This week’s economic data – What We Learned About the U.S. Economy Last Week

Job Openings Fall, Remain Near Record High: April 9 – 13

April 13, 2018April 13, 2018Kevin Roth

There were fewer available jobs in February, although employers continued struggling to fill openings. Here are the five things we learned from U.S. economic data released during the week ending April 13.

The number of job openings shrinks from its all-time high while hiring slightly edged down. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 6.052 million job openings on the final day of February, down 176,000 from January’s 6.228 million openings (itself a data series record) but still 7.7 percent ahead of its February 2017 count. Private sector employers were searching to fill 5.476 million jobs at the end of February, 7.0 percent more than they had been seeking a year earlier. Industries with large percentage year-to-year increases in job openings included transportation (+46.0 percent), state/local governments (+24.0 percent), retail (+21.9 percent), manufacturing (+21.0 percent), construction (+16.0 percent), and finance/insurance (+12.8 percent). Employers hired 5.507 million people during February, down 33,000 from January but still up 4.6 percent from a year earlier. Private sector employers expanded payrolls by 5.161 million workers, a 5.0 percent improvement from a year earlier. Industries with large year-to-year percentage gains in payrolls included manufacturing (+27.9 percent), finance/insurance (+19.2 percent), professional/business services (+12.4 percent), and health care/social assistance (+6.4 percent). Fewer workers left their jobs during February, declining 127,000 from the prior month to 5.192 million (+3.2 percent versus February 2017). This included 3.210 million people who quit their jobs (+6.4 percent versus February 2017) and 1.647 million who were laid off (-0.6 percent versus February 2017).

Core consumer prices remained on target even as gasoline prices fell in March. The Bureau of Labor Statistics’ Consumer Price Index (CPI) slipped 0.1 percent on a seasonally adjusted basis during the month but was still 2.4 percent ahead of year-ago levels. Energy prices slumped 2.9 percent as gasoline prices dropped 4.7 percent. Food prices eked out a 0.1 percent gain. Netting out both energy and food, core CPI increased 0.2 percent during March and has risen 2.1 percent over the past year. Rising were prices for medical care services (+0.5 percent), shelter (+0.4 percent), transportation services (+0.2 percent), and medical care commodities (+0.1 percent). Prices fell during the month for apparel (-0.6 percent) and used cars/trucks (-0.3 percent).

Wholesale prices had a sizable gain for the second time in three months. The final demand Producer Price Index (PPI) grew by a seasonally adjusted 0.3 percent during March following a 0.2 percent bump in February and a 0.4 percent increase in January. Final demand PPI net energy, food, and trade services (a measure of core wholesale prices) rose 0.4 percent for a third consecutive month. Food PPI jumped 2.2 percent while energy PPI slumped 2.1 percent. Net of energy and food, core wholesale goods prices increased 0.3 percent. PPI for final demand services gained 0.3 percent, with rising wholesale prices for in transportation/warehousing (+0.6 percent) and trade services (+0.3 percent). Over the past year, final demand PPI has jumped 3.0 percent while wholesale prices net of energy, food, and trade services have risen 2.9 percent.

Small business owner optimism chilled slightly in the March winds. The Small Business Optimism Index from the National Federation of Independent Business lost 2.9 points during the month to a seasonally adjusted 104.7 (1986=100). Even with the decline, this was the 16^th straight month in which the measure was above a reading of 100.0. Eight of ten components to the index lost ground from their February readings, including significant drops for future expectations for the economy, expected real sales, and whether it was a good time to expand. Only two index components—plans to increase employment and current job openings—improved in March. The press release noted that March index reading was “among the 20 best in survey history.”

