Tag: Construction Spending

Employers continued to hire in June while the trade deficit fell to a 1.5 year low in May. Here are the five things we learned from U.S. economic data released during the week ending July 6.  

The labor market remained hot during the open days of summer. Nonfarm employers expanded their payrolls by 213,000 workers, per the Bureau of Labor Statistics. While down from the 244,000 added jobs in May, it essentially matched the 213,700 monthly average of the past year. Private sector employers added 202,000 jobs during June, split by 53,000 workers in the goods-producing side of the economy and 149,000 positions in the service sector. Industries adding the most jobs during the month were professional/business services (+50,000), manufacturing (+36,000), health care/social assistance (+34,700), and leisure/hospitality (+25,000). Retailers, on the other hand, shed 21,600 workers during the month. The average workweek remained at 34.5 hours (June 2017: 34.4 hours) while average hourly wages inched up by five cents. The resulting average weekly earnings of $903.81 was up 3.0 percent.

A separate survey of households found the unemployment rate jumping 2/10^ths of a percentage point to 4.0 percent (June 2017: 4.3 percent). The good news is that this was the result of 601,000 people entering the labor force during the month. As a result, the labor force participation rate also grew by 2/10^ths of a percentage point to 62.9 percent. Labor force participation remains below pre-recession levels, although that partially (but not totally) reflects an aging populace. The labor force participation rate for adults 25 to 54 was 88.9 percent in June, down 2/10^ths of a percentage point from May but up 4/10^ths of a percentage point from a year earlier. There is some progress still needed here too—the 25-54 participation rate was about two full percentage points higher during the previous economic expansion. Falling to post-recession lows were the median length of unemployment (8.9 weeks) and the number of people with a part-time job seeking a full-time opportunity (4.743 million people). The BLS’s broadest measure of labor underutilization (the “U-6” series) shed 2/10^ths of a percentage point to 7.8 percent, matching its post-recession low.

The trade deficit narrowed to its smallest reading in 19 months. The Census Bureau and the Bureau of Economic Analysis report that exports grew by $4.1 billion to $215.3 billion (+11.7 percent versus May 2017) while imports increased by a more modest $1.1 billion to $258.4 billion (+8.3 percent versus May 2017). As a result, the trade deficit contracted by $3.0 billion to -$43.1 billion, down 6.0 percent from a year earlier and its smallest reading since October 2016. The goods deficit narrowed by $2.6 billion to -$65.8 billion (off 1.5 percent from May 2017) while the goods surplus widened by $450 million to +$22.7 billion (up 8.5 percent from May 2017). The former included the impact of a $3.6 billion rise in exported goods (including sizable gains for civilian aircraft and soybeans). The U.S. had its largest goods deficits in May with China (-$32.0 billion), the European Union (-$11.9 billion), and Japan (-$5.7 billion).

Factory orders grew during May, thanks to a gain in nondurable goods. New orders of manufactured goods increased 0.4 percent during the month to a seasonally adjusted $498.2 billion. This represented the Census Bureau measure’s third gain in four months, leaving new factory orders up 9.2 percent from a year earlier. Durable goods orders decreased 0.4 percent (an improvement from the 0.6 percent decline previously reported). Falling were orders for transportation goods (-1.1 percent), fabricated metals (-1.1 percent), primary metals (-0.3 percent), and computers/electronics (-0.2 percent) while machinery (+1.2 percent) and furniture orders (+1.1 percent) both increased. Nondurable goods orders grew 1.1 percent during the month. Nondefense capital goods net of aircraft—a proxy of business investment—inched up 0.3 percent. Shipments grew for the 12^th time in 13 months with a 0.6 percent increase to $496.1 billion (+7.2 percent versus May 2017). Durable goods shipments gained by less than 0.1 percent while those of nondurables rose 1.1 percent. Unfilled orders grew for the sixth time in seven months (+0.5 percent to $1.161 trillion) while inventories expanded for the 19^th time in 20 months (+0.2 percent to $668.4 billion)

Purchasing managers signal business activity expanded during June. The Institute for Supply Management’s Purchasing Managers Index (PMI) added 1.5 points to a seasonally adjusted reading of 60.2. This was the 22^nd straight month in which the PMI has been above a reading of 50.0, which is indicative of an expanding manufacturing sector. Three of five PMI components improved from their May readings: supplier deliveries (up 6.2 points to 68.2), production (up 8/10^ths of a point to 62.3), and inventories (up 6/10^ths of a point to 50.8). The new orders and employment components each suffered small declines. Respondents from 17 of the 18 tracked manufacturing sectors reported growth during June, led by textile mills, wood products, and nonmetallic mineral products. Survey respondents expressed concerns about “employment resources and supply chains [that] continue to struggle,” and “how tariff related activity is and will continue to affect their business.”

The ISM’s measure for the nonmanufacturing sector of the economic added a half point to a seasonally adjusted 59.1. The NMI has been above the expansionary/contractionary threshold for 101 consecutive months. Only two of the NMI’s four components gained during the month: new orders (up 2.7 points to 63.2) and business activity/production (up 2.6 points to 63.9). The employment and supplier deliveries components both lost ground during June. Seventeen of 18 tracked service sector industries grew during the month, led by mining, wholesale trade, and retail. The press release reported that while survey respondents were “optimistic,” they were concerned about “tariffs, capacity constraints, and delivery.”

Construction spending grew in May. The Census Bureau estimates the seasonally adjusted annualized value of construction put into place increased 0.4 percent during the month to $1.309 trillion. This was 4.5 percent ahead of the year-ago rate. Private sector spending grew 0.3 percent to an annualized $1.005 trillion (+4.4 percent versus May 2017). Private sector residential construction spending expanded 0.8 percent during the month while private sector nonresidential construction spending slowed 0.3 percent (including falling activity in both the manufacturing and commercial sectors). Public sector spending was at an annualized $301.1 billion, up 0.7 percent for the month and 4.7 percent over the past year.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending June 30, 2018, First-Time Claims, seasonally adjusted): 231,000 (+3,000 vs. previous week; -20,000 vs. the same week a year earlier). 4-week moving average: 224,500 (-8.2% vs. the same week a year earlier).
– Vehicle Sales (June 2018, Light Vehicle Sales, seasonally adjusted annualized rate): 17.47 million vehicles (+3.3% vs. May 2018, +4.6% vs. June 2017).
– FOMC Meeting Minutes

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

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.