Prices and Job Openings Remain Firm: August 6 – 10

Inflation continued to take hold, albeit still at a moderate rate. Here are the five things we learned from U.S. economic data released during the week ending August 10.

#1Consumer prices have risen 2.9 percent over the past year. The Bureau of Labor Statistics indicates the Consumer Price Index (CPI) grew a seasonally adjusted 0.2 percent during July, up from June’s 0.1 percent bump but matching April and May gains of 0.2 percent. Energy prices pulled back for a second consecutive month (-0.5 percent), with declines reported for gasoline (-0.6 percent), utility delivered gas (-0.5 percent), and electricity (-0.4 percent). Food CPI inched up 0.1 percent. Net of energy and food, core CPI grew 0.2 percent for the fifth time in six months. Rising were prices for used cars/trucks (+1.3 percent), transportation services (+0.5 percent), new vehicles (+0.3 percent), shelter (+0.3 percent), and medical care services (+0.1 percent). Prices dropped for medical care commodities (-1.1 percent) and apparel (-0.3 percent). Over the past year, CPI has risen 2.9 percent, its largest 12-month comparable in more than six years. The core measure has jumped 2.4 percent since last July, its largest 12-month comparable since September 2008. Both increases portend the Federal Reserve raising its short-term interest rate target at its upcoming September meeting.CPI 2008-2018 081018.png

#2While pausing in July wholesale prices were 3.3 percent ahead of their year-ago levels. Final demand Producer Price Index (PPI) was unchanged during the month on a seasonally adjusted basis, according to the Bureau of Labor Statistics. This followed gains in May and June of +0.5 percent and +0.3 percent, respectively. The core measure of wholesale prices, removing the impact of energy, food, and trade services, gained 0.3 percent during July. PPI for final demand good eked out a 0.1 percent gain as prices for both energy (-0.5 percent) and food (-0.1 percent) both dropped. PPI for core goods increased 0.3 percent for the sixth time in seven months (pharmaceutical preparations jumped 0.7 percent). Losing ground during July was PPI for final demand services, slipping 0.1 percent. Trade services PPI, a measure of retailer and wholesaler margins, slumped 0.8 percent. Over the past year, final demand PPI has risen 3.3 percent (just under its biggest increase since 2011) while the core measure has a 12-month comparable of +2.8 percent (its highest mark since March).

#3There remained more job openings than people seeking work in June. Per the Bureau of Labor Statistics, employers had a seasonally adjusted 6.662 million job openings at the end of the month, essentially matching the count from the end of May and up 8.8 percent from the same month a year earlier. Further, this was greater than the 6.564 million people the BLS had estimated were unemployed during the same month. Private sector employers had 6.053 million job openings at the end of June, up 8.6 percent from June 2017. Industries with the particularly sizeable year-to-year percentage gains in job openings included construction (+30.2 percent), retail (+29.7 percent), transportation/wholesale (+25.3 percent), manufacturing (+17.3 percent), and accommodation/food services (+9.7 percent). Hiring slowed by 104,000 to 5.651 million workers, which paced 3.4 percent ahead of year-ago hiring. Private sector employers hired 5.303 million workers during June, up 3.4 percent from a year earlier. 5.502 million people left their jobs during the month, up 83,000 from May and 3.9 percent from June 2017. 3.402 million voluntarily departed their jobs during the month (+7.5 percent versus June 2017) while 1.723 million people were laid off (-2.8 percent versus June 2017).

#4Consumers slowed the rate of them taking on debt. The Federal Reserve estimates that the American public held a seasonally adjusted $3.908 trillion in outstanding debt (not counting mortgages or other real estate-backed debt) at the end of June, a $10.2 billion increase for the month and up 4.7 percent from a year earlier. As a matter of context, consumer debt holdings had grown by $24.3 billion during May. All June’s gain came in the form of nonrevolving debt (e.g., college loans, auto loans), rising by $10.4 billion to $2.869 trillion (4.7 percent versus June 2017). Revolving credit (i.e., credit card) balances essentially held steady at $1.039 trillion (+4.8 percent June 2017).

