Hiring and Consumer Spending Bloomed This Spring: April 29 – May 3

The labor market continued to create jobs in April. Here are the five things we learned from U.S. economic data released during the week ending May 3.

#1Hiring accelerated while the unemployment rate fell to a 50-year low in April. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 263,000 workers during the month. This was the most jobs added since January and was above the average 213,000 monthly gain over the past year. Private employer payrolls expanded by 236,000, split by 202,000 jobs in the service sector and 34,000 in the goods-producing side of the economy. Industries with sizable payroll gains included professional/business services (+76,000), health care/social assistance (+52,600), leisure/hospitality (+34,000), and construction (+33,000). Hourly earnings averaged $27.77 (+3.2 percent versus April 2018) while mean weekly earnings have risen 2.9 percent over the past year to $955.29.

The separate household survey finds the unemployment falling to its lowest point since December 1969 at 3.6 percent. Some of the drop in the unemployment rate reflects the impact of the labor force shrinking by 490,000 people. The typical length of unemployment narrowed by 2/10ths of a week to 9.4 weeks (April 2018: 9.8 weeks) while the count of “involuntary” part-time workers grew by 155,000 to 4.654 million (April 2018: 4.952 million). Finally, the broadest measure of labor underutilization—the U-6 series—remained at its post-recession low of 7.3 percent.

#2Personal spending enjoyed a spurt in March. Real personal consumption expenditures (PCE) rose 0.9 percent during the month, following smaller 0.3 percent and 0.1 percent increases in January and February, respectively. The Bureau of Economic Analysis indicates spending on goods jumped 1.4 percent, led by strong gains for both durable (+2.9 percent) and nondurable (+0.8 percent) goods, while services spending had a more modest 0.3 percent bump. Without controlling for prices, nominal PCE swelled 0.9 percent. The higher expenditures occurred despite a modest increase in nominal personal income (+0.1 percent). Nominal disposable income was unchanged for the month while, after adjusted for price variations, real disposable income contracted 0.2 percent. As a result, the savings rate narrowed by 8/10ths of a percentage point to +6.5 percent. Over the past year, real personal spending has risen 2.9 percent while real disposable income has grown 2.3 percent. The PCE deflator (a measure of inflation) had grown 2.0 percent over the past year, while the core measure (which nets out energy and food) had increased 1.8 percent. The latter was below the Federal Reserve’s two-percent interest rate target. 

#3With inflation tracking below the target, the Fed held firm (as expected). The policy statement released following the week’s Federal Open Market Committee (FOMC) noted the U.S. economy “rose at a solid rate” and that the labor market “remains strong.” But it also warned that core inflation had “declined and [was] running below two percent.” As a result, the FOMC voting members voted unanimously to keep the fed funds target at a range between 2.25 and 2.50 percent. The statement also emphasized that it would “patient” before it makes a move to raise or lower the short-term interest rate target in the future.

#4Purchasing managers signal a slightly slower growth rate in economic activity in April. The Institute for Supply Management’s PMI, the headline index from its Manufacturing Report on Business, lost 2.5 points during the month to a reading of 52.8. Even though this was the PMI’s lowest reading since October 2016, this was the 32nd straight month in which the measure indicated an expanding manufacturing sector. Three of the five PMI lost ground from their March readings: new orders, employment, and production. Showing improvements were indicators measuring inventories and supplier deliveries. Thirteen of 18 manufacturing industries expanded during the month, led by textiles and electrical equipment/appliances.

The ISM’s measure for activity in the nonmanufacturing side of the economy pulled back by 6/10ths of a point to 55.5, the NMI’s lowest reading since August 2017 but its 111th month above a reading of 50.0. Just a single component of the NMI improved from its March reading—business activity/production—while the other three declined in April: employment, supplier deliveries, and new orders. Fifteen of 18 tracked nonmanufacturing industries grew during April, led by transportation/warehousing, professional/scientific/technical services, and construction. The press release noted that survey respondents were “still mostly optimistic about overall business conditions, but concerns remain about employment resources.”

#5Meanwhile, factory orders rebounded in March. The Census Bureau reports that new orders for manufactured goods jumped 1.9 percent during the month to a seasonally adjusted $508.2 billion, following a 0.3 percent drop in February and holding steady in January. Orders for transportation goods rose 7.0 percent, boosted by gains for civilian aircraft (+31.0 percent), defense aircraft (+17.7 percent), and motor vehicles (+1.5 percent). Net of transportation goods, new factory orders increased a still-robust 0.8 percent, following a 0.3 percent gain in February. Durable goods orders jumped 2.6 percent while nondurable goods rose 1.1 percent. Less favorable was data on new orders for nondefense, non-aircraft capital goods—a proxy for business investment—which held steady in March after gains of 1.0 percent and 0.3 percent in January and February, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 27, 2019, First-Time Claims, seasonally adjusted): 230,000 Unchanged vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 212,500 (-3.1% vs. the same week a year earlier).
Conference Board Consumer Confidence (April 2019, Index (1985=100), seasonally adjusted): 129.2 (vs. March 2019: 124.2.
Construction Spending (March 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.282 trillion (-0.9% vs. vs. February 2019, -0.8% vs. March 2018).
Pending Home Sales (March 2019, Index (2001=100), seasonally adjusted): 105.8 (+3.8% vs. February 2019, -1.2% vs. March 2018).
Case-Shiller Home Price Index (February 2019, 20-City Index, seasonally adjusted): +0.2% vs. January 2019, +3.0% vs. February 2018.
Productivity (2019Q1, Labor Productivity, seasonally adjusted): +3.6% vs. 2018Q4, +2.4% vs. 2018Q1.
Agricultural Prices (March 2019, Prices Received by Farmer): +2.8% vs. February 2019, -3.4% vs. March 2018 