Wholesale inventories swelled in February. Merchant wholesalers expanded their inventories 1.0 percent during the month to a seasonally adjusted $625.6 billion, per the Census Bureau. Wholesale inventories have grown 5.5 percent over the past year. Inventories of durable goods jumped 1.7 percent during February to a seasonally adjusted $240.5 billion (+8.6 percent versus February 2017), including gains for furniture (+4.5 percent), metals (+4.4 percent), machinery (+3.9 percent), and automobiles (+1.4 percent). Nondurable goods inventories expanded by a more modest 0.4 percent to $255.4 billion (+5.2 percent versus February 2017), including sizable gains for apparel (+5.0 percent), farm products (+3.3 percent), alcohol (+2.4 percent), and chemicals (+2.0 percent). The wholesale inventory-to-sales (I/S) ratio held firm during the month at 1.26. This I/S ratio for durable goods shrank by one basis point to 1.58 while that for nondurables inched up by a basis point to 0.96.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending April 7, 2018, First-Time Claims, seasonally adjusted): 233,000 (-9,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 230,000 (-7.0% vs. the same week a year earlier).
– Import Prices (March 2018, All Imports, not seasonally adjusted): Unchanged vs. February 2018, +3.6% vs. March 2017. Nonfuel imports: +0.2% vs. February 2018, +2.1% vs. March 2017.
– Export Prices (March 2018, All Exports, not seasonally adjusted): +0.3% vs. February 2018, +3.4% vs. March 2017. Nonagricultural exports: -0.1% vs. February 2018, +3.4% vs. March 2017.
– Monthly Federal Treasury Statement (March 2018, Budget Surplus/Deficit): -$208.7 billion. First 6 months of FY2018: -$599.7 billion (vs. First 6 months of FY2017: -$526.9 billion).
– University of Michigan Consumer Sentiment (April 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 97.8 (vs. March 2018: 101.4, vs. April 2017: 97.0).
– FOMC Minutes

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

Job Growth Slows, Trade Deficit Grows: April 2 – 6

April 7, 2018April 13, 2018Kevin Roth

Payroll growth slowed down while the trade deficit widened (again). Here are the five things we learned from U.S. economic data released during the week ending April 6.

Employers added fewer workers in March. Nonfarm payrolls expanded by a seasonally adjusted 103,000 during the month, per the Bureau of Labor Statistics. Even though this was the fewest jobs added in a single month since last September and less than one-third of February’s job gain (+326,000), this represented the 90^th consecutive month of job creation. Private sector employers added 102,000 jobs in March versus a mere 1,000 new government jobs. The former was split between 15,000 jobs in the goods-producing side of the economy and 87,000 in the service sector. The industries adding the most jobs during the month were: health care/social assistance (+33,800), professional/business services (+33,000), manufacturing (+22,000), and wholesale trade (+11,400). Shedding workers (at least on a seasonal basis) were the construction sector (-15,000) and retailers (-4,400). The average workweek remained at 34.5 hours (March 2017: 34.4 hours) while average weekly earnings grew by $2.76 during the month to $925.29 (+3.3 percent versus March 2017).

Based on a separate survey of households, the unemployment rate remained at its post-recession low of 4.1 percent for a sixth straight month. The labor force contracted by 158,000 to 161.7 million people, resulting in the labor force participation rate slipping by 1/10^th of a percentage point to 62.9 percent. The labor force participation rate for adults aged 25-54 held steady for the month at 82.2 percent. The median length of someone being out of work shrank by 2/10^ths of a week to 9.1 weeks (matching the post-recession low hit back last December) while the count of part-time workers seeing a full-time opportunity contracted by 141,000 to 5.019 million (March 2017: 5.500 million). The broadest measure of labor underutilization (the “U-6” series) declined by 2/10^ths of a percentage point to 8.0 percent, matching last November as its post-recession low reading.

The trade deficit widened to a nearly decade-long high in February. The Census Bureau and the Bureau of Economic Analysis report that exports increased $3.5 billion to $204.4 billion (+6.6 percent) while imports swelled by $4.4 billion to $262.0 billion (+10.9 percent). As a result, the U.S. trade deficit expanded by $0.9 billion to -$57.6 billion. The deficit was 29.6 percent larger than it was during the same month a year earlier and its widest since October 2008. The goods deficit grew by $0.4 billion to -$77.0 billion (+17.9 percent versus February 2017) while the services surplus narrowed by $0.7 billion to +$19.4 billion. Highlights of the former included a $3.1 billion gain in exported goods (thanks to higher exports of industrial supplies/materials, automobiles, and capital goods) and a $3.3 billion increase in imported goods (including capital goods, crude oil, and food/feed/beverages). The U.S. had its largest goods deficits with China (-$34.7 billion), the European Union (-$15.3 billion), Germany (-$6.7 billion), Mexico (-$6.6 billion), and Japan (-$6.0 billion). The goods deficit with Canada was a far more modest -$0.4 billion.

