Hiring Rebounds in April, The Fed Stays Put for Now: May 1 – 5

After pausing in March, employers picked up the pace of hiring in April. Here are the 5 things we learned from U.S. economic data released during the week ending May 5.

#1The labor market regained its momentum in April. The Bureau of Labor Statistics estimates nonfarm payrolls expanded by a seasonally adjusted 211,000 during the month, sharply up from the 79,000 net hires in March and much closer to February’s 232,000 job gain. Private sector employers added 194,000 jobs during April, split between 173,000 net hires in the service sector and 21,000 in the goods-producing sector of the economy. Industries with the biggest payroll gains included leisure/hospitality (+55,000), professional/business services (+39,000), health care/social assistance (+36,800), and financial services (+19,000). Even the retail sector, which had been shedding workers in recent months, manage to add 6,300 jobs during March. The average number of hours worked edged up by 1/10th of an hour to 34.4 hours (April 2016: 34.4 hours) while average weekly earnings have grown 2.5 percent over the past year to $900.94.

A separate survey of household finds the unemployment rate dropping by 1/10th of a percentage point to 4.4 percent, off 6/10ths of a point from a year earlier and its lowest point in ten years. Only 12,000 people entered the labor force during the month while the labor force participation rate inched down by 1/10th of a percentage point to 62.9 percent. The typical length of unemployment slipped 1/10th of a week to 10.2 weeks (April 2016: 11.2 weeks). The count of part-time workers seeking a full-time job fell by 281,000 to another post-recession low of 5.272 million (April 2016: 5.970 million). Finally, the broadest measure of labor underutilization (the U-6 series) fell to post-recession low of 8.6 percent (down 3/10ths of a percentage point from March and 1.1 percentage points from a year earlier). The U-6 measure had peaked during the last recession at 17.1 recent back in April 2010.Unemployment Labor Underutilization 2000-2017-050517

#2The Federal Reserve holds its short-term interest target rate, as expected, but does not appear concerned about recent weak economic data. The policy statement released following the conclusion of this week’s Federal Open Market Committee notes that economic activity had “slowed,” but also highlights that the labor market “continued to strengthen” including a comment that job gains were “solid.” Further, while household spending increased “only modestly,” the statement noted that “the fundamentals underpinning the continued growth of consumption remained solid.” Also, inflation was closing in on the Fed’s two-percent target rate. Finally, the statement noted that near-term risks to economic growth were “roughly balanced.” As a result, the committee voted unanimously to keep the fed funds target at between 0.75 percent and 1.00 percent, a rate that statement characterizes as being “accommodative.” Despite some recent weak economic data (the employment data above notwithstanding), the statement was largely unchanged from that following the March FOMC meeting. This would seem to suggest that the committee members appear to be ready for another bump in short-term rates at its next meeting at June.

#3The trade deficit was virtually unchanged even as both exports and imports slowed during March. Per the Census Bureau and the Bureau of Economic Analysis, exports and imports each declined $1.7 billion during the month leaving the goods and services deficit at -$43.7 billion. The trade deficit for goods grew by $0.4 billion while the surplus in services grew by a matching $0.4 billion. Exports of goods contracted by $2.1 billion, pulled down by a $1.8 billion decline in exports of industrial supplies/materials and a $0.9 decrease in automotive vehicles. Imports of goods decreased by $1.7 billion resulting from falling imports of capital goods and industrial supplies/materials. The U.S. had its largest goods deficits with China (-$31.4 billion), the European Union (-$10.0 billion), Mexico (-$6.5 billion), Japan (-$6.5 billion), and Germany (-$5.0 billion).

#4Real personal spending grows for the first time in 2017 during March. The Bureau of Economic Analysis finds that “real” personal consumption expenditures (PCE) grew 0.3 percent during the month, following declines of 0.1 percent and 0.3 percent during February and January, respectively. Real spending on goods edged up 0.1 percent during the month as a 1.5 percent gain in spending of nondurable goods just outpaced the 2.5 percent drop in durables. Real spending on services grew 0.4 percent during March (although this partially reflects a weather-related increase in utility spending). Over the past year, real personal consumption expenditures have grown 1.8 percent, smaller than the +2.1 percent and +1.9 percent 12-month comparables reported for February and January, respectively. Without adjustments for inflation, nominal consumer spending was unchanged during March. Nominal personal income and disposable income both grew at a 0.2 percent rate during March (their smallest monthly gains since last November) while real disposable income jumped 0.5 percent. Real disposable income has grown 2.4 percent over the past year, its best 12-month comparable since last November. Meanwhile, the savings rate grew by 2/10ths of a percentage point to +5.9 percent, its highest point since last August.

