Core Prices Chill, Job Openings Grow: May 6 – 10

Core inflation was on spring break in April, except at the gas pump.  Here are the five things we learned from U.S. economic data released during the week ending May 10.

#1Core consumer inflation was restrained (again) in April. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) grew 0.3 percent on a seasonally adjusted basis during the month, following a 0.4 percent bounce in March. Energy prices jumped 2.9 percent, led by a 5.7 percent surge in gasoline prices. Food CPI, however, slipped 0.1 percent (including a 0.5 percent drop in the prices for food consumed at home). Core CPI, which nets out energy and food, edged up 0.1 percent for the third consecutive month. Rising were prices for medical care commodities (+0.9 percent), shelter (+0.4 percent), medical care services (+0.2 percent), transportation services (+0.1 percent), and new vehicles (-0.1 percent). Prices slumped for used cars/trucks (-1.3 percent) and apparel (-0.8 percent). CPI has risen 2.0 percent over the past year while the core price measure has a 12-month comparable of +2.1 percent.

#2Wholesale prices also moderated. Final demand Producer Price Index (PPI) grew at a seasonally adjusted 0.2 percent during April, down from the 0.6 percent burst a month earlier. The Bureau of Labor Statistics’ core wholesale price measure, which removes the impact of energy, food and trade services, jumped 0.4 percent. Both the headline and core PPI measures have risen 2.2 percent over the past year. During April, wholesale energy prices rose 1.8 percent (PPI for gasoline surged 5.9 percent) while food PPI slipped 0.2 percent. Net of energy and food, PPI for core goods was unchanged for the month (the first time it failed to increase since last December).

#3 Job openings rebounded in March. The Bureau of Labor Statistics reports that there were 7.488 million job openings on the final day of March (on a seasonally adjusted basis), up 346,000 from February, reversing January’s 483,000 contraction, up 8.6 percent from a year earlier, and well ahead of the 6.211 unemployed people during the month. Industries with large percentage year-to-year increases in job openings included construction (+53.8 percent), wholesale trade (+20.9 percent), professional/business services (+18.3 percent), and manufacturing (+11.7 percent). Hiring continued to lag, however, slipping by 35,000 jobs during the month to 5.660 million (up a measly 0.6 percent from a year earlier). Job separations fell by 142,000 to 5.434 million (essentially matching the March 2018 count). Voluntarily quits were 3.3 percent ahead of their year-ago pace (to 3.409 million) while layoffs slowed 4.0 percent over the same period to 1.700 million workers.

#4The trade deficit widened slightly in March. The Census Bureau and the Bureau of Economic Analysis indicates the U.S. trade deficit expanded by $0.7 billion to a seasonally adjusted -$50.0 billion as exports grew by $2.1 billion and imports expanded by $2.8 billion. Over the past year, exports have increased by 1.3 percent while imports have risen 2.1 percent. The goods deficit grew by $0.5 billion to -$72.4 billion while the services surplus narrowed by $0.2 billion to +$22.4 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

#5Consumer put away their credit cards in March. The Federal Reserve estimates consumer revolving credit balances shrank by $2.2 billion during the month to a seasonally adjusted $1.057 trillion. Over the past year, revolving credit balances have grown 3.2 percent. Non-revolving credit balances, which includes college and auto loans, increased by $12.4 billion during March (and 5.6 percent over the past year) to $2.995 trillion. In total, outstanding consumer credit balances (not including mortgages and other real estate backed loans) expanded by $10.3 billion during the month to $4.052 trillion, representing a 4.9 percent since March 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 4, 2019, First-Time Claims, seasonally adjusted): 228,000 -2,000 vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 220,250 (+2.3% vs. the same week a year earlier).
Wholesale Trade (March 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $669.8 billion (-0.1% vs. February 2019, +6.7% vs. March 2018).
Monthly Treasury Statement (First 7 Months of FY2019, Federal Government Budget Deficit): -$530.9 billion (+37.8% vs. First 7 Months of FY2018).
Senior Loan Officers Opinion Survey

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

Hiring and Consumer Spending Bloomed This Spring: April 29 – May 3

The labor market continued to create jobs in April. Here are the five things we learned from U.S. economic data released during the week ending May 3.

#1Hiring accelerated while the unemployment rate fell to a 50-year low in April. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 263,000 workers during the month. This was the most jobs added since January and was above the average 213,000 monthly gain over the past year. Private employer payrolls expanded by 236,000, split by 202,000 jobs in the service sector and 34,000 in the goods-producing side of the economy. Industries with sizable payroll gains included professional/business services (+76,000), health care/social assistance (+52,600), leisure/hospitality (+34,000), and construction (+33,000). Hourly earnings averaged $27.77 (+3.2 percent versus April 2018) while mean weekly earnings have risen 2.9 percent over the past year to $955.29.