Transportation goods drove up factory orders during February. The Census Bureau estimates new orders for manufactured goods increased 1.2 percent to a seasonally adjusted $498.0 billion (+7.1 percent versus February 2017). As noted with the prior week’s durable goods report, transportation goods orders jumped 7.0 percent, with large gains for defense aircraft (+34.8 percent), ships (+30.6 percent), civilian aircraft (+26.2 percent), and motor vehicles (+1.5 percent). Net of transportation goods, new orders edged up 0.1 percent during the month and were 6.4 percent ahead of February 2017 levels. Growing during the month were orders for electrical equipment/appliances (+3.4 percent), primary metals (+2.8 percent), and machinery (+1.2 percent). Losing ground during the month were orders for nondurable goods (-0.5 percent) and computers/electronics (-0.1 percent). Shipments grew for the 14^th time in 15 months, increasing 0.9 percent to $249.8 billion. Unfilled orders grew for the fourth time in five months (+0.2 percent to $1.143 trillion) while inventories expanded for the 15^th time in 16 months (+0.3 percent to $675.2 billion).

Purchasing managers report slightly slower growth in business activity during March. The Institute for Supply Management’s Purchasing Managers Index (PMI) lost 1.5 points to a reading of 59.3. Even with the drop, this was the 19^th straight month in which the PMI was above a reading of 50.0, indicative of an expanding manufacturing sector. All five PMI components declined from their February readings (in order from largest to smallest decline): employment, new orders, inventories, production, and supplier deliveries. Seventeen of 18 tracked manufacturing sectors expanded during March, led by fabricated metal products, plastics/rubber products, and computers/electronics.

The ISM’s measure of service sector activity (NMI) dropped by 7/10^ths of a point to 58.8. This was the measure’s 98^th straight month being above the 50.0 expansion/contraction threshold. Two of four NMI components improved from the February readings—supplier deliveries and employment—while two others (new orders and business activity/production) contracted. Respondents from 15 of 18 tracked service sector industries reported growth during the month, led by mining, transportation/warehousing, and agriculture. The press release noted that a “majority of respondents remain positive about business conditions.”

Construction spending remained in neutral for a third month. The Census Bureau places the value of construction put in place during February at a seasonally adjusted annualized rate (SAAR) of $1.273 trillion. This was up a mere 0.1 percent from January and 3.0 percent ahead of the February 2017 rate. Private sector construction spending jumped 0.7 percent during the month to a SAAR of $982.0 billion (+3.4 percent versus February 2017). Private sector residential construction spending edged up 0.1 percent while nonresidential spending gained 1.5 percent. The story was less favorable for the public sector, where construction spending slumped 2.1 percent to an annualized rate of $291.1 billion. Public sector construction spending has risen by a more modest 1.6 percent over the past year.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending March 31, 2018, First-Time Claims, seasonally adjusted): 242,000 (+27,000 vs. previous week; +1,000 vs. the same week a year earlier). 4-week moving average: 228,250 (-8.7% vs. the same week a year earlier).
– Vehicle Sales (March 2018, Light Vehicle Retail Sales, seasonally adjusted annualized rate): 17.48 million units (+2.3% vs. February 2018, +3.9% vs. March 2017.
– Consumer Credit (February 2018, Outstanding Credit Balances (non-real estate), seasonally adjusted): $3.868 trillion (+$10.6 billion vs. January 2018, +5.1% vs. February 2017).

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

Q4 GDP Revised Up, Consumer Spending Paused: March 26 – 30

March 31, 2018March 31, 2018Kevin Roth

Q4 GDP was revised upward, but consumer spending has been sluggish during the first two months of 2018. Here are the five things we learned from U.S. economic data released during the week ending March 30.

A new estimate finds that the U.S. economy expanded during Q4 more quickly than previously reported. The Bureau of Economic Analysis’ third estimate of Gross Domestic Product (GDP) finds the U.S. economic swelled 2.9 percent on a seasonally adjusted annualized rate (SAAR) during the final three months of 2017. This was up from the 2.5 percent annualized growth rate reported a month earlier. With the upward revision, BEA now estimates the U.S. economy expanded 2.3 percent for all of 2017, which was an improvement from the 1.5 percent growth rate in 2016 but below 2015’s 2.9 percent gain. The latest revision to Q4 GDP was the result of higher than previously believed levels of personal spending and private inventory investment. Positive contributors to GDP growth during the quarter were personal spending, fixed investment, and government spending, while net exports and private inventory accumulation were both drags on economic growth. Corporate profits slipped 0.1 percent during Q4 following a 4.3 percent bump during Q3.

