One More Look at September Labor Market Trends: November 6 – 10

The latest Job Openings and Labor Turnover report finds hiring slowed during September. Here are the five things we learned from U.S. economic data released during the week ending November 10.

#1The pace of hiring slowed a bit in September even with the number of job openings remaining at record highs. The Bureau of Labor Statistics indicates that employers had a seasonally adjusted 6.093 million job openings at the end of September, up a mere 3,000 from August but 7.5 percent ahead of the year-ago count. Industries with substantially large year-to-year percentage gains in job openings included wholesale trade (+31.4 percent), manufacturing (+30.4 percent), transportation (+21.8 percent), and health care/social assistance (+9.8 percent). On the other hand, both the federal government (-20.6 percent) and retailers (-2.7 percent) reported having fewer open positions than they did back in September 2016. Employers hired a seasonally adjusted 5.273 million workers during September, down 147,000 from August but still up 1.8 percent from the September 2016 count. Hiring rose over the past year in manufacturing (+20.2 percent), construction (+18.9 percent), financial activities (+9.6 percent), and health care/social assistance (+6.8 percent). Hiring fell versus a year earlier in retail (-9.2 percent) and the government (-4.6 percent). 5.240 million people left their jobs during September, off 33,000 from August but still 6.0 percent ahead of the year-ago pace. The number of people who had quit their job increased by 89,000 during the month to 3.182 million (+3.4 percent versus September 2016) while layoffs slowed by 78,000 to 1.703 million (+12.3 percent versus September 2016).job openings and hiring-2003-2017 111017

#2Wholesalers added to their inventories add a slower rate during September as sales jumped. The Census Bureau reports that merchant wholesaler inventories grew 0.3 percent during the month to a seasonally adjusted $609.5 billion. While this was down from August’s 0.8 percent gain, it leaves wholesale inventories up 4.6 percent from September 2016 levels. Stockpiles of durables expanded 0.3 percent during September while those of nondurables increased 0.4 percent. Wholesaler sales surged 1.3 percent during September—following a 1.9 percent gain in August—to a seasonally adjusted $480.5 billion (+8.5 percent). Durable goods sales jumped 0.7 percent during the month while those of nondurables rose 1.8 percent (including a 12.6 percent surge in petroleum sales).

#3Layoff activity remained muted during the first days of November. The Department of Labor estimates there were a seasonally adjusted 239,000 first-time claims made for unemployment insurance benefits during the week ending November 4. This was up 10,000 from the prior week but down 11,000 from the same week a year ago. The four-week moving average of first-time claims slipped by 1,250 to 231,250. The four-week moving average was 9.7 percent below that of the same week a year ago. During the week ending October 21, 1.639 million people were receiving some form of unemployment insurance benefits, 8.1 percent below the count receiving the same during the same week a year earlier.

#4Consumers added to their debt load in September. Per the Federal Reserve, consumers had a seasonally adjusted $3.788 trillion in outstanding consumer debt (not including mortgages and other real estate backed debt) at the end of September, this was up $20.8 billion from August and 5.6 percent from a year earlier. Nonrevolving debt balances (e.g., auto and college loans) jumped by $14.4 billion to $2.782 trillion (+5.6 percent versus September 2016). Revolving debt balances (e.g., credit cards) crossed over the trillion dollar mark for the first time at $1.006 trillion. This represented a $6.4 billion bump up from August and was 5.6 percent ahead of year-ago levels.

#5Bankers report easing leading standards to their commercial customers during Q3. A “modest net percentage” of banks responding to the Federal Reserve’s October 2017 Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that they had eased lending standards for the commercial and industrial (C&I) loans in recent months. These “eased” standards took the form of expanded credit lines, lower costs for credit lines, narrowed spreads of loan rates over the banks’ cost of funds, eased loan covenants, and lower interest spreads. Increased competition among lenders was the most significant driver for the relaxed lending standards to commercial borrowers. Banks were more likely to have maintained their current lending standards for their residential real estate loan offerings while tightening standards and terms on credit cards and car loans. Demand for residential real estate loans, credit cards, and auto loans all have weakened during the past quarter.

