More Records Fall: May 4 – 8

The employment report highlighted a week full of dismal economic data. Here are the five things we learned from U.S. economic data released during the week ending May 8.

#1All the job gains since the Great Recession are gone. Nonfarm employment shrank by a startling 20.500 million (seasonally adjusted) in April, by far the steepest decline in payrolls ever for the Bureau of Labor Statistics data series going back to 1939. The estimate of 131.405 million employed people was at its lowest point since January 2011. Private-sector payrolls dropped 19.520 million workers, split between 2.355 million in the goods-producing side of the economy and 17.165 million in the service sector. Job losses cut across every sector of the economy with the most significant hits in leisure/hospitality (-7.653 million), retail (-2.107 million), professional/business services (-2.128 million), health care/social assistance (-2.087 million), manufacturing (-1.330 million), construction (-975,000), and local government (-801,000).

A separate survey of households puts the unemployment rate at 14.7 percent, compared to 3.5 percent just two months earlier. Even worse, the BLS acknowledges that this figure likely understates actual unemployment as there was a surge in the count of workers “classified as employed but absent from work.” As it suspects that most of these people are genuinely unemployed, the real unemployment rate is likely five percentage points higher than reported above. Further, 6.432 million people left the labor market, putting the labor force participation rate at a 48-year low of 60.2 percent (its lowest point since 1973). The same measure for adults aged 25 to 54 fell by 2.7 percent points to 79.8 percent (its lowest reading since April 1983). If a worker has not lost their job, they may be working fewer hours—the count of part-time workers desiring full-time work surged 88.8 percent in April to 10.741 million. The broadest measure of labor underutilization—the U-6 series—hit 22.8 percent in April, compared to 8.7 percent during the previous month and 6.7 percent as recently as December.

U.S. Unemployment Rate Data: April 2020
U.S. Unemployment Rate Data: April 2020

#2The service sector also broke its winning streak in April. The NMI, the headline index of the Institute for Supply Management’s Nonmanufacturing Report on Business, tumbled by 10.7 points to a reading of 41.8. The NMI had not been below a reading of 50.0—the threshold between an expanding and contracting service sector—since December 2009. All four major components of the NMI—business activity, new orders, employment, and supplier deliveries—pointed towards a shrinking service sector. Sixteen of 18-tracked service sector industries contracted in April, led by declines for arts/entertainment/recreation, agriculture, and retail. The press release noted purchasing managers’ concerns “about the continuing coronavirus impacts on the supply chain, operational capacity, human resources, and finances, as well as the uncertain timelines for the resumption of business and a return to normality.”

#3Factory orders sank in March. New factory orders hemorrhaged 10.3 percent during the month to a seasonally adjusted $445.8 billion, the largest single-month decline in the 28-year history of the Census Bureau measure. Transportation goods orders decreased 41.3 percent, hurt by massive cancelations for civilian aircraft and a drop for automobiles. Net of transportation, core factory orders dropped 3.7 percent, with declines for nondurable goods, primary metals, fabricated metal products, and machinery countering increased orders for electrical equipment/appliances. Shipments fell for a third consecutive month, shedding 5.2 percent to $473.6 billion (non-transportation goods shipments dropped 3.6 percent). 

#4International trade decelerated in March. The Census Bureau and Bureau of Economic Analysis report that exports plunged by $20.0 billion to a seasonally adjusted $187.7 billion (-10.9 percent vs. March 2019). Meanwhile, imports dove $15.4 billion to $232.2 billion (-11.9 percent versus March 2019). The resulting -$44.4 billion deficit was up $4.6 billion from February but off 15.7 percent from a year earlier. The goods deficit widened by $4.6 billion to -$65.6 billion while the services surplus shrank by less than $0.1 billion to +$21.2 billion. Exports fell for industrial supplies/materials (including crude oil and other petroleum products), automotive vehicles, and other capital goods. Imports declined for consumer goods (cell phones and gem diamonds) and automotive vehicles.

#5Consumer credit contracted in March. Consumers held $4.209 trillion in outstanding non-real estate-backed credit balances at the end of March, per the Federal Reserve. This was down $12.1 billion from the prior month but still up 3.7 percent from the same month a year earlier. Revolving (credit card) balances shrank by their fastest pace since 1989, -$28.2 billion, to $1.066 trillion. Nonrevolving credit balances (i.e., auto and college loans) grew by $16.1 billion to $3.143 trillion. Revolving credit balances were up a mere 0.5 percent from a year earlier, while nonrevolving credit balances advanced 4.9 percent.

