Employers have added 12.1 million jobs over the past five months, recovering 55 percent of the jobs lost earlier this spring. Here are the five things we learned from U.S. economic data released during the week ending November 6.
1. Payrolls grew again in October but remained well short of pre-pandemic levels. The Bureau of Labor Statistics estimates nonfarm payrolls grew a seasonally adjusted 638,000 during the month. This was the smallest gain over the past five months, reflecting the impact of the loss of 147,000 temporary jobs tied to the end of the 2020 Census. Payrolls remained 10.1 million below their February levels. Private-sector employers added 906,000 workers (up slightly from the 892,000 advance in September), split between 783,000 in the service sector, and 123,000 in the economy’s goods-producing side. Industries adding the most workers were leisure/hospitality (+271,000), professional/business services (+208,000, including 108,700 in temporary help services), retail trade (+103,700), and construction (+84,000). Government employment shrank by 268,000.
A separate household survey has the unemployment rate fell by a full percentage point to 6.9 percent. The labor force expanded by 724,000 people, while the labor force participation rate jumped by 3/10ths of a point to 61.7 percent. The labor force participation among adults 25 to 54 also advanced by 3/10ths of a point (to 81.2 percent). 6.683 million people held a part-time job but sought a full-time opportunity (up 383,000 for the month). The median length of unemployment grew by 1.6 weeks to 19.3 weeks—it was at 9.2 weeks during the same week one year ago. The broadest measure of labor underutilization fell by 7/10ths of a percentage point to 12.1 percent. The same measure was at 6.9 percent in October 2019.
2. The Federal Reserve will continue to be accommodative. The policy statement released following the past week’s Federal Open Market Committee (FOMC) meeting nearly matched that from the previous meeting. While noting the economy “will depend significantly on the course of the virus,” the statement indicated that business activity and employment “continued to recover.” The FOMC “seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run” and, as a result, kept its fed funds target rate at a range between zero and 0.25 percent. Further, the Fed will be purchasing Treasury securities and agency mortgage-backed securities “over the coming months.”
3. Factory orders jumped for a fifth straight time in September. New orders for manufactured goods rose 1.1 percent during the month to a seasonally adjusted $475.0 billion, per the Census Bureau. Even though orders have been growing every month since May, their year-to-date total was off 8.4 percent from the same nine months in 2019. Durable goods orders gained 1.9 percent in September, while those of nondurables advanced 0.3 percent. Shipments grew for a fifth straight month, adding 0.3 percent to $482.8 billion, with gains for durable and nondurable goods of 0.4 percent and 0.3 percent, respectively. Year-to-date, shipments in 2020 were off 7.2 percent from the prior year. Unfilled orders contracted for the sixth time over the past seven months, shrinking 0.2 percent to $1.076 trillion while inventories held steady at $686.7 billion.
4. Purchasing managers report growth in both manufacturing and the service sector during October. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, hit its highest level since September 2018 with a 3.9 point advance to a reading of 59.3. The measure has been above a reading of 50.0—the threshold between an expanding and contracting manufacturing sector—for five consecutive months. Rising were PMI components tied to new orders (up 7.7 points to 67.9), employment (up 3.6 points to 53.2), production (up 2.0 points to 63.0), and inventories (up 4.8 points to 51.9). Fifteen of 18-tracked manufacturing industries expanded during October, led by apparel, fabricated metal products, and nonmetallic mineral products. The press release stated that “the overall manufacturing community continues to exceed expectations.”
The Services PMI, from the ISM’s Services Report on Business, slipped by 1.2 points to a reading of 56.6. Like above, this measure has been above the critical 50.0 mark for five straight months. Taking a step back were index components tied to business activity/production (off 1.8 points to 61.2), new orders (down 2.7 points to 58.8), and employment (falling 1.7 points to 50.1). Sixteen of 18 service industries reported growth in October, led by transportation/warehousing, construction, and accommodation/food services. While noting that survey respondents were “cautiously optimistic,” the press release indicated that there was “a degree of uncertainty due to the pandemic, capacity constraints, logistics and the elections.”
5. Trade deficit narrowed but remained large in September. The Census Bureau and Bureau of Economic Analysis report exports jumped 2.6 percent to a seasonally adjusted $176.4 billion (-15.7 percent vs. September 2019) while imports grew 0.5 percent to $240.2 billion (-6.5 percent vs. September 2019). The resulting trade deficit of -$63.9 billion was $3.1 billion smaller than that of the prior month but 33.4 percent greater than a year earlier. The goods deficit shrank by $3.1 billion to -$80.1 billion while the services surplus grew by less than $0.1 billion to +$16.8 billion. The former improved due to gains in exports of soybeans and capital goods. The U.S. had its largest goods deficits with China (-$24.3 billion), the European Union (-$17.3 billion), and Mexico (-$10.7 billion).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending October 31, First-Time Claims, seasonally adjusted): 751,000 (-8,000 vs. the previous week, +539,000 vs. the same week a year earlier). 4-week moving average: 787,000 (+366.0% vs. the same week a year earlier).
- Construction Spending (September 2020, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.414 trillion (+0.3% vs. August 2020, +1.5% vs. September 2019).
- Wholesale Trade (September 2020, Inventories of Merchant Wholesalers, seasonally adjusted): $638.5 billion (+0.4% vs. August 2020, -3.9% vs. September 2019).
- Productivity (2020Q3, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +4.9% vs. 2020Q2, +4.1% vs. 2019Q3.
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What We Learned About the U.S. Economy Last Week 