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.

A New Low for the Unemployment Rate: October 1 – 5

The unemployment rate dropped to a multi-decade low while the trade deficit widened to a six-month high. Here are the five things we learned from U.S. economic data released during the week ending October 5.  

#1The unemployment rate fell to a 49-year low during September. The Bureau of Labor Statistics reports that nonfarm payrolls grew by a seasonally adjusted 134,000 during the month, below the 165,000 and 270,000 jobs created during July and August. Some of the slowdown in job creation can be linked to the effects of Hurricane Florence, which weighed on the retail (-20,000 jobs) and leisure/hospitality (-17,000) sectors. Private sector employers added 121,000 jobs during September, less than half of the 254,000 private sector jobs added in August. Industries adding the most workers during September were professional/business services (+54,000), health care/social assistance (+29,800), transportation/warehousing (+23,800), and construction (+18,000). The average number of hours worked remained at 34.5 hours (September 2017: 34.3 hours) while average weekly earnings increased by $2.76 to $939.78 (+3.4 percent versus September 2017).

Based on a separate survey of households, the unemployment rate dropped to its lowest reading since December 1969 at 3.7 percent. This was down 2/10ths of a percentage point from August and a half percentage point from the same month a year earlier. 150,000 people entered the labor force during the month, but the labor force participation rate remained at 62.7 percent (September 2017: 63.0). The labor force participation rate for adults aged 25 to 54 shed 2/10ths of a percentage point to 81.8 percent, matching its year-ago reading. The median length of unemployment was 9.2 weeks, off 9/10ths of a week from September 2017 while the number of part-time workers seeking a full-time position has fallen 9.8 percent over the past year to 4.642 million people. Finally, the broadest measure of labor underutilization (the U-6 series) came in at 7.5 percent, just above its post-recession low (September 2017: 8.3 percent).

Unemployment Rate 1968=2018 100518

#2The trade deficit grew to a six-month high in August. Export activity slowed $1.7 billion during the month to a seasonally adjusted $209.4 billion (+7.1 percent versus August 2017) while imports grew by $1.5 billion to $262.7 billion (+9.6 percent versus August 2017), per the Census Bureau and the Bureau of Economic Analysis. The resulting trade deficit of -$52.2 billion represented a $3.2 billion increase for the month, a 20.5 percent jump from the same month a year earlier, and the largest trade deficit since February. The goods deficit blossomed by $3.6 billion to -$76.7 billion (+17.2 percent versus 2017) while the service surplus widened by $0.4 billion to +$23.5 billion (+10.2 percent versus August 2017). The former was hurt by declining exports of crude oil/petroleum products and soybeans and increased imports of automotive vehicles and cell phones. The U.S. had its largest goods deficits with China (-$34.4 billion), the European Union (-$14.9 billion), and Mexico (-$8.7 billion).

#3Aircraft orders fueled factory orders in August, but core capital orders struggled. The Census Bureau reports that new orders for manufactured goods jumped 2.3 percent during the month after falling 0.5 percent in July. The seasonally adjusted $510.5 billion estimate for new orders represented a robust 10.0 percent increase over the past year. As noted with the previous week’s durable goods report, much of the rise was the product of the 69.0 percent surge in civilian aircraft orders and the 17.0 percent bounce in orders for defense aircraft. Net of transportation goods, factory orders managed a mere 0.1 percent increase. Durable goods orders rose 4.4 percent to $259.6 billion while orders for nondurables gained 0.2 percent to $250.9 billion. Civilian capital goods orders net of aircraft—a proxy of business investment—slumped 0.9 percent. Shipments grew 0.5 percent during the month to $504.0 billion (+7.8 percent versus August 2017), with the gain shrinking to a 0.2 percent increase after removing transportation goods. Shipments of core capital goods contracted 0.2 percent during August.

#4Purchasing managers report business activity largely held firm in September. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, slid by 1.5 points to a reading of 59.8. Even with the decline, this was the 25th consecutive month in which the measure was above a reading of 50.0, indicative of an expanding manufacturing sector. Only two of the five PMI components improved during the month:  production (+0.6) and employment (+0.3). Dropping were PMI components linked to supplier deliveries (-3.4), new orders (-3.3), and inventories (-2.1). Fifteen of 18 manufacturing industries expanded during September, led by textile mills, “miscellaneous” manufacturing, and plastics/rubber products. The press release noted that survey respondents remained “overwhelmingly concerned about tariff-related activity.”

The NMI, the headline index from the Nonmanufacturing Report on Business, jumped by 3.1 points to a reading of 61.6. This was the measure’s 104th straight month with a reading above 50.0. All four NMI components jumped during the month: employment (+5.7), business activity/production (+4.5), new orders (+1.2), and supplier deliveries (+1.0). Seventeen of 18 tracked nonmanufacturing industries grew during September, led by mining, real estate, and wholesale trade. The press release noted the survey respondents were “positive” about current market conditions but were concerned about “capacity, logistics and the uncertainty with global trade.”

#5Construction spending inched up in August. The Census Bureau estimates the value of construction put in place grew 0.1 percent during the month to a seasonally adjusted annualized rate of $1.319 trillion. This was 6.5 percent ahead of August 2017’s annualized rate. Private sector construction spending slowed 0.5 percent to $1.007 billion (+4.4 percent versus August 2017). Dropping during the month were expenditures on both private sector residential (-0.7 percent) and nonresidential (-0.2 percent) spending. Public sector spending rose 2.0 percent during August to an annualized $316.7 billion. Public sector construction spending has surged 14.0 percent over the past 12 months.

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 29, 2018, First-Time Claims, seasonally adjusted): 207,000 (-8,000 vs. previous week; -47,000 vs. the same week a year earlier). 4-week moving average: 207,000 (-24.9% vs. the same week a year earlier).
Consumer Credit (August 2018, Outstanding Non-Real Estate Backed Consumer Credit, seasonally adjusted): $3.935 trillion (+$20.1 billion vs. July 2018, +4.7% vs. August 2017).

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

 

Hiring Remains Firm, Trade Deficit Shrinks: July 2 – 6

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.  

#1The 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.Job Gains-2008-2018 070618

A separate survey of households found the unemployment rate jumping 2/10ths 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 2/10ths 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 2/10ths of a percentage point from May but up 4/10ths 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 2/10ths of a percentage point to 7.8 percent, matching its post-recession low.

#2The 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).

#3Factory 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 12th 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 19th time in 20 months (+0.2 percent to $668.4 billion)

#4Purchasing 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 22nd 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 8/10ths of a point to 62.3), and inventories (up 6/10ths 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.”

#5Construction 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.