Employment – What We Learned About the U.S. Economy Last Week

Autos Fuel Retail Sales, Prices Firm: September 9 – 13

September 14, 2019September 14, 2019Kevin Roth

Consumers were buying vehicles in August. Here are the five things we learned from U.S. economic data released during the week ending September 13.

Auto sales outpaced an otherwise modest retail sales report for August. The Census Bureau reports that retail and food services sales totaled $526.1 billion, up 0.4 percent from July and 4.1 percent from a year earlier. Sales at auto dealers and parts stores jumped 1.8 percent while those at gas stations fell 0.9 percent (due to lower prices at the pump). Net of both, core retail sales grew a tepid 0.1 percent following a 0.9 percent surge in July (12-month comparable: +4.2 percent). Sales rose during the month at building material/garden stores (+1.4 percent), sporting goods/hobby retailers (+0.9 percent), and health/personal care stores (+0.7 percent). Sales slumped, however, at department stores (-1.1 percent), furniture retailers (-0.5 percent), and grocery stores (-0.3 percent).

Core consumer prices rose for a third straight month in August. The Consumer Price Index (CPI) grew 0.1 percent on a seasonally adjusted basis for the third time over the past four months, per the Bureau of Labor Statistics. Energy CPI fell 1.9 percent (pulled down by a 3.5 percent drop in gasoline prices) while food CPI held steady. Net of both, core CPI grew 0.3 percent for a third consecutive month. Rising were prices for used cars/trucks (+1.1 percent), medical care services (+0.9 percent), transportation services (+0.4 percent), medical care commodities (+0.3 percent), apparel (+2.2 percent), and shelter (+0.2 percent). Prices slipped 0.1 percent for new vehicles. While headline CPI has grown by “only” 1.7 percent over the past year, the core measure of consumer prices has climbed 2.4 percent over the same 12 months.

And wholesale prices firmed too. The Bureau of Labor Statistics indicates that the Producer Price Index (PPI) for final demand increased 0.1 percent on a seasonally adjusted basis in August after rising 0.2 percent in July. The core measure—PPI net of energy, food, and trade services—jumped 0.4 percent after slipping 0.1 percent during the prior month. PPI for final demand goods dropped 0.5 percent, pulled down by declines for both energy (-2.5 percent—gasoline prices plummeted 6.6 percent) and food (-0.6 percent). Core goods PPI was unchanged for the month. PPI for final demand services grew 0.3 percent—but more notable was the core measure (which nets out trade services and transportation/warehousing) growing 0.5 percent. Over the past year, headline PPI has risen 1.8 percent while the 12-month comparable for the core wholesale prices was +1.9 percent.

The number of job openings pulled back slightly, but workers continued to quit their jobs. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.217 million open jobs on the final day of July. While still near the historical high for the data series, this was off 31,000 from June and 3.0 percent from a year earlier. While both construction (+18.8 percent) and manufacturing (+7.0 percent) had sizable year-to-year percentage increases in job openings, other industries reported negative 12-month comparables: financial activities (-15.3 percent), retail trade (-15.2 percent), and accommodation/food services (-10.2 percent). Hiring picked up during July, rising by 237,000 to 5.953 million (+2.1 percent versus July 2018). 5.759 million people departed their jobs during the same month, up 246,000 from June and 1.5 percent ahead of the year-ago pace. This included 3.592 million people who voluntarily quit their jobs (up 130,000 for the month and 4.3 percent from July 2018), a signal suggesting Americans remain confident about the labor market. 1.799 million left their jobs due to a layoff, up 88,000 for the month but down 3.2 percent from a year earlier.