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

Economic Growth Moved Forward in Q1: April 22 – 26

The U.S. economy grew faster than expected during the first three months of this year. Here are the five things we learned from U.S. economic data released during the week ending April 26.  

#1GDP rebounded in Q1. The Bureau of Economic Analysis’ initial estimate of first quarter Gross Domestic Product (GDP) has the U.S. economy expanding at a seasonally adjusted annualized rate (SAAR) of 3.2 percent. This up from Q4 2018’s 2.2 percent growth rate, but below the Q2 and Q3 paces of expansion of +4.2 percent and +3.4 percent, respectively. The biggest positive contributors to Q1 GDP were personal consumption (adding 82-basis points to the growth rate), change in private inventories (contributing 65-basis points), imports (58-basis points), exports (45-basis points), government expenditures (41-basis points), and nonresidential fixed investment (38-basis points). Dragging down Q1 GDP was residential fixed investment, which cost 11-basis points in economic growth. The BEA will revise its estimate of Q1 GDP twice over the next two months.GDP Growth 2015-2019 042619

#2Economic data suggest business activity picked up in March. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic measures, improved by 16-basis points during the month to a reading of -0.15, its best reading since last December. (The CFNAI is designed such that a 0.00 reading indicates the U.S. economy is growing at its historical average.) Thirty-seven CFNAI components made positive contributions to the headline index, with 47 others making negative contributions and one with a neutral contribution. Among the four major categories of indicators, three of four made improved contributions in March: sales/orders/inventories made a +0.05 contribution (up from +0.01 in February), employment improved by 12-basis points to -0.03, and production improved by two-basis points to -0.10. Losing a basis point was the contribution from personal consumption/housing (to -0.07). The CFNAI’s three-month moving average slumped by six basis points to -0.24, which suggests below average economic growth.

#3Existing home sales pulled back in March following February’s bounce. The National Association of Realtors indicates that sales of previously owned homes dropped 4.9 percent during March to a seasonally adjusted annualized rate of 5.21 million units. This followed an 11.2 percent sales surge in February. Sales fell in all four Census regions: Midwest (-7.9 percent), West (-6.0 percent), South (-3.4 percent), and South (-2.1 percent). Existing home sales were 5.4 percent behind their March 2018 pace, with negative 12-month comparables in all four Census regions. There were 1.68 million homes on the market at the end of March, which was the most since last November, up 2.4 percent from a year earlier, and the equivalent to a 3.9 month supply. The press release noted that sales were “underperforming in relation to the strength in the jobs markets.

#4But new home sales rose in March. The Census Bureau reports that sales of single-family homes increased 4.5 percent during the month to a seasonally adjusted annualized rate (SAAR) of 692,000 units. This was 3.0 percent ahead of the March 2018 sales pace. Sales grew during the month in three of four Census regions—Midwest (+17.6 percent), West (+6.7 percent), and South (+3.6 percent—but dropped 22.2 percent in the Northeast. There were 344,000 new homes available for sale at the end of March, up 13.2 percent from a year earlier and the equivalent to a 6.0 month supply.

#5Consumer confidence eased slightly in April. The Index of Consumer Sentiment lost 1.2 points during the month to a seasonally adjusted 97.2 (1966Q1=100), per the University of Michigan. While the measure was off 1.6 points from a year earlier, it has stayed within a relatively narrow ten-point range (91.2 to 101.4) since November 2016. Losing a full point was the current conditions index to 112.3 (April 2018: 114.9) while the expected conditions index shed 1.4 points to 87.4 (April 2018: 88.4). The press released noted that the “data indicate that inflation-adjusted personal consumption expenditures will grow by 2.5 percent in 2019.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 20, 2019, First-Time Claims, seasonally adjusted): 230,000 (+37,000 vs. previous week). 4-week moving average: 206,000
Durable Goods Orders (March 2019, New Orders for Manufactured Durable Goods, seasonally adjusted): $258.5 billion (+2.7% vs. February 2019).
Bankruptcy Filings (12-Month Period through March 31, 2019, Business and Non-Business Filings): 772,646 (-0.9% vs. March 31, 2018).- FHFA House Price Index (February 2019, Purchase-Only Index, seasonally adjusted): +0.3% vs. January 2019, +4.9% vs. February 2018.