Other U.S. economic data released over the past week:
University of Michigan Index of Consumer Sentiment (November 2017-preliminary, Index (1966Q1=100, seasonally adjusted):  97.8 (vs. October 2017: 100.7; November 2016: 93.8).

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

Employers Resume Hiring: October 30 – November 3

Employers resumed adding workers in October while holds off another rate hike until (probably) December. Here are the five things we learned from U.S. economic data released during the week ending November 3.

#1Payrolls rebounded in October while the September jobs decline turned into a small gain. Per the Bureau of Labor Statistics, nonfarm payroll employment grew by a seasonally adjusted 261,000. This followed September’s hurricane caused weak payroll expansion of a mere 18,000 jobs. The latter represented an improvement from the previously reported estimate for September payrolls, which had shown a contraction of 33,000 jobs. Because of the revision to September’s payrolls data, employment has now grown for 85 consecutive months with nonfarm employers adding 162,000 workers on average over the past three months. The goods-producing side of the private sector economy added 33,000 workers while private service sector payrolls swelled by 219,000 workers. The most notable industry was leisure/hospitality, which added 106,000 jobs following a hit of 102,000 jobs during September. Other sectors adding significant numbers of workers were professional/business services (+50,000), health care/social assistance (+33,500), and manufacturing (+24,000). Wage growth remained weak: average weekly earnings were at $912.63, up 2.4 percent from the same month a year earlier.

A separate survey of households has the unemployment falling by 1/10th of a percentage point to 4.1 percent. This is down 7/10ths of a percentage point from a year earlier and its lowest point since December 2000. The unemployment rate was pulled down in part by the 765,000 people who had exited the labor force during the month. The resulting labor force participation rate of 62.7 percent was its lowest point since May and puts it near a 40+ year low. (Some of that reflects an aging population reaching retirement age—the labor force participation rate for adults aged 25 to 54 was at 81.6 percent, matching its year-ago rate). Falling to post-recession low is the count of part-time workers who are seeking a full-time opportunity. This count of “involuntary” part-time workers declined by 369,000 to 4.753 million (-18.8 percent versus October 2016). The typical length of unemployment decreased by 4/10ths of a week to 9.9 weeks (October 2016: 10.2 weeks). Finally, the broadest measure of labor underutilization published by the BLS (the U-6 series) dropped 4/10ths of a percentage point to 7.9 percent. The last time the U-6 series was this low was back in December 2006 (which ended up being the lowest reading for the measure during the 2001-2007 economic recovery).Labor Force Participation Rate 2007-2017

#2The Federal Reserve leaves its short-term interest rate target alone, for now. Minutes released following this past week’s meeting of the Federal Open Market Committee (FOMC) meeting notes that both economic activity and the labor market had continued to improve “despite hurricane-related disruptions.” This included household spending continuing to expand “at a moderate rate” and business investment that “has picked up in recent quarters.” The committee believes the hurricanes are “unlikely” to have a significant impact on economic activity over the medium term, with further strengthening of the labor market expected to continue. In this environment, the FOMC voted unanimously to keep the fed funds target rate at a range between 1.00 and 1.25 percent. The policy statement, without being explicit, would seem to indicate that we should expect a quarter point target rate bump at the FOMC’s final 2017 meeting in December. (The other Fed news of the week was President Trump’s nomination of Fed governor Jerome Powell as the new chairman of the central bank.)

#3Personal spending surged in September. The Bureau of Economic Analysis reports that “real” personal consumption expenditures (PCE) grew 0.6 percent on a seasonally adjusted basis during the month. This was its largest monthly gain since March. Real spending on durable goods jumped 3.5 percent while that on both nondurables and services grew a more modest 0.3 percent during September. The surge in durable goods spending is partially the result of deferred and replacement purchases following the recent hurricanes. Over the past year, real PCE has grown 2.7 percent, which includes a 7.3 percent bump up in durable goods spending. Nominal spending, which is not adjusted for inflation, jumped 1.0 percent. Both nominal personal and nominal disposable incomes grew 0.4 percent during the month. After adjusting for price variation, real disposable income was unchanged during the month and has risen 1.2 percent over the past year. The savings rate dropped by a half percentage point during September to +3.1 percent, its lowest reading since early 2008.