The separate household survey finds the unemployment falling to its lowest point since December 1969 at 3.6 percent. Some of the drop in the unemployment rate reflects the impact of the labor force shrinking by 490,000 people. The typical length of unemployment narrowed by 2/10ths of a week to 9.4 weeks (April 2018: 9.8 weeks) while the count of “involuntary” part-time workers grew by 155,000 to 4.654 million (April 2018: 4.952 million). Finally, the broadest measure of labor underutilization—the U-6 series—remained at its post-recession low of 7.3 percent.

#2Personal spending enjoyed a spurt in March. Real personal consumption expenditures (PCE) rose 0.9 percent during the month, following smaller 0.3 percent and 0.1 percent increases in January and February, respectively. The Bureau of Economic Analysis indicates spending on goods jumped 1.4 percent, led by strong gains for both durable (+2.9 percent) and nondurable (+0.8 percent) goods, while services spending had a more modest 0.3 percent bump. Without controlling for prices, nominal PCE swelled 0.9 percent. The higher expenditures occurred despite a modest increase in nominal personal income (+0.1 percent). Nominal disposable income was unchanged for the month while, after adjusted for price variations, real disposable income contracted 0.2 percent. As a result, the savings rate narrowed by 8/10ths of a percentage point to +6.5 percent. Over the past year, real personal spending has risen 2.9 percent while real disposable income has grown 2.3 percent. The PCE deflator (a measure of inflation) had grown 2.0 percent over the past year, while the core measure (which nets out energy and food) had increased 1.8 percent. The latter was below the Federal Reserve’s two-percent interest rate target. 

#3With inflation tracking below the target, the Fed held firm (as expected). The policy statement released following the week’s Federal Open Market Committee (FOMC) noted the U.S. economy “rose at a solid rate” and that the labor market “remains strong.” But it also warned that core inflation had “declined and [was] running below two percent.” As a result, the FOMC voting members voted unanimously to keep the fed funds target at a range between 2.25 and 2.50 percent. The statement also emphasized that it would “patient” before it makes a move to raise or lower the short-term interest rate target in the future.

#4Purchasing managers signal a slightly slower growth rate in economic activity in April. The Institute for Supply Management’s PMI, the headline index from its Manufacturing Report on Business, lost 2.5 points during the month to a reading of 52.8. Even though this was the PMI’s lowest reading since October 2016, this was the 32nd straight month in which the measure indicated an expanding manufacturing sector. Three of the five PMI lost ground from their March readings: new orders, employment, and production. Showing improvements were indicators measuring inventories and supplier deliveries. Thirteen of 18 manufacturing industries expanded during the month, led by textiles and electrical equipment/appliances.

The ISM’s measure for activity in the nonmanufacturing side of the economy pulled back by 6/10ths of a point to 55.5, the NMI’s lowest reading since August 2017 but its 111th month above a reading of 50.0. Just a single component of the NMI improved from its March reading—business activity/production—while the other three declined in April: employment, supplier deliveries, and new orders. Fifteen of 18 tracked nonmanufacturing industries grew during April, led by transportation/warehousing, professional/scientific/technical services, and construction. The press release noted that survey respondents were “still mostly optimistic about overall business conditions, but concerns remain about employment resources.”

#5Meanwhile, factory orders rebounded in March. The Census Bureau reports that new orders for manufactured goods jumped 1.9 percent during the month to a seasonally adjusted $508.2 billion, following a 0.3 percent drop in February and holding steady in January. Orders for transportation goods rose 7.0 percent, boosted by gains for civilian aircraft (+31.0 percent), defense aircraft (+17.7 percent), and motor vehicles (+1.5 percent). Net of transportation goods, new factory orders increased a still-robust 0.8 percent, following a 0.3 percent gain in February. Durable goods orders jumped 2.6 percent while nondurable goods rose 1.1 percent. Less favorable was data on new orders for nondefense, non-aircraft capital goods—a proxy for business investment—which held steady in March after gains of 1.0 percent and 0.3 percent in January and February, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 27, 2019, First-Time Claims, seasonally adjusted): 230,000 Unchanged vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 212,500 (-3.1% vs. the same week a year earlier).
Conference Board Consumer Confidence (April 2019, Index (1985=100), seasonally adjusted): 129.2 (vs. March 2019: 124.2.
Construction Spending (March 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.282 trillion (-0.9% vs. vs. February 2019, -0.8% vs. March 2018).
Pending Home Sales (March 2019, Index (2001=100), seasonally adjusted): 105.8 (+3.8% vs. February 2019, -1.2% vs. March 2018).
Case-Shiller Home Price Index (February 2019, 20-City Index, seasonally adjusted): +0.2% vs. January 2019, +3.0% vs. February 2018.
Productivity (2019Q1, Labor Productivity, seasonally adjusted): +3.6% vs. 2018Q4, +2.4% vs. 2018Q1.
Agricultural Prices (March 2019, Prices Received by Farmer): +2.8% vs. February 2019, -3.4% vs. March 2018 

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

Gas Prices Rise, Core Prices Held in Check: April 8 – 12

Prices rose at the gas pump in March but moderated elsewhere. Here are the five things we learned from U.S. economic data released during the week ending April 12.

