Layoffs Skyrocketed in Mid-March: March 23 – 27

The first set of data reflecting the impact of the COVID-19 pandemic—jobless data—came out last week. Here are the five things we learned from U.S. economic data released during the week ending March 27.

#1COVID-19 layoffs led to a record number of jobless claims. The Department of Labor reports there were a seasonally adjusted 3.283 million first-time claims made for unemployment insurance benefits during the week ending March 21. The number of initial claims was up by more than 3 million filings from the prior week, 1,164 percent from the same week a year ago, and shatters the previous record of 695,000 claims back in October 1982. The press release noted that job cuts came from many industries, including the service sector (“particularly accommodation and food service”), health care/social assistance, arts/entertainment/recreation, transportation/warehousing, and manufacturing industries. As large as the number was, the data likely are underestimating actual layoff activity (due to capacity issues on claim filing websites and not all laid-off workers being aware of their eligibility for benefits).

#2Growth in personal income held steady in February but sputtered for personal spending. The Bureau of Economic Analysis reports that personal income rose at a seasonally adjusted 0.6 percent in February, matching the previous month’s growth rate. Disposable personal income—which nets out personal taxes—jumped 0.5 percent during the month with the “real” measure—which adjusted for inflation—increased 0.4 percent. Personal consumption expenditures (PCE) grew by a more modest 0.2 percent (matching January’s increase) while real PCE inched up 0.1 percent. Real spending on goods fell by 0.2 percent, including durable goods expenditures slumping 0.7 percent. Edging up was real spending on nondurable goods (+0.1 percent) and services (+0.2 percent). The savings rate bloomed by 3/10ths of a percentage point to +8.2 percent (its highest reading since last March). Over the past year, real disposable income has risen 2.2 percent, while the 12-month comparable for real spending was +3.0 percent.

#3Meanwhile, economic activity picked up in February. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, added 49-basis points during the month to a reading of +0.16 (its best mark since last November and indicative of economic growth higher than the historical average). Forty-four of the 85 indicators made positive contributions to the CFNAI, with the other 41 measures having negative impacts on the headline index. Also, all of the advance came from production-related indicators, with much smaller positive contributions coming from indicators tied to employment and personal consumption/housing. Measures linked to sales/orders/inventories made a small negative contribution. The CFNAI’s three-month moving average deteriorated by ten-basis points to -0.21. The Federal Reserve Bank of Chicago’s website included this statement: “The data through February were unlikely to have been affected much by the COVID-19 outbreak.” This will not be true for March’s report. 

#4Q4 2019 was likely the final quarter of economic growth for a while. The Bureau of Economic Analysis’ final estimate of Gross Domestic Product (GDP) for the last three months of 2019 finds the U.S. economy expanded 2.1 percent on a seasonally adjusted annualized basis. This matched the two previous estimates of Q4 GDP growth and followed growth rates of +2.1 percent and +2.0 percent during the two prior quarters. GDP increased 2.3 percent for all of 2019, down from gains of 2.9 percent in 2018 and 2.4 percent in 2017. The same report shows corporate profits grew an annualized 2.6 percent in Q4 after contracting 0.2 percent during the prior quarter. For all of 2019, corporate profits were flat when compared to 2018. We will see the first estimate of Q1 data—the first GDP report reflecting coronavirus impacts—on April 29.

#5New home sales slowed in February. The Census Bureau estimates new home sales declined 4.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 765,000 units. Despite the decline, sales were 14.3 percent above year-ago levels. February sales slumped in the West (-17.2 percent) and Midwest (-7.3 percent) but advanced in the Northeast (+38.9 percent) and South (+1.0 percent). All four Census regions enjoyed year-to-year sales increases. There were 319,000 homes available for sale at the end of the month, off 0.9 percent for the month and 6.7 percent from a year earlier. This was the equivalent to a 5.0 month supply of homes. 

Other U.S. economic data released over the past week:
FHFA House Price Index (January 2020, Purchase-Only Index, seasonally adjusted): +0.3% vs. December 2019, +5.2% vs. January 2019.

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

Hiring and Business Activity Rose in January: February 3 – 7

Both the labor market and business sentiment started 2020 on a high note. Here are the five things we learned from U.S. economic data released during the week ending February 7.