#5Construction Spending, particularly that for nonresident structures and in the public sector, slowed during March. The Census Bureau reports that the seasonally adjusted annualized rate of construction put in place slipped 0.2 percent during the month to $1.218 trillion. This was up 3.6 percent from a year earlier. Private sector construction spending was unchanged from February at $940.2 billion (SAAR), which was nevertheless 7.0 percent above that of March 2016. Private sector residential construction spending jumped 1.2% during the month, with much of the gain coming from a 2.0 percent bump in spending of new multi-family properties. Private sector non-residential spending declined 1.3 percent during March, pulled down by lower construction spending for the commercial, office, educational, religious, amusement/recreation, transportation, and power properties. Public construction spending declined 0.9 percent to a SAAR of $278.1 billion. This was off 6.5 percent from the same point a year earlier. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 29, 2017, First-Time Claims, seasonally adjusted): 238,000 (-19,000 vs. previous week; -38,000 vs. the same week a year earlier). 4-week moving average: 243,000 (-7.6% vs. the same week a year earlier).
Factory Orders (March 2017, New Orders for Manufactured Goods, seasonally adjusted): $478.2 billion (+0.2% vs. February 2017, +5.8% vs. March 2016).
Vehicle Sales (April 2017, Vehicle Retail Sales, seasonally adjusted annualized rate): 16.88 million units (+1.6% vs. March 2017, -3.0% vs. April 2016.
Productivity (1st Quarter 2017-preliminary, Nonfarm Business Labor Productivity, seasonally adjusted): -0.6% vs. Q4 2016, +1.1% vs. Q1 2016.
ISM Manufacturing Report on Business (April 2017, Purchasing Managers Index (>50=Growth in Manufacturing, seasonally adjusted): 54.8 (vs. March 2017: 54.8).
ISM Nonmanufacturing Report on Business (April 2017, NMI (>50=Growth in Nonmanufacturing, seasonally adjusted): 57.5 (vs. March 2017: 55.2).
Consumer Credit (March 2017, Outstanding Non-Real Estate Back Consumer Loan Balances, seasonally adjusted):  $3.806 trillion (+$16.4 billion vs. February 2017, +6.0% vs. March 2016).

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

Despite Continued Strength in Consumer Confidence, Economic Growth Slows: April 24 – 28

The U.S. economy slammed on its brakes during the first quarter as consumer spending faltered. Here are the 5 things we learned from U.S. economic data released during the week ending April 28.

#1Economic growth sputtered during the opening months of 2017. Per the Bureau of Economic Analysis, the Gross Domestic Product (GDP) grew by a paltry seasonally adjusted annualized rate (SAAR) of 0.7 percent during the first quarter of 2017. This was the slowest pace of economic expansion since the first quarter of 2014 when the U.S. economy had contracted 1.2 percent (although it is worth noting that GDP grew by only 0.8 percent during the same quarter a year ago). The feeble growth rate in the economy was largely the product of weakness in consumer spending, which increased only 0.7 percent) during the quarter. As a result, personal consumption expenditures contributed a mere 23-basis points in GDP growth during the quarter, versus a 240-basis point contribution during the previous quarter. Also making positive contributions to GDP growth during the quarter were nonresidential fixed investment (+112-basis point contribution), increased exports (+68-basis point contribution), and residential fixed investment (i.e., housing with a +50-basis point contribution). Drags on the U.S. economy were the decline in private inventories (costing 93-basis points in GDP growth), a rise in imports (costing 61-basis points in GDP growth), and a decrease in government spending (costing 30-basis points in GDP growth). The BEA will revise its estimate of Q1 GDP growth twice in the coming two months.Q1 GDP Contributors-042817

#2Still, there is a measure that suggests economic growth was just above its historical average in March. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators that tracks business activity, shed 19-basis points but remained positive at +0.08. More critically, the three-month moving average for the CFNAI came in at +0.03, which was down 13-basis points from February but also was the fourth straight month in which it was positive. A positive reading in the moving average suggests that the U.S. economy is expanding at a rate greater than its historic average. Forty-eight of the 85 components that make up the CFNAI made positive contributions to the index, with three of four major groupings of these indicators making positive contributions: sales/orders/inventories (adding seven-basis points to the index), production (adding four-basis points to the index), and employment (adding two-basis points to the index). Personal consumption/housing-related index components cost five-basis points in CFNAI growth. 

#3Transportation goods sparked growth in durable goods orders during March. New orders for manufactured durable goods gained 0.7 percent during the month to a seasonally adjusted $238.7 billion, its third consecutive monthly increase. The Census Bureau report indicates new orders for transportation goods rose 2.4 percent, with solid increases in orders for defense aircraft (+26.1 percent) and civilian aircraft (+7.0 percent). New orders for motor vehicles declined for a second straight month with a 0.8 percent contraction. Net of transportation goods, new orders for durable goods slipped 0.2 percent although orders for core capital goods orders inched up 0.2 percent. Growing during the month were new orders for primary metals (+0.8 percent) and electrical equipment (+0.4 percent) while orders fell for computers (-3.8 percent), communications equipment (-1.2 percent), fabricated metal products (-0.8 percent), and machinery (-0.2 percent).