Other U.S. economic data released over the past week:
Jobless Claims (Week ending May 2, First-Time Claims, seasonally adjusted): 3,169,000 (-677,000 vs. the previous week, +2,944,000 vs. the same week a year earlier). 4-week moving average: 4,173,500 (+1,788.5% vs. the same week a year earlier).
Productivity (Q1 2020, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): -2.5% vs. Q4 2019, +0.3% vs. Q1 2019.
Wholesale Trade (March 2020, Inventories of Merchant Wholesalers, seasonally adjusted): -0.8% vs. February 2020, -2.0% vs. March 2019.
Bankruptcies (12-month Period Ending March 31, 2020, Bankruptcy Filings): 764,282 (-1.1% vs. 12-month period ending March 31, 2019).
Senior Loan Officer Opinion Survey (April 2020): Lenders “tightened their standards and terms significantly on commercial and industrial (C&I) loans to firms of all sizes.”

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

Payrolls and the Service Sector Bloom, Manufacturing Struggles: January 6 – 10

The U.S. labor market added 22.6 million jobs during the 2010s. Here are the five things we learned from U.S. economic data released during the week ending January 10.

#12019 was the 10th straight year of job gains. The Bureau of Labor Statistics reports that nonfarm payrolls expanded by a seasonally adjusted 145,000 in December. This was the 111th straight month of job gains, although the smallest single-month gain since last May. The 2.11 million jobs added jobs for all of 2019 also was the fewest for a year since 2011 (although 2017’s count of 2.15 million was not much larger). All of December’s payrolls gain came from the service sector, which added 140,000 jobs, while the goods-producing side of the economy shed 1,000 workers. The industries adding the most jobs during the month were retail (+41,200), leisure/hospitality (+40,000), health care/social assistance (+33,900), and construction (+20,000). Manufacturing employment fell by 12,000 in December. The same report notes that average hourly earnings have grown 2.9 percent over the past year to $28.32.

Nonfarm Payrolls 2009-2019 011020

A separate households survey keeps the unemployment rate at a post-recession low of 3.5 percent and finds 209,000 people entering the labor market during the month. The labor force participation rate held steady at 63.2 percent, with the same measure for adults 25-54 eking out a 1/10th of a percentage point increase to 82.9 percent (its highest point since June 2009). The median length of unemployment declined by 2/10ths of a week to 9.0 weeks (December 2018: 9.4 weeks), while the count of part-time workers seeking a full-time job fell to a post-recession low of 4.148 million (December 2018: 4.655 million). The broadest measure of labor underutilization (the U-6 series) slipped by 2/10ths of a point to 6.7 percent (the lowest ever for the 26-year old data series).

#2Service sector business activity remained robust in December. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, added 1.1 points to a reading of 55.0. Not only was this the NMI’s best mark since last August, but it also represented the 119th consecutive month in which the measure was above a reading of 50.0, the threshold between a growing and contracting service sector. Two of four NMI components improved in December: business activity/production (up 5.6 points to 57.2) and supplier deliveries (up a full point to 52.5). The other two measures fell: new orders (down 2.2 points to 54.9) and employment (down 3/10ths of a point to 55.2). Eleven of 18-tracked service sector industries reported growth in December, led by retail, arts/entertainment/recreation, and management of companies/support services. 

#3New factory orders continued to struggle in November. The Census Bureau finds new orders for manufactured goods dropped for the third time in four months with a $3.6 billion decrease to a seasonally adjusted $493.0 billion. Durable goods orders fell by $5.2 billion to $242.2 billion, while orders for nondurables grew by $1.6 billion to $250.8 billion. On the bright side, new orders for civilian goods rose 0.7 percent while those for civilian non-aircraft capital goods inched up 0.2 percent. Shipments grew by $1.7 billion to $502.2 billion, with gains for durable and nondurable goods of $0.1 billion and $1.6 billion, respectively. Unfilled orders fell for the second time in three months, shrinking by $4.9 billion to $1.159 trillion while inventories expanded by $2.0 billion to $701.0 billion, its 11th gain in 12 months. 

#4The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis state that exports increased by $1.4 billion during the month to a seasonally adjusted $208.6 billion (+0.3 percent versus November 2018) while imports fell by $2.5 billion to $251.7 billion (-3.8 percent versus November 2018). The resulting trade deficit of -$43.1 billion was down $3.9 billion from October and its smallest reading in more than three years. The goods deficit narrowed by $3.9 billion to -$63.9 billion while the service surplus mostly held steady at +$20.8 billion. The U.S. had its largest goods deficits with China (down $2.2 billion to -$25.6 billion), European Union (-$13.5 billion), and Mexico (-$8.5 billion).

#5Consumers took on more debt in November, but credit card balances declined. The Federal Reserve estimates consumers had outstanding non-real estate backed credit balances of $4.176 trillion (seasonally adjusted). This represented an increase of $12.5 billion for the month and 4.5 percent from a year earlier. Consumers shed $2.3 billion in outstanding revolving credit—i.e., credit cards—to $1.086 trillion (+2.9 percent versus November 2018). On the flipside, nonrevolving credit balances, including those for student and auto loans, grew by $14.9 billion to $3.090 trillion, up 5.0 percent from a year earlier. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 4, 2020, First-Time Claims, seasonally adjusted): 214,000 (-9,000 vs. previous week; -7,000 vs. the same week a year earlier). 4-week moving average: 224,000 (+0.1% vs. the same week a year earlier).
Wholesale Trade (November 2019, Merchant Wholesaler Inventories, seasonally adjusted): $674.9 billion (-0.1% vs. October 2019, +3.3% vs. November 2018).