#4The trade deficit widened slightly during September. Per the Census Bureau and the Bureau of Economic Analysis, exports increased $2.1 billion during the month to a seasonally adjusted $196.8 billion (+4.6 percent versus September 2016). At the same time, imports expanded by $2.8 billion to $240.3 billion (+6.1 percent versus September 2016). The resulting trade deficit of -$43.5 billion was up $0.7 billion from August but 13.1 percent greater than that of a year ago. The goods deficit grew by $0.6 billion during September to -$65.4 billion (+10.0 percent versus a year earlier) while the services surplus shrank by $0.2 billion to +$21.9 billion (+4.4 percent versus a year earlier). Industrial supplies exports (particularly crude oil) grew by $1.9 billion while pharmaceutical preparation exports fell by $1.0 billion. Capital goods imports jumped $1.5 billion while industrial supplies/materials increased by $1.1. billion. Passenger car imports declined $0.5 billion during September. The U.S. had its biggest goods trade deficits with China (-$29.9 billion), the European Union (-$14.6 billion), Germany (-$5.9 billion), and Japan (-$5.9 billion).

#5Purchasing managers describe robust business activity in October. The Purchasing Managers Index (PMI) from the Institute for Supply Management shed 2.1 points during the month to a seasonally adjusted reading of 58.7. Even with the drop, this was the 14th consecutive month in which the PMI –a measure of activity in the manufacturing sector of the U.S. economy—was above a reading of 50.0, the threshold between a growing and contracting manufacturing sector. All five components of the PMI declined from September: inventories (-4.5), supplier deliveries (-3.0), new orders (-1.2), production (-1.2), and employment (-0.5). Sixteen of 18 tracked manufacturing industries expanded during October, led by paper products, nonmetallic mineral products, and machinery. The press release noted survey respondents’ comments had reflected “expanding business conditions.”

The headline index from the ISM’s Report on Business for the nonmanufacturing sector of the economy inched up by 3/10ths of a point to 60.1, measure’s highest market in its nine-year history and the 94th straight month in which it was above 50.0. Two of the index’s four components grew during the month: business activity/production (up 9/10ths of a point to 62.2) and employment (up 7/10ths of a point to 57.5). The new order index slipped 2/10ths of a point to 62.8 while the supplier deliveries measure held steady at 58.0.  Sixteen of 18 tracked service sector industries reported growth during October, led by agriculture, construction, and transportation/warehousing. The press release indicated that survey respondents continued to have a “positive outlook for business conditions.”

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

Jobless Claims (week ending October 28, 2017, First-Time Claims, seasonally adjusted): 229,000 (-5,000 vs. previous week; -32,000 vs. the same week a year earlier). 4-week moving average: 232,500 (-9.0% vs. the same week a year earlier).
Factory Orders (September 2017, New Orders for Manufactured Goods, seasonally adjusted): $478.5 billion (+1.4% vs. August 2017, +7.0% vs. September 2016).
Vehicle Sales (October 2017, Light Vehicle Retail Sales, seasonally adjusted annualized rate): 18.09 million units (-2.6% vs. September 2017, +1.2% vs. October 2016).
Conference Board Consumer Confidence (October 2017, Index (1985=100), seasonally adjusted): 125.9 (vs. September 2017: 120.6).
Case-Shiller Home Price Index (August 2017, 20-City Index, seasonally adjusted): +0.5% vs. July 2017, +5.9% vs. August 2016.
Agricultural Prices (September 2017, Prices Received by Farmers): 91.8 (-1.7% vs. August 2017, +6.3% vs. September 2016).

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

The U.S. Economy Expanded During the Summer, Held Firm in September: October 23 – 27

GDP enjoyed a second consecutive quarter of robust growth during the summer. Here are the five things we learned from U.S. economic data released during the week ending October 27.  

