A Cautious Gain: July 6 – 10

The service sector expanded in June while hiring picked up mid-spring. Here are the five things we learned from U.S. economic data released during the week ending July 10.


The service sector came roaring back in June. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, rose 11.7 points to a reading of 57.1. This followed two months in which the measure was below a reading of 50.0, the threshold of an expanding and contracting service sector. All four NMI components sharply improved during the month, including massive gains for business activity/production, new orders, and employment. Fourteen of 18 nonmanufacturing industries expanded in June, led by agriculture, accommodation/food services, and wholesale trade. The press release notes that purchasing managers were “cautiously optimistic about business conditions and the economy.”

Hiring surged in May. The Bureau of Labor Statistics tells us that employers added a seasonally adjusted 6.487 million workers during the month, well above the 4.047 hires in April and a record for the data series. Hiring surged in leisure/hospitality, health care/social assistance, and construction. The jump in hiring only partially chipped away at the 24.6 million people who left their jobs—voluntarily and involuntarily—during March and April. The count of people leaving their jobs in May was far better—in fact, the 4.145 million separations in May represented a nearly eight-year low. There were 1.796 million layoffs in May, down from 11.489 million in March and 7.708 million in April. There were 5.497 million open jobs at the end of May, up 401,000 from April but 26.1 percent below the year-ago count.

Wholesaler inflation remained low in June. The producer price index (PPI) for final demand declined for the fourth time in five months during the month. The 0.2 percent drop left the Bureau of Labor Statistics’ measure down 0.8 percent from a year earlier. The core measure, which removes the impact of energy, food and trade services, rose 0.3 percent (its biggest single-month gain since January). Wholesale goods prices increased 0.2 percent, including a 7.7 percent jump in energy prices (gasoline: +26.3 percent), food prices plummeting 5.2 percent (meat prices: -27.7 percent), and core goods prices inching up 0.1 percent. Wholesale services prices slipped 0.3 percent, with trade services (i.e., wholesaler and retailer margins) falling 1.8 percent (primarily due to a 7.3 percent decline in machinery and vehicle wholesaling).

Consumers held less credit in May. The Federal Reserve estimates outstanding non-real estate consumer credit balances fell by $18.3 billion to $4.112 trillion. Credit balances had not been this small since last July but were 0.8 percent ahead of year-ago levels. Revolving credit (e.g., credit cards) balances plummeted by $24.3 billion to $995.6 billion, down 7.2 percent from a year earlier and its lowest reading since August 2017. Nonrevolving credit balances (e.g., car and college loans) grew by $6.0 billion to $3.117 trillion, up 3.8 percent over the past year.

Wholesale inventories shrank while sales rose in May. The Census Bureau reports that merchant wholesaler inventories narrowed by 1.2 percent during the month to a seasonally adjusted $642.5 billion (-4.2 percent versus May 2019). Durables inventories declined 2.0 percent to $388.6 billion (led by a 5.1 percent drop in automotive inventories) while nondurable inventories expanded 0.1 percent to $254.0 billion (with 14.4 percent growth in petroleum counterbalancing declines in most other categories). Wholesale sales surged 5.4 percent in May to $419.1 billion. This followed April’s 16.4 percent drop and left sales 16.2 percent behind its year-ago pace. Durable goods sales rose 23.4 percent while those for nondurables increased a more most 1.8 percent.

Other U.S. economic data released over the past week:

Jobless Claims (Week ending July 4, First-Time Claims, seasonally adjusted): 1,314,000 (-99,000 vs. the previous week, +1,103,000 vs. the same week a year earlier). 4-week moving average: 1,437,250 (+556.7% 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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