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

Spring Had Sprung for Retailers in March: April 15 – 19

Retail sales rebounded while manufacturing sputtered in March. Here are the five things we learned from U.S. economic data released during the week ending April 19.  

#1Retail sales surged in March. The Census Bureau places total U.S. retail and food services sales at a seasonally adjusted $514.1 billion. The 1.6 percent increase from February was the largest single-month percentage gain in retail sales since the fall of 2017 and left sales up 3.6 percent from a year earlier. A part of the increase was thanks to improved sales at both auto dealers/parts stores (+3.1 percent) and gas stations (+3.5 percent), the latter the product of higher gasoline prices. Core retail sales rose a still robust 0.9 percent for the month, reversing February’s 0.7 percent sales decline and placing the measure 3.6 percent ahead of that from a year earlier. Sales activity rose at retailers focused on apparel (+2.0 percent), furniture (+1.7 percent), groceries (+1.2 percent), electronics/appliances (+0.5 percent), building materials (+0.3 percent), and health/personal care (+0.2 percent), along with a 0.8 percent bounce at restaurants and bars. The only major retailer category to suffer a sales decline during the month was sporting goods/hobby stores with a 0.3 percent drop while department store sales were flat.

#2Manufacturing output was flat in March. The Federal Reserve estimates manufacturing production was unchanged during the month after having increased 0.3 percent in February, leaving output up a soft 1.0 percent over the past year. Durable goods output slipped 0.1 percent, with output falling sharply for wood products and automobiles but growing for primary metals and electronics/computers. Nondurable goods production eked out a 0.1 percent increase, boosted by gains for textiles, petroleum/coal products, and chemicals. Overall, industrial production declined 0.1 percent in March, reversing February’s 0.1 percent gain. Mining output dropped 0.8 percent while that at utilities inched up 0.2 percent. The former has risen 10.5 percent over the past year while the latter’s 12-month comparable was +3.8 percent.

#3The trade deficit narrowed in February. The Census Bureau and the Bureau of Economic Analysis report that exports grew by $2.3 billion to $209.7 billion (+2.3 percent versus February 2018) while imports inched up by $0.6 billion to $259.7 billion (-0.5 percent versus February 2018). As a result, the trade deficit contracted by $1.8 billion to -$49.4 billion, its smallest reading since last June. The goods deficit shrank by $1.2 billion to -$72.0 billion while the services surplus grew by $0.5 billion to +$22.6 billion. The former was the result of higher exports of civilian aircraft and automobiles/parts and a decline in imports of industrial supplies/materials. The U.S. had its biggest goods trade deficits with China, the European Union, and Mexico.

#4Forward-looking economic indicators improved in March. The Conference Board’s Leading Economic Indicators (LEI) added 4/10ths of a point in March to a reading of 111.9 (+3.1 percent versus March 2018). Eight of ten LEI components made positive contributions, led by first-time unemployment insurance claims and consumers’ expectations for the economy. The coincident index grew by 1/10th of a point to 105.8 (+2.1 percent versus March 2018), with three of four components making positive contributions (industrial production was the exception). The lagging index also added 1/10th of a point as it grew to 107.0 (+2.9 percent versus March 2018), with four of seven components improving from their February readings. The press release notes that even with March’s gain, the LEI “continues to moderate, suggesting that growth in the US economy is likely to decelerate toward its long-term potential of about 2 percent by year end.”

#5Housing starts and building permits declined in March. The Census Bureau estimates housing starts slipped 0.3 percent during the month to a seasonally adjusted annualized rate of 1.139 million units. This was 14.2 percent below the March 2018 rate and the measure’s lowest mark since May 2017. Starts of single-family homes slowed 0.4 percent to an annualized 785,000 while multi-family unit starts slumped 3.4 percent. Looking towards the future, the number of issued building permits declined 1.3 percent to an annualized 1.269 million permits (-7.8 percent versus March 2018), with declines for single-family and multi-family homes of 1.1 percent and 2.7 percent, respectively. The annualized count of completed homes also fell, with a 1.9 percent drop to 1.338 million homes, which was nevertheless up 6.8 percent from a year ago.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 13, 2019, First-Time Claims, seasonally adjusted): 192,000 (-5,000 vs. previous week; -35,000 vs. the same week a year earlier; fewest since September 6, 1969). 4-week moving average: 201,250 (-10.8% vs. the same week a year earlier).
Housing Market Index (April 2019, Index (>50=greater percentage of homebuilders viewing housing market as “good” versus being “poor,” seasonally adjusted): 63 (vs. March 2019: 62, April 2018: 68).
State Employment (March 2019, Nonfarm Payrolls, seasonally adjusted) Vs. February 2019: Grew in 1 state, essentially unchanged in 49 states and the District of Columbia. Vs. March 2018: Grew in 22 states, essentially unchanged in 28 states and the District of Columbia.
Business Inventories (February 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.017 trillion (+0.3 percent versus January 2019, +4.9% vs. February 2018).
Treasury International Capital Flows (February 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$42.4 billion (vs. January 2019: -$19.6 billion, vs. February 2018: +$57.6 billion.
Beige Book

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