The U.S. economy gained momentum in February. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, surged by 86-basis points during the month to a seasonally adjusted reading of +0.88. This was the CFNAI’s best reading since last October. Much of the gain came from production-related economic indicators, which made a +0.50 contribution to the CFNAI (a big improvement from January when the same measures had made a negative -0.15 contribution). Also making positive contributions during the month were indicators tied to employment (+0.31) and sales/orders/inventories (+0.09). Dragging down the CFNAI were indicators related to consumption/housing (-0.02). In all, 63 of the 85 economic indicators made positive contributions to the CFNAI. The CFNAI’s 3-month moving average gained by 21-basis points to +0.37. Since the CFNAI is indexed such that a reading of 0.00 means the U.S. economy is growing at its historical level, the +0.37 moving average indicates the U.S. economy is expanding at an above average rate.

Personal spending failed to grow for a second consecutive month. The Bureau of Economic Analysis finds real personal consumption expenditures (PCE) were unchanged during February after having contracted 0.2 percent during January. Even with the recent lack of increases, real PCE has increased 2.8 percent over the past year, matching January’s 12-month comparable. Real spending on services and goods also was steady during February, with the latter split between a 0.6 percent increase in spending on durable goods and a 0.3 percent contraction for nondurables. Over the past year, spending on goods has grown 4.3 percent while that on services was 2.1 percent ahead of year-ago levels. Real disposable personal income gained 0.2 percent during February, slower than January’s 0.6 percent advance. Over the past year, real disposable income has increased 2.1 percent. The gap between spending and income has been covered by a slowdown in savings, although this has recovered in recent months. The personal savings rate was at +3.4 percent in February, up 2/10^ths of a percentage point from January. Finally, the Federal Reserve’s preferred gauge of inflation continues to gradually creep up. The PCE deflator has grown 1.8 percent over the past year while the core measure (which removes the impact of energy and food) gained 1.6 percent over the same 12 months.

Two measures of consumer sentiment moved in opposite directions during March, although both indicate that Americans remain optimistic. The Conference Board’s Consumer Confidence Index shed 2.3 points during the month to a seasonally adjusted reading of 127.7 (1985=100). Despite losing a step during the month, the measure remained 2.8 points ahead of its year-ago reading and stayed close to the 18-year high achieved in February. The present conditions index lost 1.3 points during March to a reading of 159.9 while the expectations index shed three full points to 106.2. 37.9 percent of survey respondents described current business conditions as “good” versus 13.4 percent seeing them as “bad.” Similarly, 39.9 percent of consumer saw the number of available jobs as “plentiful” while only 14.9 percent viewed them as “hard to get.” The press release noted that the results suggest “suggest further strong [economic] growth in the months ahead.”

The University of Michigan’s Index of Consumer Sentiment added 1.7 points during March to a seasonally adjusted 101.5 (1966Q1=100). While this was a small pullback from the preliminary March reading reported a few weeks earlier, this final reading represented a 14-year high point for the sentiment measure and a 4.5 point improvement over the previous year. The current conditions index jumped 6.3 points to a record-high of 121.2 (March 2017: 113.2) while the expectations index slipped 1.2 points to 88.8 (March 2017: 86.5). The press release indicates that the index readings suggest a real growth rate in real personal spending of 2.6 percent from mid-2018 to mid-2019.

Pending home sales picked up in February. The National Association of Realtors says that its measure of contract signings to purchase a previously owned home gained 3.1 percent during the month to a seasonally adjusted index reading of 107.5 (2001=100). Even with the gain, this was 4.1 percent under the year-ago contract signing pace. The index improved during February in all four Census regions, led by a 10.3 percent bounce in the Northeast. The Pending Home Sales Index also grew 3.0 percent in the South, 0.7 percent in the Midwest and 0.4 percent in the West. All four regions had negative 12-month comparables, spanning from a 9.5 percent drop in the Midwest to a 1.5 percent year-to-year slowdown in the South. The press release notes that the “minuscule” number of homes on the market and “its adverse effect on affordability” as weighing on the housing market.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending March 24, 2018, First-Time Claims, seasonally adjusted): 215,000 (-12,000 vs. previous week; -38,000 vs. the same week a year earlier). 4-week moving average: 224,500 (-11.1% vs. the same week a year earlier).
– Case-Shiller House Price Index (January 2018, 20-City Index, seasonally adjusted): +0.8% vs. December 2017, +6.4% vs. January 2017.
– Agricultural Prices (February 2018, Prices Received by Farmers (Index (2011=100)): 90.8 (+5.7% vs. January 2018, -0.2% vs. February 2017).

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

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