#1Headline consumer prices rose in March, core prices not so much. The Consumer Price Index (CPI) jumped 0.4 percent on a seasonally adjusted basis, per the Bureau of Labor Statistics. This was the biggest single-month increase for CPI in 14 months, leaving the measure up 1.9 percent over the past year. Energy CPI surged 3.5 percent as gasoline prices swelled 6.5 percent. Food prices gained 0.3 percent, including a 0.4 percent bounce in the price of food at home. Net of energy and food, core CPI inched up a modest 0.1 percent and has risen 2.0 percent over the past year. Prices increased during March for shelter (+0.4 percent), new vehicles (+0.4 percent), and medical care services (+0.3 percent). Falling were prices for apparel (-1.9 percent) and used cars/trucks (-0.4 percent).

#2Wholesale prices also jumped in March. The Bureau of Labor Statistics indicates that final demand Producer Price Index (PPI) grew a seasonally adjusted 0.6 percent, its largest one-month increase since last October. Core final demand PPI, which removes the impact of energy, food, and trade services, was unchanged, however. Sixty percent of the rise in headline PPI was because of the 16.0 percent surge in wholesale gasoline prices. Final demand energy PPI rose 5.6 percent while that for foods grew a far more modest 0.3 percent. Trade services PPI—measuring retailer and wholesaler margins—jumped 1.1 percent for its biggest gain since last October. Over the past year, headline final demand PPI has risen 2.2 percent while the 12-month comparable for the core measure was +2.0 percent. 

#3The number of job openings contracted (yet remained near record highs) in February. The Bureau of Labor Statistics reports there were a seasonally adjusted 7.087 million nonfarm job openings on the final day of February, down 538,000 from January but still 8.5 percent ahead of the February 2018 count. Among the industries showing the most substantial year-to-year percentage increases in job opening were construction (+44.4 percent), professional/business services (+24.9 percent), manufacturing (+9.4 percent), and health care/social assistance (+8.5 percent). Hiring also pulled back slightly, dropping by 133,000 to 5.696 million (up 1.8 percent versus February 2018). Industries with the most significant 12-month percentage gains in hires were transportation/warehousing (+8.9 percent), wholesale trade (+7.5 percent), retail (+6.8 percent), and health care/social assistance (+5.7 percent). 5.556 million people left their jobs in February, essentially matching the 5.532 million that had done so in January and up 5.4 percent from a year earlier. Versus the previous year, the number of people who quit their job rose 9.6 percent to 3.480 million while the count of workers laid off was off 1.2 percent to 1.742 million

#4New factory orders fell for the fourth time in five months in February. The Census Bureau estimates new orders for manufactured goods declined 0.5 percent during the month to a seasonally adjusted $497.5 billion. Durable goods orders slumped 1.6 percent while those for nondurable goods gained 0.6 percent. New orders net of transportation goods increased 0.3 percent while those of civilian non-aircraft capital goods (a proxy for business investment) slipped 0.1 percent. Shipments grew for the first time in five months with a 0.4 percent gain to $505.5 billion, with increases of 0.2 percent and 0.6 percent for durable and nondurable goods, respectively. The value of unfilled orders fell for the fourth time in five months, off 0.3 percent to $1.178 trillion while inventories widened for the 27th time in 28 months (up 0.3 percent to $687.8 billion).

#5Small business owner sentiment held steady in March. The Small Business Optimism Index, from the National Federation of Independent Business, eked out a 1/10th of a point increase during the month to a seasonally adjusted reading of 101.8 (1986=100). While 2.9 points below its March 2018 reading, the index has been above a reading of 100.0 for 27 consecutive months. Four of the index’s ten components improved from their February readings (led by measures tracking both current job openings and plans to increase employment) while three declined in March (including a four-point drop for current inventories). The press release said the measures indicate the U.S. economy will enjoy “solid growth… with no signs of a recession in the near term.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 6, 2019, First-Time Claims, seasonally adjusted): 196,000 (-8,000 vs. previous week; -31,000 vs. the same week a year earlier; fewest since October 4, 1969). 4-week moving average: 207,000 (-7.6% vs. the same week a year earlier).
Import Prices (March 2019, All Imports, not seasonally adjusted): +0.6% vs. February 2019, Unchanged vs. March 2018. Nonfuel Imports: -0.2% vs. February 2019, -0.8% vs. March 2018.
Export Prices (March 2019, All Exports, not seasonally adjusted):  +0.7% vs. February 2019, -2.3% vs. March 2018. Nonagricultural Exports: +0.7% vs. February 2019, +1.0% vs. March 2018.
Monthly Treasury Statement (March 2019, Budget Deficit): First Six Months of FY2019: -$691.2 trillion (vs. First Six Months of FY2018: $599.7 billion).
FOMC Minutes

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