billion (+2.3 percent versus October 2018).

#4Purchasing managers say that the manufacturing sector contracted for a fourth straight month in November. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, slipped by 2/10ths of a point to a seasonally adjusted 48.1. This was the fourth straight month in which the PMI was under a reading of 50.0, which is the threshold between a growing and contracting manufacturing sector. Among the five PMI components, two (production and supplier deliveries) improved during November, while the other three (inventories, employment, and new orders) fell. Only five of 18-tracked manufacturing industries reported growth during the month, led by apparel, food/beverage/tobacco, and paper products. The press release noted that survey respondents’ sentiment was “neutral regarding near-term growth.”

#5Growth in the service sector slowed in November. The headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business—the NMI—lost 8/10ths of a point to a reading of 53.9. Even with the drop, the NMI has been over a reading of 50.0 for 118 consecutive months, indicative of an expanding service sector. Among the four index components, the one tied to business activity fell sharply while that for supplier delivers suffered a smaller decline. Rising were NMI components for employment and new orders. Twelve of 18-tracked service sector industries grew in November, led by real estate, health care/social assistance, and arts/entertainment/recreation. Commenters to ISM’s survey said they were “hampered by constraints in labor resources.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 30, 2019, First-Time Claims, seasonally adjusted): 203,000 (-10,000 vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 217,750 (-4.3% vs. the same week a year earlier).
Construction Spending (October 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.291 trillion (-0.8% vs. September 2019, +1.1% vs. October 2018).
Consumer Credit (October 2019, Outstanding Non-Real Estate Back Credit Balances, seasonally adjusted): $4.165 trillion (+$18.9 billion vs. September 2019, +4.8% vs. October 2018).
Wholesale Trade (October 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $675.6 billion (+0.1% vs. September 2019, +3.8% vs. October 2018).

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

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