#1The U.S. economy expanded solidly during Q3. The Gross Domestic Product (GDP) grew a seasonally adjusted annualized rate (SAAR) of 3.0 percent during the months of July, August, and September. This follows the Bureau of Economic Analysis’ estimate of GDP growing 3.1 percent during Q2, marking the two best consecutive quarters of economic growth since the second and third quarters of 2014. Positive contributors to Q3 economic growth were consumption (adding 162-basis points to GDP growth), the change in private inventory accumulation (+73-basis points), business fixed investment (+49-basis points), exports (+28-basis points), imports (+12-basis points), and federal government expenditures (+8-basis points). Dragging down Q3 GDP growth were residential fixed investment (cost 24-basis points in GDP growth) and state/local government expenditures (-9-basis points). The BEA report did not contain any comment on whether the recent hurricanes had hindered overall economic growth. The BEA will revise its estimate of Q3 GDP growth twice over the next two months.GDP Growth 2010-2017 102717

#2Economic activity appears to have improved in September. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, jumped by 54-basis points to a reading of +0.17. (A reading of 0.00 would have indicated economic growth at the historical average.) This was the measure’s best reading since June. Fifty-four of the CFNAI’s components improved from the August’ readings, with all four major categories of components advancing during the month. Among the big 4 categories, the largest surge came from those related to production with its contribution to CFNAI rising from -0.33 in August to +0.10 in September. Much smaller improvements came with components related to employment (up five-basis points to +0.06), personal consumption/housing (up four-basis points to -0.07), and sales/orders/inventories (up a basis point to +0.07). The CFNAI’s three-month moving average—which smooths out some of the month-to-month volatility in the index—held steady at a reading of -0.16.

#3Durable goods orders grew in September. The Census Bureau tells us that new orders for manufactured durable goods blossomed 2.2 percent during the month to a seasonally adjusted $238.7 billion. Some of the gain comes from a sharp 31.5 percent increase in new orders for civilian aircraft. Transportation goods gained 5.1 percent for the month, also reflecting smaller increased orders for defense aircraft (+0.7 percent) and motor vehicles (+0.1 percent). Net of transportation goods, core durable goods orders increased 0.7 percent during September, matching its August gain and just below its July increase of 0.8 percent. Rising during the month were new orders for communications equipment (+4.8 percent) and fabricated metal products (+1.7 percent). New orders fell for computers/related products (-5.5 percent), machinery (-0.2 percent), and primary metals (-0.1 percent). Durable goods shipments grew for the fourth time in five months with a 1.0 percent bounce to $240.5 billion. Net of transportation goods, durable goods shipments increased 1.2 percent. Growing for the first time in three months was the value of unfilled orders (+0.2 percent) while durable goods orders inventories expanded for the 14th time in fifteen months (+0.5 percent).

#4New home sales jumped during September. Per the Census Bureau, new home sales rose 18.9 percent during the month to a seasonally adjusted annualized rate (SAAR) of 667,000 units. This was the fastest pace of new home sales since right before the start of the last recession in October 2007. Sales jumped by double-digit percentages in three of four Census regions: Northeast (+33.3 percent), South (+25.8 percent), and Midwest (+10.6 percent). Sales grew by a more modest 2.9 percent in the West. New home sales were 17.0 percent above their September 2016 pace. There were 279,000 new homes available for sale at the end of September, matching the count from the prior month but up 15.3 percent from a year earlier. This translated into a 5.0-month supply (its lowest point since March). 

#5Consumer sentiment surged to a 17 year high in October. The University of Michigan’s Index of Consumer jumped 5.6 points during the month to a seasonally adjusted 100.7. This was up 13.5 points from the same month a year earlier and the measure’s best reading since November 2000. Indices for both current and expectations both rose from their September mark, with the former up 4.8 points to 116.5 and the latter adding 6.1 points to 90.5. The current conditions index has not been this high since May 2000 while the expectations index hit its best reading since January 2015. The press statement noted that more than half of survey respondents “expected good times during the year ahead and anticipated the expansion to continue uninterrupted over the next five years.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 21, 2017, First-Time Claims, seasonally adjusted): 233,000 (+10,000 vs. previous week; -22,000 vs. the same week a year earlier). 4-week moving average: 239,500 (-5.0% vs. the same week a year earlier).
Pending Home Sales (September 2017, Index (2001=100), seasonally adjusted): 106.0 (unchanged vs. August 2017; -3.5% vs. September 2016).
FHFA House Price (August 2017, Purchase-Only Index, seasonally adjusted): +0.7% vs. July 2017; +6.6% vs. August 2016).

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