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

Tame Inflation in September: October 7 – 11

The running theme of last week’s economic data was softness. Here are the five things we learned from U.S. economic data released during the week ending October 11.

#1Consumer prices held steady in September. The Consumer Price Index (CPI) failed to increase for the first time since January and was up by “only” 1.7 percent over the past year, per the Bureau of Labor Statistics. Food prices edged up 0.1 percent while energy prices fell 1.4 percent (gasoline prices: -2.4 percent versus September 2018). Net of food and energy, core CPI grew 0.1 percent, its smallest increase since May. Despite the softness, the core measure has risen 2.4 percent over the past year. Prices jumped 0.4 percent for health care services and 0.3 percent for shelter and transportation services. Prices slumped for used trucks/cars (-1.6 percent), health care commodities (-0.6 percent), apparel (-0.4 percent), and new vehicles (-0.1 percent).

#2…While wholesale prices slid. The Producer Price Index (PPI) for final demand fell 0.3 percent on a seasonally adjusted basis in September, its biggest decline since January. The Bureau of Labor Statistics’ core measure—which removes food, energy, and trade services—held steady during the month after rising 0.4 percent in August. Wholesale energy prices fell 2.5 percent versus August (gasoline: -7.2 percent), while food prices increased (boosted in part by higher meat prices). Core goods prices slipped 0.1 percent. Over the past year, PPI has risen 1.4 percent while the core measure also remained below the two percent target at +1.7 percent.

#3The number of available jobs fell to a 1.5-year low in August. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.051 million open jobs at the end of the month, down 123,000 from July and 4.0 percent from a year earlier. (Some context: even with the drop, the number of openings remained quite strong by historical standards.) The private sector was responsible for 6.320 million job openings, off 4.4 percent from August 2018 levels. Weighing down the number of job openings were year-to-year drops in wholesale trade (-17.9 percent), financial activities (-16.3 percent), accommodation/food services (-10.7 percent), professional/business services (-8.4 percent), retail (-8.2 percent), and manufacturing (-3.4 percent). Hiring also slowed—falling by 199,000 jobs to 5.779 million (-0.8 percent versus August 2018)—as did separations, with 228,000 fewer people departing their jobs in August (and off 2.4 percent from a year earlier). The count of people leaving their jobs—a proxy for workers’ confidence in the labor market—slowed by 142,000 during the month (but still 1.5 percent ahead of the year-ago pace) to 3.526 million. Layoffs, however, were essentially unchanged for the month at 1.787 million (-1.2 percent versus August 2018).

#4Small business owner sentiment moderated slightly in September. The Small Business Optimism Index, from the National Federation of Independent Business, shed 1.3 points during the month (after losing 1.8 points in August) to a seasonally adjusted 104.7 (1986=100). The measure was 6.1 points below its year-ago mark. Seven of the ten index’s components fell during the month, led by declines on whether it is a good time to expand, plans to increase employment, and expectations for the economy to improve. The press release noted that the index remained at high levels but that the tariffs were “adversely affecting many small firms.”

#5Growth in consumer credit slowed as summer ended. The Federal Reserve reports that consumer had a seasonally adjusted $4.141 trillion in outstanding debt balances at the end of August, up $17.9 billion for the month and 5.0 percent over the past year. This was down from the $23.0 billion increase in July. (These figures do not include mortgages and other real estate-backed debt). Outstanding balances of nonrevolving credit (e.g., auto and student loans) expanded by $19.9 billion to $3.062 trillion (+5.5 percent versus August 2018). Contracting, however, were revolving credit balances (e.g., credit cards), which shrank by $2.0 billion to $1.079 trillion (+3.8 percent versus August 2018).

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 5, 2019, First-Time Claims, seasonally adjusted): 210,000 (-10,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 213,750 (+0.1% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (October 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 96.0 (vs. September 2019: 93.2, vs. October 2018: 98.6).
Import Prices (September 2019, All Imports, not seasonally adjusted): +0.2% vs. August 2019, -1.6% vs. September 2018. Nonfuel Imports: -0.1% vs. August 2019, -1.1% vs. September 2018.
Export Prices (September 2019, All Exports, not seasonally adjusted): -0.2% vs. August 2019, -1.6% vs. September 2018. Nonagricultural Exports: -0.1% vs. August 2019, -1.9% vs. September 2018.
Wholesale Trade (August 2019, Merchant Wholesalers Inventories, seasonally adjusted): +0.2% vs. July 2019, +6.2% vs. August 2018.
FOMC Minutes

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