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.

Open Jobs Remained Open in June: August 5 – 9

Employers continued to seek workers, but producer prices and service sector growth both staggered. Here are the five things we learned from U.S. economic data released during the week ending August 9.

#1Job openings continued to outpace the number of unemployed Americans in June. The Bureau of Labor Statistics tells us that there were a seasonally adjusted 7.348 million jobs available on the final day of June. While this was a decline of 36,000 from May and 0.6 percent from a year earlier, job openings remained near record-high levels. Further, job openings well outpaced the 5.975 million unemployed people the BLS had reported previously. Compared to a year earlier, industries reporting substantial percentage increases in open jobs included government (+12.2 percent), construction (+7.4 percent), manufacturing (+5.9 percent), professional/business services (+4.6 percent), and health care/social assistance (+3.5 percent). Hiring slowed by 58,000 to 5.702 million jobs (-2.2 percent versus June 2018). Also taking a step back was the number of people separated from their jobs: 5.481 million (down 76,000 from May and 1.5 percent from a year earlier). Voluntarily quits were up 2.4 percent from a year earlier to 3.478 million while layoff activity was off 7.7 percent from the year-ago pace (at 1.702 million).Job Openings and Unemployed 2014-9 080919.png

#2Core wholesale prices contracted in July. Final demand producer price index (PPI) grew a seasonally adjusted 0.2 percent during the month, its largest single-month gain since April. But much of the increase in the Bureau of Labor Statistics measure resulted from a 5.2 percent jump in wholesale gasoline prices. Netting out the impact of gains in energy goods (+2.3 percent), foods (+0.2 percent), and trade services (+0.2 percent), core PPI fell 0.1 percent during the month, its first decline in nearly four years (October 2015). Final demand PPI for goods grew 0.4 percent following two consecutive declines while final demand for PPI for services gained 0.2 percent. The 12-month comparables for both headline PPI and core PPI were +1.7 percent, lowest levels for each since late 2016 or early 2017.

#3Expansion in the service sector mellowed in July. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, shed 1.4 points during the month to a reading of 53.7. While this was the 114th straight month in which the NMI was above a reading of 50.0 (indicative of an expanding service sector), it was its lowest reading since August 2016. Of the NMI’s four components, two pulled back in July: business activity/production (down 5.1 points) and new orders (down 1.7 points). While the employment component added 1.2 points during the month, the supplier deliveries component held steady. Thirteen of 18 tracked nonmanufacturing industries report growth, led by accommodation/food services, professional/scientific/technical services, and real estate. The press release noted “concerns related to tariffs and employment resources.”

#4Consumers took on more debt in June, all nonrevolving. The Federal Reserve reports that outstanding consumer credit balances grew by $14.6 billion during the month to a seasonally adjusted $4.102 trillion (+5.3 percent versus June 2018). Outstanding balances of nonrevolving credit (e.g., auto loans, college loans) widened by $14.7 billion to $3.031 trillion (+5.6 percent versus June 2018). Revolving credit balances (e.g., credit cards), however, contracted by $0.1 billion to $1.072 trillion (+4.6 percent versus June 2018).

#5Wholesale inventories held steady in June. The Census Bureau estimates merchant wholesalers’ inventories were at a seasonally adjusted $679.7 billion. While essentially matching May’s reading, this represented a 7.6 percent increase over the past year. Inventories of durable goods expanded by 0.3 percent, with increases of at least one percent for computer equipment, furniture, and lumber. Nondurables inventories shrank 0.4 percent, pulled down by sizable for drugs and chemicals. The inventory-to-sales ratio of 1.36 was unchanged from May but was up 10-basis points from a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 3, 2019, First-Time Claims, seasonally adjusted): 209,000 (-8,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 212,250 (-1.7% vs. the same week a year earlier).
Senior Loan Officer Opinion Survey

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