Gas Prices Dropped as 2018 Ended: January 7 – 11

Core consumer prices grew at a steady, moderate pace in December. Here are the five things we learned from U.S. economic data released during the week ending January 11.  

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Consumer prices fell in December, but core prices inched up. The Consumer Price Index (CPI) declined 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This was the first drop in consumer prices since last March, with gasoline prices being the main culprit. Energy CPI slumped by 3.5 percent (its third decline in four months) with gasoline prices plummeting 7.5 percent. Prices for both electricity (+1.8 percent) and utility delivered natural gas (+0.7 percent) both rose. Also rising were food prices (+0.4 percent—its biggest single-month gain since May 2014), pulled up by increased costs for fruit and vegetables. Net of energy and food, core CPI gained 0.2 percent. Rising were prices for medical care services (+0.4 percent) and shelter (+0.3 percent) while prices fell 0.2 percent for transportation services, used cars/trucks, and medical care commodities. Over the past year, CPI has increased by 1.9 percent while core consumer prices have risen 2.2 percent.CPI December 2018 111119.png

#2Even with a decline in November, there were more job openings than the number of unemployed people. The Bureau of Labor Statistics reports that there were 6.888 million open jobs on the final day of November, down 243,000 from October but 16.1 percent ahead of the November 2017 count. This was greater than the BLS’s estimate of 6.018 million unemployed people during the month. Private sector employers had 6.266 million open jobs in November, up 15.5 percent from a year earlier. Most industries reported double-digit percentage increases in job openings, with notable exceptions being retail (-6.2 percent), wholesale trade (+5.4 percent), and financial activities (+8.9 percent). Also dropping during the month was the number of people hired, declining by 218,000 to 5.710 million people (+3.7 percent versus November 2017). Industries reporting particularly large year-to-year percentage increases in hiring included wholesale trade (+31.7 percent), transportation/warehousing (+16.1 percent) health care/social assistance (+14.0 percent), financial activities (+10.9 percent), and manufacturing (+9.9 percent). 

#3Service sector activity chilled a bit as 2018 wrapped up. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, shed 3.1 points to a reading of 57.5. This was the measure’s lowest reading since July but also represented the 107th consecutive month in which it was higher than 50.0 (indicative of an expanding service sector). Three of the NMI’s four components lost ground relative to November: business activity/production (down 5.3 points), supplier deliveries (down 5.0 points), and employment (off 2.1 points). Eking a small gain was the component tied to new orders, which added 2/10ths of a point. Sixteen of 18 tracked nonmanufacturing industries reported growth during December, led by arts/entertainment/recreation, transportation/warehousing, and health care/social assistance. Whereas the comments from survey respondents were “mostly optimistic about overall business conditions,” highlighted comments noted potential adverse effects resulting from the tariffs.

#4Small business owner optimism slipped again in December but remained near post-recession highs. The Small Business Optimism Index shed 4/10ths of a point during the month to a seasonally adjusted 104.4 (1986=100). Even though this was the fourth straight monthly decline, the National Federation of Independent Business’s measure has been above a reading of 100.0 for 25 consecutive months. Four of the index’s ten components improved from their November readings: plans to increase inventories (up six points), current job openings (up five points), current inventories (up four points), and plans to increase employment (up a point). Of the six declining components, the largest decreases were for expected economic conditions (off six points), whether it is a good time to expand (off five points), and plans to make capital outlays (down four points). The press release emphasized that small businesses “need workers to generate more sales, provide services, and complete projects.”

#5Consumer borrowing rose in November. The Federal Reserve estimates consumers held a seasonally adjusted $3.979 trillion in outstanding non-real estate related debt (e.g., mortgages) at the end of November. This represented an increase of $22.2 billion from October and a 4.3 percent gain over the past year. Revolving credit (e.g., credit card) expanded by $4.8 billion to $1.042 trillion (+2.2 percent versus November 2017). Nonrevolving credit balances rose by $17.3 billion in November to $2.937 trillion. Nonrevolving consumer credit balances, which includes both college and auto loans, have increased by 5.1 percent over the past 12 months.

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 5, 2019, First-Time Claims, seasonally adjusted): 216,000 (-17,000 vs. previous week; +31,000 vs. the same week a year earlier). 4-week moving average: 221,750 (-9.4% vs. the same week a year earlier).
FOMC Minutes

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

Payrolls Surged as 2018 Ended: December 31 – January 4

Employers added more workers in December than they had in any month since February. Here are the five things we learned from U.S. economic data released during the week ending January 4.