#4New home sales hit an eight-year high in March. The Census Bureau reports that new home sales jumped 5.8 percent during the month to a seasonally adjusted annualized rate (SAAR) of 621,000. This was 15.6 percent above year-ago levels and its highest reading since last July (which itself was the post-recession high). Sales grew in three of four Census regions during the month—Northeast (+25.8 percent), West (+16.7 percent), and South (+1.6 percent)—but declined 4.5 percent in the Midwest. All four Census regions enjoyed positive year-to-year sales gains. There were 268,000 new homes available for sale at the end of March, up 1.1 percent from February and 9.8 percent from a year earlier. This translated into a still tight 5.2-month supply of new homes on the market.

#5Consumer sentiment remained near post-recession highs in April, although one measure pulled back during the month. The Conference Board’s Consumer Confidence Index fell by 4.6 points during April to a reading of 120.3 (1985=100). March’s reading was the best reading in the sentiment measure since December 2000. The current conditions lost 3.3 points (to 140.6) while the expectations index shed 5.6 points (to 112.3). 30.2 percent of survey respondents felt that current business conditions were “good” (versus 32.4 percent in March), while 13.8 percent saw them as “bad” (versus 13.1 percent in March). Looking towards the future, 24.8 percent of consumers believe business conditions will improve over the next six months while 10.9 percent expect them to worsen. Related, 23.0 percent of survey respondents expect there will be increased job availability in the coming months versus 13.1 percent anticipating a decline. The press release noted that despite a pullback in April, consumer confidence “still remains at strong levels” and that “consumers remain confident that the economy will continue to expand in the months ahead.”

Meanwhile, the University of Michigan’s Index of Consumer Sentiment edged up by 1/10th of a point to a seasonally adjusted reading of 97.0. Despite essentially holding steady during the month, this puts the index eight full points above its April 2016 reading and keeps it near its post-recession high. The current conditions index dropped by a half-point to 112.7 (April 2016: 106.7) while the forward-looking expectations index jumped 9.4 points to 87.0.  The press release noted that the “partisan divide” that this survey has been demonstrating in recent months narrowed during April, people who identified themselves as Democrats were far more pessimistic than those who are Republicans. The release also stated that the data points towards an anticipated 2.5 percent growth rate in real consumer spending during 2017.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 22, 2017, First-Time Claims, seasonally adjusted): 257,000 (+14,000 vs. previous week; -4,000 vs. the same week a year earlier). 4-week moving average: 242,250 (-7.4% vs. the same week a year earlier).
Pending Home Sales (March 2017, Index (2001=100), seasonally adjusted): 99.1 (-2.9% vs. February 2017, +1.8% vs. March 2016).
Case-Shiller Home Price Index (February 2017, 20-City Index, seasonally adjusted): +0.7% vs. January 2017, +5.9% vs. February 2016.
FHFA House Price Index (February 2017, Purchase-Only Index, seasonally adjusted): +0.8% vs. January 2017, +6.4% vs. February 2016.
Agricultural Prices (March 2017, Prices Received by Farmers (Index: 2011=100), seasonally adjusted): 94.8 (+3.4% vs. February 2017, +2.4% vs. March 2016).

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

Home Sales Gain Again While Factory Output Slows. What We Learned During the Week of April 17 – 21

Home sales hit a ten-year high in March and housing starts remained solid.  But the manufacturing sector ends its recent winning streak. Here are the 5 things we learned from U.S. economic data released during the week ending April 21.

#1Existing home sales hit another post-recession high in March. The National Association of Realtors reports that existing home sales jumped 4.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.710 million homes. This was up 5.9 percent from a year earlier and represented the best month for sales of previously owned homes since February 2007. Sales grew in three of four Census regions: Northeast (+10.1 percent), Midwest (+9.2 percent), and South (+3.4 percent). Sales slipped 1.6 percent in the West. All four Census regions enjoyed positive 12-month sales comparables.  Even though inventories of unsold homes grew 5.8 percent during the month, the 1.830 million homes available for sale at the end of March was a 6.6 percent drop from a year earlier and represented a very tight 3.8 month supply. As a result, the median sales price for existing homes has risen 6.8 percent over the past year to $236,400. The press release described the spring home buying season as “promising,” but noted that “finding available properties to buy continues to be a strenuous task for many buyers.”

