Job Openings Shrink, Hiring Picks Up: November 4 – 8

Job openings, factory orders, and trade activity all declined in September. Here are the five things we learned from U.S. economic data released during the week ending November 8.

#1The number of job openings fell, but hiring increased in September. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.024 million jobs on the final day of September, down 277,000 for the month and 5.0 percent from a year earlier. (It is worth noting that this is still a large number of available jobs by historical standards.) Private-sector job openings were 7.0 percent below that from a year earlier, with substantial year-to-year percentage declines in retail (-27.0 percent), accommodation/food services (-15.7 percent), health care (-11.2 percent), and wholesale trade (-11.0 percent). Meanwhile, hiring grew by 50,000 during the month to 5.934 million, up 4.7 percent from a year earlier. Private-sector hiring outpaced September 2018 levels by 4.5 percent. 5.808 million people left their jobs in September, up 76,000 for the month and 4.5 percent over the past year. Fewer people voluntarily departed their jobs in September, down 103,000 from August to 3.498 million (+3.1 percent versus September 2018). On the other hand, layoffs jumped by 152,000 to 1.964 million (+8.0 percent versus September 2018).JOLTS 110819

#2Factory orders slowed in September. The Census Bureau estimates new orders for manufactured goods declined 0.6 percent during the month to a seasonally adjusted $496.7 billion. Durable goods orders slumped 1.2 percent while orders for nondurable edged up 0.1 percent. Civilian capital goods orders net of aircraft—a proxy for business investment—slowed 0.6 percent in September. Shipments fell for the third straight month, shedding 0.2 percent to $501.1 billion. Unfilled orders slightly lost ground (-$0.1 billion) after two monthly gains (to $1.163 trillion). Inventories expanded 0.3 percent to $697.9 billion. 

#3Exports and imports decelerated in September. The Census Bureau and the Bureau of Economic Analysis report that exports declined by $1.8 billion during the month to $206.0 billion (-1.8 percent versus September 2018) while imports fell by $4.4 billion to $258.4 billion (-2.8 percent versus September 2018). As a result, the trade deficit narrowed by $2.6 billion in September to -$52.5 billion, down 6.5 percent from a year earlier. The goods deficit contracted by $2.7 billion to -$71.7 billion (-7.2 percent versus September 2018), while the services surplus declined by $0.1 billion to +$19.3 billion (-9.0 percent). The former included the impact of declining exports of both food (soybeans) and automobiles and lower imports of consumer goods (including cell phones, toys, and artwork), capital goods, and automotive vehicles.

#4Service sector activity picked up in October. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, added 2.1 points during the month. The resulting reading of 54.7 signaled the 117th straight month of service sector growth. All four NMI components improved in October: employment (up 3.3 points), new orders (up 1.9 points), business activity/production (up 1.8 points), and supplier deliveries (up 1.5 points). Thirteen of 18 nonmanufacturing industries expanded during the month, led by agriculture, utilities, and professional/scientific/technical services. The press release noted that survey respondents “continue to be concerned about tariffs, labor resources and the geopolitical climate.”

#5Productivity sputtered during the summer. The Bureau of Labor Statistics finds nonfarm business labor production declined 0.3 percent on a seasonally adjusted basis during Q3, after having grown 2.3 percent during the prior quarter. Nonfarm output rose 2.1 percent, with the number of hours worked gained 2.4 percent. Productivity has risen 1.4 percent over the past year. Manufacturing sector production inched down 0.1 percent during Q3, with a 1.1 percent increase in manufacturing output and a 1.3 percent gain in hours worked. Durable goods manufacturing productivity gained 1.2 percent during the quarter while that for nondurables manufacturing contracted 1.5 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 2, 2019, First-Time Claims, seasonally adjusted): 211,000 (-8,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,250 (-0.9% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (November 2019-preliminary, Index (1966Q1=100), seasonally adjusted): 95.7 (vs. October 2019: 95.5, vs. November 2018: 97.5).
Consumer Credit (September 2019, Outstanding Consumer Credit Balances, net of mortgages and other real estate-backed mortgages, seasonally adjusted): $4.193 trillion (+$9.5 billion vs. August 2019, +4.9% vs. September 2018).
Wholesale Trade (September 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $676.7 billion (-0.4% vs. August 2019, +4.8% vs. September 2018).
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Job Creation and Economic Expansion Trudge Along: October 28 – November 1

October employment and Q3 GDP data show growth, albeit at a tempered rate. Here are the five things we learned from U.S. economic data released during the week ending November 1.

#1Job creation slowed in October, hurt by a now-settled strike. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 128,000 during the month, down from the 180,000 created jobs in September. This report also includes substantial upward revisions to August and September payrolls totaling a combined 95,000 jobs. Weighing on the headline October number was the 41,600 decline in motor vehicle manufacturing jobs resulting from the now-settled General Motors strike. Private-sector employers added 131,000 workers, split between 157,000 added in the service sector and a drop in 26,000 jobs in the goods-producing side of the economy. Among the industries adding the most positions during the month were leisure/hospitality (+61,000), health care/social assistance (+34,200), and professional/business services (+22,000). Average weekly earnings of $969.39 represented a 2.7 percent gain over the past year.