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Job creation accelerated in December. The Bureau of Labor Statistics estimates nonfarm employers added 312,000 on a seasonally adjusted basis during the month, the most since last February. In addition, the BLS added a combined 58,000 jobs to its previously reported estimates of October and November job creation. The resulting 2.64 million workers added over the past 12 months made 2018 the best year for job creation since 2015 and continued the nine-year winning streak in terms of employment gains. The private sector added 301,000 jobs during December, with health care/social assistance, leisure/hospitality, professional/business services, construction, and manufacturing leading the way. Average hourly earnings have risen 3.2 percent over the past year to $27.48. Average weekly earnings also have grown 3.2 percent over the past year, in this case to $948.06.job gains 2008 - 2018

Based on a separate household survey, the unemployment rate increased by 2/10ths of a percentage point to 3.9 percent. But this gain is more of a good news story as 419,000 people had entered the labor market during the month. The labor force participation rate also grew by 2/10ths of a percentage point to 63.1 percent (December 2017: 62.7 percent). The median length of unemployment edged up by 1/10th of a week to 9.1 weeks (December 2017: 8.9 weeks) while the number of part-time workers seeking a full-time opportunity dropped by 24,000 to 4.657 million (December 2017: 4.986 million). Finally, the broadest measure of labor underutilization by the BLS (the U-6 series) stayed near its post-recession low at 7.6 percent (December 2017: 8.1 percent).

#2Payroll company data showed the same. Private sector employment expanded by a seasonally adjusted 271,000 jobs in December, per the ADP National Employment Report. The report, based on data flowing through payroll systems of 411,000 ADP clients, finds jobs growth among large (+54,000 jobs), medium (+129,000), and small-sized (+89,000) businesses. The service sector added 224,000 workers while the goods-producing side of the economy added 47,000 jobs. The press release noted, “the busy holiday season greatly impacted both trade and leisure and hospitality.”

#3Jobless claims grew during Christmas week but remained very low. The Department of Labor reports that the number of first-time claims made for unemployment insurance benefits increased by 10,000 during the week ending December 29 to a seasonally adjusted 231,000. Relative to the same week a year earlier, this was down by 17,000 claims. The four-week moving average of first-time claims was at 218,750, 8.9 percent below the moving average of the final week of 2017. A total of 1.794 million people were receiving some form of unemployment insurance benefits during the week ending December 15, down 11.2 percent from the same week a year earlier.

#4An outplacement firm reports rising job cuts in 2018. The 2018 Challenger Report indicates that announced job cuts rose 28.6 percent during the year to 538,659. This was the most announced job cuts since 2015 but well under the nearly 1.3 million announced layoffs in 2009. The count of announced layoffs during the final quarter of 2018 was 42.8 percent ahead of that from the final three months of 2017. The sectors with the largest number of reported job cuts in 2018 were retail, telecommunications, health care/products, and financial. The press release noted that most of the announced job cuts result from company restructuring, closings, and “voluntary” severance. It stressed that “large-scale job cut announcements due to these tariffs have yet to be announced, it seems.”

#5Manufacturing growth cooled in December, per purchasing managers. The Purchasing Managers Index (PMI), the headline index from the Institute for Supply Management’s Manufacturing Report on Business, dropped by 5.2 points to a reading of 54.1. This was the biggest single-month drop in the PMI in more than ten years and the measure’s lowest reading since 2016. Yet despite the drop, this was the 28th straight month in which the measure was above a reading of 50.0, indicative of an expanding manufacturing sector. All five components of the PMI declined during the month: new orders (down 11.0 points), production (down 6.3 points), supplier deliveries (down 5.0 points), employment (off 2.2 points), and inventories (down 1.7 points). Eleven of 18 tracked manufacturing industries grew during December, led by textiles, apparel, and transportation equipment. The press release states respondents’ comments noted “continued expanding business strength, but at much lower levels.”

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

Job Creation Solid, If Slower: December 3 – 7

Job creation mellowed a bit in November while the trade deficit widened again in October. Here are the five things we learned from U.S. economic data released during the week ending December 7.

#1Job creation slowed in November, but wage growth held firm. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 155,000 workers during the month, down from the 237,000 added in October and below the 211,000 average of the past 12 months. The private sector added 161,000 workers during the month while government employment contracted by 6,000. Industries expanding their payrolls the most include health care/social assistance (+40,100), professional/business services (+32,000), manufacturing (+27,000), transportation/warehousing (+25,400), retail (+18,200), and leisure/hospitality (+15,000). Average hourly wages have grown 3.1 percent over the past year to $27.35 with average weekly earnings increased a more modest 2.8 percent because the average workweek slipped by 1/10th of an hour to 34.4 hours.