#5The federal budget deficit is more than 20 percent larger than what it was this time last year. The Bureau of the Fiscal Service, a part of the Department of the Treasury, reports that the U.S. government had a budget deficit of $76.9 billion during July. This was up $2.0 billion from June and 79.0 percent from the same month a year earlier. Tax receipts totaled $225.3 billion while outlays were at $302.1 billion.  More notable is that the budget deficit generated over the first ten months of FY2018—$684.0 billion—was 20.8 percent greater than that of the first ten months of FY2017. Receipts over this time period were up a mere 1.0 percent while expenditures rose 4.4 percent. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 4, 2018, First-Time Claims, seasonally adjusted): 213,000 (-6,000 vs. previous week; -39,000 vs. the same week a year earlier). 4-week moving average: 214,250 (-11.3% vs. the same week a year earlier).
Wholesale Trade (June 2018, Wholesale Inventories, seasonally adjusted): $632.4 billion (+0.1% vs. May 2018, +5.1% vs. June 2017).
Senior Loan Officer Opinion Survey on Bank Lending 

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

Job Openings Rise to Another Record: May 7 – 11

Employers continue having trouble filling open positions. Here are the five things we learned from U.S. economic data released during the week ending May 11.

#1Job openings hit an (at least) 17-year high during March while growth in hiring lagged. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 6.550 million available jobs at the end of March, up 472,000 for the month, 16.8 percent above the year-ago count, and the most since the launch of the data series back in December 2000. Private sector employers had 5.928 million job openings, up 16.5 percent from a year earlier. Some of the largest year-to-year percentage increases in job openings were in construction (+38.5 percent), trade/transportation/utilities (+26.4 percent), retail (+24.0 percent), state/local government (+23.9 percent), professional/business services (+20.6 percent), financial activities (+17.2 percent), and leisure/hospitality (+17.0 percent). Employers had difficulty finding people to fill these positions as the 5.425 million hired workers during the month was down 86,000 from February and up a more modest 2.4 percent from a year earlier. Industries with strong year-to-year percentage gains in hiring included arts/entertainment/recreation (+26.0 percent), professional/business services (+13.5 percent), manufacturing (+12.7 percent), transportation/warehousing (+7.0 percent), and wholesale trade (+6.9 percent). 5.291 million people left their jobs during March, up 118,000 from February and 2.3 percent from a year earlier. This included 3.344 million people who quit their jobs (+6.4 percent from a year earlier) and 1.278 million people who were subject to a layoff (down 7.1 percent from March 2017).Job Openings and Hiring 2008-2018 051118

#2Consumer prices grew at a moderate rate in April. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) increased 0.2 percent on a seasonally adjusted basis during the month, up from a 0.1 percent decline in March and leaving the measure 2.5 percent ahead of its year-ago mark. Energy prices rebounded 1.4 percent during April following a 2.8 percent pullback in March (gasoline prices increased 3.0 percent). Food prices grew at their fastest rate in 13 months with a 0.3 percent advance (fruits/vegetables, eggs, beer, and dairy products leading the way). Net of energy and food, core CPI saw its smallest gain since last November with a 0.1 percent increase. Helping keep the core measure in check were declining prices for used cars/trucks (-1.6 percent), new vehicles (-0.5 percent), transportation services (-0.4 percent), and medical care commodities (-0.2 percent). Rising were prices for shelter (+0.3 percent), apparel (+0.3 percent) and medical care services (+0.2 percent).

#3Lower food prices lead to the smallest increase in wholesale prices of the year. The final demand measure of the Producer Price Index (PPI) grew a seasonally adjusted 0.1 percent during April following a 0.3 percent increase in March, per the Bureau of Labor Statistics. The core measure of wholesale prices—final demand PPI net of energy, food, and trade services—increased 0.1 percent following three monthly 0.4 percent gains. Final demand prices were unchanged during April as energy prices edge up 0.1 percent and food prices fell 1.1 percent (including a 17.8 percent drop in vegetable prices). Core final demand goods prices (net of energy and food) grew 0.3 percent for the third time in four months. Final demand PPI for services gained 0.2 percent, reflecting a 0.2 percent gain in trade services PPI and a 0.6 percent jump in transportation/warehousing prices. Over the past year, final demand PPI has grown 2.6 percent while the core measure (net of energy, food, and trade services) has increased 2.5 percent.