#1Hiring continued in January. The Bureau of Labor Statistics finds nonfarm payrolls expanded by a seasonally adjusted 225,000 in January, following gains of 261,000 and 147,000 in November and December, respectively. Private-sector employers added 206,000 workers, split between 32,000 in the goods-producing side of the economy and 174,000 in the service sector. Industries adding the workers in January included health care/social assistance (+47,200), construction (+44,000), leisure/hospitality (+36,000), transportation/warehousing (+28,300), and professional/business services (+21,000). (The same report featured a revision to 2019 payrolls data that now shows employers added 2.096 million workers during the year, down 12,000 from the prior estimate). Hourly wages averaged $28.44 in January, up 3.1 percent from a year earlier.

A separate household survey finds the unemployment rate edging up 1/10th of a percentage point to a still very low 3.6 percent. The labor force participation rate jumped 2/10ths of a percentage point to 63.4 percent. The participation rate for adults aged 25-54 rose by 2/10ths of a percentage point to 83.1 percent, its best reading since September 2008. The median length of unemployment inched up 3/10ths of a week to 9.3 weeks, while the count of part-time workers seeking full-time work grew by 36,000 to 4.182 million. The broadest measure of labor underutilization—the U-6 series—added 2/10ths of a point to 6.9 percent (still very close to its post-recession low).

#2A slowdown in trade activity led to a trade deficit contraction in 2019. Per the Census Bureau and the Bureau of Economic Analysis report that 2019 exports totaled $2.500 trillion (off $1.5 billion from 2018) while imports summed to $3.117 trillion (off $12.5 billion from 2018). The resulting trade deficit for 2019 of -$616.8 billion was $10.9 billion smaller than that of 2018, its first decline since 2013 and the equivalent to 2.9 percent of U.S. GDP. The goods deficit for all of 2019 narrowed by $21.4 billion to -$866.0 billion while the services surplus shrank by $10.4 billion to +$249.2 billion. These figures include the December trade data, which found the trade deficit growing by $5.2 billion during the month to a seasonally adjusted -$48.9 billion.

#3Purchasing managers indicate that business activity gained in January. The Institute for Supply Management’s PMI—the headline index from its Manufacturing Report on Business—surged by 3.1 points to a reading of 50.9. This was the first time since last July that the PMI was above a reading of 50.0, the threshold between an expanding and contracting manufacturing sector. Four of five PMI components advanced in January: production (up 9.5 points to 54.3), new orders (up 4.4 points to 52.0), employment (up 1.4 points to 46.6), and supplier deliveries (up 7/10ths of a point to 52.9). The inventories component shed 4/10ths of a point to 48.8. Only eight of 18-tracked manufacturing industries expanded during the month, led by furniture, wood products, and food/beverage goods. The press release noted that “global trade remains a cross-industry issue” for many companies.

The NMI—the headline index from the ISM’s Non-Manufacturing Report on Business—added 6/10ths of a point in January to 55.5, its best reading since last summer. Two of four NMI components improved during the month:  business activity (up 3.9 points to 60.9) and new orders (up 9/10ths of a point to 56.2). Slumping were measures for inventories (down 4.5 points to 46.5) and supplier deliveries (down 8/10ths of a point to 51.7). Twelve of 18 service sector industries expanded during the month, led by agriculture, management of companies/support services, and health care/social assistance. While “mostly positive” about business conditions, survey respondents noted that they “continue to have difficulty with labor resources.” 

#4Factory orders expanded for the second time in three months in December. The Census Bureau indicates new orders for manufactured goods rose 1.8 percent during the month to a seasonally adjusted $499.3 billion. Durable goods orders jumped 2.4 percent while those for nondurables advanced 1.1 percent. A proxy for business investment—civilian non-aircraft orders—fell 0.8 percent. Shipments increased or a third straight month with a 0.5 percent rise, including a 1.1 percent bounce in nondurables shipments (durable shipments, however, fell 0.2 percent). Unfilled orders mostly held steady at $1.156 trillion while inventories expanded for the 12th time in 13 months (rising 0.5 percent to $704.9 billion). Even with December’s advance, last year was not a great year for manufacturing: factory orders totaled $5.957 trillion for all of 2019, down 0.6 percent from 2018.