Based on a separate survey of households, the unemployment rate held steady at its post-recession low of 3.7 percent. 133,000 people entered the labor force during the month, but the labor force participation rate remained at 62.9 percent. The labor force participation rate for adults aged 25 to 54 edged down by 1/10th of a percentage point to 82.4 percent. While just off its post-recession high, this measure remained its peak during the previous business cycle (October 2000: 83.4 percent). The median length of unemployment dropped by a half week to a post-recession low of 8.9 weeks while the count of part-time workers seeking a full-time job (“involuntary part-time workers”) grew by 181,000 to 4.802 million.  The broadest measure of labor underutilization by the BLS (the U-6 series) inched up 2/10ths of a percentage point to 7.6 percent.Unemployment Rate 2008-2018 120718

#2The U.S. trade deficit widened once again in October. The Census Bureau and Bureau of Economic Analysis report that exports slowed $0.3 billion during the month to a seasonally adjusted $211.0 billion (+6.3 percent versus a year earlier) while imports grew by $0.6 billion to $266.5 billion (+8.5 percent versus a year earlier). As a result, the U.S. goods and services deficit expanded by $0.9 billion to -$54.6 billion. The deficit was 18.1 percent larger than that of the year earlier and was its largest reading since October 2008. The goods deficit expanded by $0.9 billion to -$78.1 billion while the surplus on services shrank a modest $0.1 billion to +$22.6 billion. The former was hurt by a decline in exports of soybeans and civilian aircraft/engines and increased imports of pharmaceutical preparations and automotive vehicles/engines. The U.S. had its biggest trade deficits in goods with China (-$38.2 billion), the European Union (-$15.1 billion), and Mexico (-$6.4 billion).

#3October factory orders were soft. The Census Bureau indicates new orders for manufactured goods dropped by $10.5 billion during the month to a seasonally adjusted $502.7 billion. New orders for transportation goods fell 12.0 percent, pulled down by massive declines in orders for defense (-59.3 percent) and civilian (-22.2 percent) aircraft (both of which tend to be volatile month-to-month). Net of transportation goods, new orders increased 0.3 percent. Durable goods orders slumped 4.3 percent while nondurable orders gained 0.3 percent. Unchanged were orders for civilian capital goods net of aircraft (a proxy of business investment). Shipments slipped 0.1 percent to $508.4 billion, its first drop after 15 consecutive monthly increases, with unfilled orders also contracting by 0.1 percent to $1.184 trillion. Inventories expanded for the 24th straight month with a $0.9 billion gain to $681.7 billion.

#4Purchasing managers say business activity accelerated in November. The headline index from the Institute for Supply Management’s Manufacturing Report on Business, the PMI, added 1.6 points during the month to a seasonally adjusted 59.3. This was the PMI’s 27th consecutive month above a reading of 50.0, indicative of an expanding manufacturing sector. Four of five PMI components improved from their October readings: new orders (up 4.7 points), inventories (up 2.2 points), employment (1.6 points) and production (up 7/10ths of a point). The measure tracking supplier deliveries lost 1.3 points. Thirteen of 18 tracked manufacturing industries reported growth during the month, led by computers/electronics, plastics/rubber product, and paper products. Survey respondents’ comments stated that “[d]emand remains strong” but noted many detrimental impacts of tariffs (both current and pending).

The NMI, the headline index from ISM’s Non-Manufacturing Report on Business, has been above a reading of 50.0 for 106 straight months. In November, the NMI edged up by 4/10ths of a point to 60.7. Only two of the NMI’s four components improved during the month:  business activity/production (up 2.7 points) and new orders (up a full point). Slipping were components tracking employment (off 1.3 points) and supplier deliveries (down a full point). Seventeen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, professional/scientific/technical services, and health care/social assistance. The press release stated that survey respondents “remain positive about current business conditions and the direction of the economy.”

#5Construction spending sputtered again in October. The Census Bureau estimates the value of construction put in place edged down 0.1 percent during the month to a seasonally adjusted annualized rate (SAAR) of $1.309 trillion, its third monthly decline. Construction spending has grown 4.9 percent over the past 12 months. Private sector spending decreased 0.4 percent to $998.7 billion (SAAR), up 3.9 percent from October 2017. Residential private sector spending dropped 0.5 percent while the nonresidential private sector measure shrank more slowly (-0.3 percent). Public sector construction gained 0.8 percent to an annualized $304.2 billion, up 8.8 percent from a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 1, 2018, First-Time Claims, seasonally adjusted): 231,000 (-3,000 vs. previous week; -4,000 vs. the same week a year earlier). 4-week moving average: 228,000 (-5.3% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (December 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 97.5 (vs. November 2018: 97.5; vs. December 2017: 95.9).
Productivity (2018 Q3-revision, Nonfarm Labor Productivity, seasonally adjusted annual rate): +2.3% vs. 2018 Q2, +1.3% vs. 2017 Q3.
Beige Book

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