#4Small business owner confidence held firm in April. The Small Business Optimism Index eked out a 1/10th of a point gain to a seasonally adjusted reading of 104.8 (1986=100). This was the 17th consecutive month in which the National Federation of Independent Business’s measure was above a reading of 100. Four of ten index components gained during the month: earnings trends (up three points), plans to make capital outlays (up three points), current inventories (up two points), and expected real sales. Three measures declined from their March readings: plans to increase employment (down four points), expected economic conditions (down two points), and whether it is a good time to expand (off a single point). The press release claims that “[n]ever in the history of this survey have we seen profit trends so high.”

#5Consumers took on debt at a slower pace in March. The Federal Reserve reports that outstanding consumer credit balances (net of mortgages and other real estate backed debt) grew by $11.7 billion during the month to a seasonally adjusted $3.875 trillion. This was smaller than the $13.6 billion advance during February and left outstanding debt balances up 5.0 percent over the past year. Revolving credit balances (e.g., credit cards) contracted by $2.6 billion to $1.027 trillion (+4.8 percent versus March 2017). Nonrevolving credit balances (including college and auto loans) increased by $14.2 billion to $2.848 trillion. This represented a 5.1 increase from the same month a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 5, 2018, First-Time Claims, seasonally adjusted): 211,000 (Unchanged vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 216,000 (-11.7% vs. the same week a year earlier).
Import Prices (April 2018, All Imports, not seasonally adjusted): +0.3% vs. March 2018, +3.3% vs. April 2017. Nonfuel Imports: +0.2% vs. March 2018, +1.8% vs. April 2017.
Export Prices (April 2018, All Exports, not seasonally adjusted): +0.6% vs. March 2018, +3.8% vs. April 2017. Nonagricultural Exports: +0.7% vs. March 2018, +4.0% vs. April 2017.
U. of Michigan Consumer Sentiment (May 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 98.8 (vs. April 2018: 98.8, vs. May 2017: 97.1).
Wholesale Inventories (March 2018, Inventories of Merchant Inventories, seasonally adjusted): $627.4 billion (+0.3% vs. February 2018, +5.5% vs. March 2017).
Monthly Treasury Statement (April 2018, Federal Government Budget Surplus/Deficit): +$214.3  Billion (vs. April 2017: +$176.3 billion).  The deficit over 1st 7 months of FY2018: -$385.4 billion (vs. 1st 7 months of FY2017: -$344.4 billion).
Senior Loan Officer Opinion Survey (April 2018).

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

Job Creation and the Trade Deficit Both Grow: March 5 – 9

Payroll growth surprised to the upside while the trade deficit widened once again. Here are the five things we learned from U.S. economic data released during the week ending March 9.

#1Employers accelerated their pace of hiring during February. Nonfarm payrolls grew by a seasonally adjusted 313,000 workers during the month, the most jobs added since June 2016. Further, the Bureau of Labor Statistics upwardly revised its estimates of December and January job gains by a combined 54,000. Nonfarm employers have added 2.281 million people to their payrolls over the past year, for a monthly average of 190,083 jobs. Private sector employers added 287,000 jobs to their payrolls in February, split between 100,000 in the goods-producing side of the economy and 187,000 in the service sector. The industries adding the most workers during the month included construction (+61,000), retail (+50,300), professional/business services (+50,000), manufacturing (+32,000), health care/social assistance (+29,100), and financial activities (+28,000). The average workweek inched up by 1/10th of an hour to 34.5 hours (February 2017: 34.4) while average weekly earnings grew by $4.06 to $922.88 (up 2.9 percent over the past year).Growth in Employment-030918

Based on a separate survey of households, the employment rate remained at its post-recession low of 4.1 percent for a third consecutive month. An impressive 806,000 people entered the labor force, leading to a 3/10ths of a percentage point increase in the labor force participation rate to 63.0 percent, its highest point since last September. The labor force participation rate for adults aged 25 to 54—arguably a better measure of the number of adults in their prime working years—rose by half of a percentage point to a post-recession high of 82.2 percent. The typical length of unemployment slipped by 1/10th of a week to 9.3 weeks (February 2017: 10.1 weeks). 5.160 million people held a part-time job but were seeking a full-time opportunity, down from the 5.670 million at the same time a year earlier. The broadest measure of labor underutilization published by the BLS—the U-6 series—held firm at 8.2 percent (February 2017: 9.2 percent).