#5Productivity improved as 2019 ended. The Bureau of Economic Analysis reports that nonfarm business sector labor productivity grew 1.4 percent during the fourth quarter of 2019, an improvement over the 0.2 percent contraction in Q3. Output increased 2.5 percent during the quarter, fueled by a 1.1 percent gain in hours worked. Manufacturing sector productivity, however, contracted during Q4. The 1.2 percent drop in manufacturing sector productivity was split by declines for durable and nondurable goods of -0.8 percent and -2.2 percent, respectively. Over the past year, nonfarm productivity jumped 1.8 percent (its best annual gain since 2010), while manufacturing productivity slumped 0.7 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 1, 2020, First-Time Claims, seasonally adjusted): 202,000 (-15,000 vs. previous week; -28,000 vs. the same week a year earlier). 4-week moving average: 211,750 -6.1% vs. the same week a year earlier).
Wholesale Trade (December 2019, Total Inventories of Merchant Wholesalers, seasonally adjusted): $674.5 billion (-0.2% vs. November 2019, +2.1% vs. December 2018).
Construction Spending (December 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.328 trillion (-0.2% vs. November 2019, +5.0% vs. December 2018).
Consumer Credit (December 2019, Outstanding Non-Real Estate Consumer Credit Balances, seasonally adjusted): $4.197 trillion (+$22.1 billion vs. November 2019, +4.7% vs. December 2018).
Senior Loan Officer Opinion Survey

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

Increased Economic Activity, Decreased Durable Goods Orders: December 23 – 27

The U.S. economy expanded more quickly in November, but durable goods orders faltered. Here are the five things we learned from U.S. economic data released during the week ending December 27.

#1Economic activity accelerated in November. The Chicago Fed National Activity Index (CFNAI), a weighted average of 85 economic indicators, soared by 132-basis points during the month to its best reading since February 2018: +0.56. Fifty of the 85 indicators made positive contributions to the CFNAI, with 64 measures improving from their October marks. All four major categories of indicators grew in November. Still, the most significant gains came from indicators tied to production (making a +0.49 contribution to the CFNAI) and employment (making a +0.12 contribution). The three-month moving average of the CFNAI improved by ten basis points to a reading of -0.25. (A moving average ranging between 0.00 and -0.70 is indicative of below-average economic growth.)

#2Durable goods orders fell hard in November. The Census Bureau reports that new orders for manufactured goods slumped 2.0 percent during the month to a seasonally adjusted $242.6 billion, its second decline in three months. A primary culprit was the sharp 72.7 percent drop in orders for defense aircraft. Net of defense goods, durable goods orders rose 0.8 percent. Among major industries segments, orders increased for electrical equipment/appliances (+2.0 percent), motor vehicles (+1.9 percent), fabricated metal products (+0.4 percent), computers/electronics (+0.2 percent). Orders declined for civilian aircraft (-1.8 percent), machinery (-1.6 percent), and primary metals (-0.3 percent). 

#3New home sales gained in November. The Census Bureau finds new single-family home sales grew 1.3 percent during the month to a seasonally adjusted annualized rate (SAAR) of 719,000 units. New home sales have risen 16.9 percent over the past year. Sales grew in the Northeast (+52.4 percent), and West (+7.5 percent), held steady in the Midwest, slowed 4.1 percent in the South. Three of four Census regions enjoyed positive 12-month comparables, with only the Midwest experiencing a year-to-year sales decline. There were 323,000 new homes for sale at the end of November (a 5.4 month supply), matching the October count but 3.3 percent below November 2018 levels. The median sales price of $330,800 was up 7.2 percent from a year earlier (it is worth noting that price comparisons are difficult because the mix of homes sold likely differ month-to-month).

#4Jobless claims remained well in check during the final days of 2019. The Department of Labor estimates there were a seasonally adjusted 222,000 first-time claims made for unemployment insurance benefits during the week ending December 21. This was down 13,000 from the prior week and 30,000 from two weeks ago (when the late Thanksgiving holiday had messed with seasonal adjustments), but essentially matched the year-ago count of 223,000 first-time claims. The four-week moving average of first-time claims edged up by 2,250 to 228,000. This represented a 3.1 percent increase from a year earlier.

#5Agricultural prices rose in November. The U.S. Department of Agriculture’s index of the prices received by farmers increased by 4.6 percent to a reading of 88.6 (2011=100). This left the measure 0.2 percent ahead of its year-ago mark. Prices rose for eggs (+176.9 percent from the prior month), lettuce (+66.6 percent), cattle (+5.6 percent), and milk (+4.8 percent) but fell for corn, broilers, apples, and hogs. Meanwhile, cost pressures were held in relative check as the prices paid by farmers index inched up 0.3 percent to 110.4 (November 2018: 109.8). 

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