#2Housing starts slip but remained near post-recession highs in March. Per the Census Bureau, housing starts were at a seasonally adjusted annualized rate (SAAR) of 1.215 million units, down 6.8 percent for the month but still 9.2 percent its March 2016 pace. (Note that while housing starts were near their post-recession high, they remained well below the peak values seen during the early and middle part of the last decade.) While both the month-to-month and year-to-year comparables were equivalent for both single-family and multi-family properties, they did differ by region. Versus February, starts grew 12.9 percent in the Northeast but dropped 16.2 percent in the Midwest, 16.0 percent in the West, and 3.2 percent in the South. Starts have grown over the past year in the South (+19.4 percent) and West (+9.2 percent) while they have fallen in the Northeast (-14.9 percent) and Midwest (-2.5 percent). Looking towards the future, the SAAR of issued building permits grew 3.6 percent during March to 1.26 million permits (+17.0 percent). Permit issuance was up sharply in all four Census regions: Northeast (+26.1 percent), West (+24.5 percent), South (+14.6 percent), and Midwest (+4.9 percent). The annualized rate of housing completions grew 3.2 percent during the month to 1.168 million units. This was a healthy 13.4 percent above the March 2016 pace of completions.Housing Starts 2005-2017-042117

#3Industrial production rose during March, but manufacturing output did not. The Federal Reserve reports that industrial production grew 0.5 percent during March, following a tepid 0.1 percent increase during February and a 0.3 percent decline during January. The increase was largely the result of an 8.6 percent surge in output at utilities as weather conditions returned to their seasonal norms after an abnormally warm winter had suppressed demand for heating. Mining output edged up 0.1 percent during the month. On the flip side, manufacturing production fell 0.4 percent during March and was only 0.8 percent above its year ago level. This was the first monthly decline in manufacturing output since last August. The production of durable manufactured goods dropped 0.8 percent with all major categories of durable products reporting output declines (except for computers/electronics). Falling by at least one percent was the output of automobiles, electrical equipment/appliances, and primary metals. Production of nondurables eked out a 0.2 percent gain, with petroleum/coal products seeing the largest gain in output. Capacity utilization increased 4/10ths of a percentage point to 76.1 percent, but the same measure for the manufacturing sector saw factory utilization declining by 3/10ths of a percentage point to 75.7 percent.

#4Forward-looking data suggest continued economic growth for the remainder of this year. The Conference Board’s Leading Economic Indicators added a half point during March to a hit a seasonally adjusted 126.7 (2010=100). This left the measure 3.5 percent above where it was a year earlier. Eight of the leading index’s components improved during the month, led by the interest rate spread, purchasing managers’ report on new orders, and consumers’ expectations for future business conditions. The coincident index added 2/10ths of a point 114.9 (+2.0 percent vs. March 2016) with all 4 of the measure’s components making a positive contribution to the index (including, industrial production and personal income). The lagging index held firm at 123.6 during the month, which left the measure 2.3 percent above where it was a year ago. Three of the seven components of the lagging index made positive contributions, led by banks’ prime rate for loans. The press release stated the results suggest continued economic growth in 2017, “with perhaps an acceleration later in the year if consumer spending and investment pick up.”

#5A closer look at March employment data finds payrolls were unchanged in most states. The Bureau of Labor Statistics’ Regional and State Employment report indicates that there were statistically significant increases in nonfarm payrolls during the month in three states: Washington state (+10,000). Tennessee (+8,600), and Maine (+3,000). Payrolls declined in four other states: New Jersey (-17,500), Pennsylvania (-16,100), Missouri (-13,400), and Louisiana (-8,500). Payrolls did not significantly change in the other 43 states and in the District of Columbia during the month. Even with the relative stagnation during March, nonfarm payrolls have expanded in 27 states over the past year, with the largest percentage gains occurring in Utah, Florida, Georgia, and Nevada. Only two states—Alaska and Wyoming—suffered year-to-year payroll declines.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 15, 2017, First-Time Claims, seasonally adjusted): 244,000 (+10,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 247,250 (-8.4% vs. the same week a year earlier).
NAHB Housing Market Index (April 2017, Index (>50 = “Good” Housing Market Conditions), seasonally adjusted): 68 (vs. March 2017: 71, vs. April 2016: 58).
Bankruptcy Filings (12-month period through March 31, 2017): 794,492 (-4.7 percent versus 12-month period through March 31, 2016). Business bankruptcy filings: 770,901 (-4.7 percent vs. March 31, 2016), Nonbusiness bankruptcy filings: 23,591 (-4.9 percent versus March 31, 2016).
Treasury International Capital Flows (February 2017, Foreign Purchases of Domestic U.S. Securities, not seasonally adjusted): +$35.9 billion (vs. January 2017: +$14.8 billion., vs. February 2016; +$26.9 billion).
Beige Book

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