A separate survey of households places the unemployment rate of 3.6 percent, up 1/10th of a point from September but still near a 50-year low. 325,000 people entered the labor force, leading to the labor force participation rate edging up 1/10th of a point to 63.3 percent. The same measure for adults aged 25 to 54 added 2/10ths of a point to 82.8 percent, its highest reading since August 2009. The median length of unemployment slipped 1/10th of a week to 9.3 weeks (October 2018: 9.4 weeks), but the count of part-time workers seeking a full-time job grew by 88,000 to 4.438 million (October 2018: 4.630 million). The U-6 series—the broadest measure of labor underutilization—inched up by 1/10th of a percentage point to 7.0 percent (October 2018: 7.5 percent).Unemployment Rate 2004-2019 110119

#2Economic growth slowed slightly during the summer. The Bureau of Economic Analysis’ first estimate of Gross Domestic Product (GDP) says the U.S. economy expanded at a seasonally adjusted annualized rate of 1.9 percent, just below Q2’s 2.0 percent growth rate. Pulling down Q3 economic activity were smaller increases in personal spending, government expenditures, and business investment. Contributing to Q3 GDP growth were, in declining order, personal spending (adding 193 basis points to GDP growth), government spending (+35 basis points), and residential fixed investment (+18 basis points). Dragging down economic activity, however, were business investment (costing 22 basis points in GDP growth), net exports (-8 basis points), and the change in private inventories (-5 basis points). The BEA will revise its Q3 GDP estimate twice over the next two months. 

#3A third (and probably final) rate cut by the Fed in 2019. The policy statement released following the past week’s Federal Open Market Committee meeting continued to characterize economic activity growing “at a moderate rate” and that the labor market “remains strong.” It also retained the observation that consumer spending was growing “at a strong pace” but also noted that exports and business investment were “weak.” As a result, a divided FOMC voted to cut the fed funds target rate by a quarter-point to a range between 1.5 and 1.75 percent. But it appears that the committee believes this is the final rate cut for now. Why? The statement no longer includes the line that the Fed would “act as appropriate to sustain” the economic expansion. Instead, it now says the FOMC would “continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.”

#4Personal spending grew moderately in September. The Bureau of Economic Analysis indicates that real personal consumption expenditures (PCE) increased 0.2 percent on a seasonally adjusted basis during the month, matching August’s gain. Spending on goods grew 0.4 percent, split between a 0.6 percent rise for durable goods and a 0.3 percent bounce for nondurables. Spending on services edged up 0.1 percent. Nominal PCE also grew 0.2 during September, funded by 0.3 percent increases for nominal personal income and both nominal and real disposable income. The savings rate rose by 2/10ths of a percentage point to +8.3 percent. Over the past year, real PCE has risen 2.6 percent, funded by 3.5 percent growth in real disposable income.

#5Manufacturing activity slowed in October. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added a half-point during the month to a reading of 48.3. This was the third straight month in which the PMI was below 50.0, indicating a contraction in manufacturing sector economic activity. Three of five PMI components improved during the month: inventories (up 2.0 points), new orders (up 1.8 points), and employment (up 1.4 points). Losing ground were components tied to supplier deliveries (off 1.6 points) and production (off 1.1 points). Only five of 18-tracked manufacturing industries expanded in October, led by furniture, printing, and food/beverage/tobacco. The press release noted that “global trade remains the most significant cross-industry issue.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 26, 2019, First-Time Claims, seasonally adjusted): 218,000 (-5,000 vs. previous week; -1,000 vs. the same week a year earlier). 4-week moving average: 214,750 (-0.6% vs. the same week a year earlier).
Chicago Fed National Activity Index (September 2019, Index (0.00=Historical Economic Growth), seasonally adjusted): -0.45 (vs. August 2019: +0.15; September 2018: +0.06).
Conference Board Consumer Confidence (October 2019, Index (1985=100), seasonally adjusted): 125.9 (vs. September 2019: 126.3).
Construction Spending (September 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.294 trillion (+0.5% vs. August 2019, -2.0% vs. September 2018.
Bankruptcies (12-month Period Ending September 30, 2019, Number of Business and Nonbusiness Filings): 776,674 (+0.4% vs. 12-month period ending September 30, 2018).
Case-Shiller Home Price Index (August 2019, 20-City Index, seasonally adjusted): Unchanged vs. July 2019, +2.0% vs. August 2018.
Agricultural Prices (September 2019, Prices Received by Farmers, not seasonally adjusted): -3.9% vs. August 2019, -1.6% vs. September 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.
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.