#2The U.S. trade deficit widened for a fifth consecutive month. The Census Bureau and the Bureau of Economic Analysis reports that exports declined 1.3 percent to a seasonally adjusted $200.9 billion while imports shrank by less than 0.1 percent to $257.5 billion. The resulting trade deficit expanded by 5.0 percent to -$56.6 billion. The trade deficit has grown by 16.2 percent over the past year. The goods deficit jumped by $2.8 billion to -$76.5 billion while the services surplus eked out a $0.1 billion increase to +$19.9 billion. The former resulted from a $3.3 billion decrease in exported goods (thanks to a decline in exports of both civilian aircraft and industrial supplies/materials). The U.S. had its largest goods deficits with China (-$35.5 billion), the European Union (-$15.0 billion), Germany (-$6.3 billion), Mexico (-$5.6 billion), and Japan (-$5.6 billion).

#3The service sector continued growing at a solid if slightly slower rate in February. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business shed 4/10ths of a point to a reading of 59.5. This was the 97th straight month in which the NMI was above a reading of 50.0, indicative of an expanding service sector. The NMI slipped because of a sharp 6.6 point drop in the index component associated with employment (to a still expanding reading of 55.0). Two other index components grew during February (business activity/production (up 3.0 points) and new orders (up 2.1 points)) while that for supplier deliveries held firm. Sixteen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, transportation/warehousing, and utilities. The press release noted that a “majority of respondents continue to be positive about business conditions and the economy.”

#4Even with a small upward revision for Q4, productivity gains continued to disappoint. The Bureau of Economic Analysis raised its estimate of nonfarm labor productivity during the final three months of 2017from a 0.1 percent decrease to being unchanged on a seasonally adjusted basis. This was the outcome of output growing 3.2 percent and the number of worked gaining 3.3 percent. Manufacturing sector productivity surged 6.0 percent during Q4, thanks to a 6.6 percent increase in output resulting from a mere 0.5 percent increase in the number of hours worked. Durable goods manufacturing productivity jumped 8.1 percent while that for nondurable goods manufacturing increased 3.4 percent. For all of 2017, nonfarm business productivity gained by a feeble 1.2 percent, which was nevertheless an improvement from being unchanged for all of 2016. Manufacturing sector productivity inched up 0.6 percent during 2017 after having gained by only 0.4 percent and 0.3 percent in 2016 and 2015, respectively.

#5Consumers took on credit card debt at a slower rate in January. The Federal Reserve indicates that outstanding consumer credit balances (net of any real estate related loans—e.g., mortgages, home equity loans) totaled a seasonally adjusted $3.855 trillion at the end of the month, up $13.9 billion from December and 5.3 percent from a year earlier. Balances of nonrevolving credit (e.g., student loans, college loans) jumped by $12.8 billion during the month to $2.825 trillion (+5.0 percent versus January 2017). Not rising as much were outstanding revolving credit balances (e.g., credit cards), which inched up by $0.7 billion to $1.030 trillion (+6.1 percent versus January 2017). Revolving balances had risen by $6.1 billion and $11.3 billion during December and November, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 3, 2018, First-Time Claims, seasonally adjusted): 231,000 (+21,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 222,500 (-8.6% vs. the same week a year earlier).
Factory Orders (January 2018, New Orders for Manufactured Goods, seasonally adjusted):$491.7 billion (-1.4% vs. December 2017, -6.6% vs. January 2017).
Wholesale Trade (January 2018, Inventories of Merchant Wholesalers, seasonally adjusted): $619.1 billion (+0.8% vs. December 2017, +4.8% vs. January 2017).
Beige Book

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