The federal budget deficit crossed the trillion dollar threshold, and the fiscal year is not even over yet. The Department of the Treasury reports that the U.S. government has collected $3.088 trillion in receipts through the first 11 months of FY2019, up 3.5 percent from the same 11-month period last year. Expenditures, however, have grown 7.0 percent over the same period to $4.155 trillion. The resulting budget deficit of $1.067 trillion was 18.9 percent ahead of that from the first 11 months of FY2018. Year-to-date individual income tax revenues were 0.9 percent ahead of that a year earlier while corporate tax receipts have expanded 4.5 percent. Among the notable gainers in expenditures were defense (+9.0 percent), debt service (+9.0 percent), and health & human services (+8.4 percent)

Other U.S. economic data released over the past week:
– Jobless Claims (week ending September 7, 2019, First-Time Claims, seasonally adjusted): 204,000 (-15,000 vs. previous week; -4,000 vs. the same week a year earlier). 4-week moving average: 212,500 (+0.3% vs. the same week a year earlier).
– Import Prices (August 2019, All Imports, not seasonally adjusted): -0.5% vs. July 2019, -2.0% vs. August 2018; Nonfuel Imports: Unchanged vs. July 2019, -1.0% vs. August 2018.
– Export Prices (August 2019, All Exports, not seasonally adjusted): -0.6% vs. July 2019, -1.4% vs. August 2018; Nonagricultural Exports: -0.4% vs.
– NFIB Small Business Optimism (August 2019, Index (1986=100), seasonally adjusted): 103.1 (vs. July 2019: 104.7, August 2018: 108.8).
– University Surveys of Consumers (September 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 92.0 (vs. August 2019: 89.8, vs. September 2018: 100.1).
– Business Inventories (July 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.043 trillion (+0.4% vs. June 2019, +4.8% vs. July 2018).
– Consumer Credit (July 2019, Outstanding Consumer (non-real estate-backed) Loan Balances, seasonally adjusted): $4.123 trillion (+$23.3 billion vs. June 2019, +5.2% vs. July 2018).

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

Job Creation Underwhelmed in August: September 2 – 6

September 7, 2019September 7, 2019Kevin Roth

Job creation slowed in August while one measure of manufacturing activity turned negative. Here are the five things we learned from U.S. economic data released during the week ending September 6.

Private-sector payrolls growth decelerated in August. The Bureau of Labor Statistics tells us that nonfarm payrolls grew by a seasonally adjusted 130,000 during the month, off from the downwardly revised gains in June and July of 178,000 and 159,000, respectively. The expansion in payrolls also is a bit misleading as 25,000 of net gain is the result of temporary federal government hires to support the 2020 Census. The private sector added 96,000 workers, down from July’s 131,000 net gain and the fewest since May. The industries adding the most jobs in August were professional/business services (+37,000), health care/social assistance (+36,800), financial activities (+15,000), construction (+14,000), and leisure/hospitality (+12,000). Average weekly earnings of $966.98 represented a 2.9 percent increase from a year earlier.

A separate survey of households keeps the unemployment rate at 3.7 percent for a third consecutive month. The labor force expanded by a robust 590,000 people, translating into a labor force participation rate of 63.2 percent. The same measure for adults aged 25-54 jumped by 6/10^ths of a percentage point to 82.6 percent (tying the post-recession high achieved back in January). The median length of unemployment held steady at 8.9 weeks (August 2018: 9.4 weeks) while the count of part-time workers seeking a full-time job grew by 397,000 to 4.381 million (August 2018: 4.368 million). Finally, the broadest measure of labor underutilization from the BLS (the “U-6” series) increased by 2/10^ths of a point to 7.2 percent (August 2018: 7.4 percent).

The trade picture improved slightly in July. The Census Bureau and the Bureau of Economic Analysis estimate exports increased by $1.2 billion to a seasonally adjusted $207.5 billion (-0.6 percent versus July 2018) while imports slowed by $0.4 billion to $261.4 billion (virtually unchanged from a year earlier). The resulting deficit of -$54.0 billion was $1.5 billion smaller than that of June but also was 2.9 percent greater than that of a year earlier. Over the first seven months of 2019, the trade deficit has totaled -$373.8 billion, 8.2 percent greater than the gap from the first seven months of 2018. The goods deficit fell by $1.6 billion to -$73.6 billion while the services surplus shrank by $0.1 billion to +$19.7 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

Purchasing managers tell us manufacturing slowed in August. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, shed 2.1 points during the month to a reading of 49.1. This was the first time in nearly three years in which the PMI fell below a reading of 50.0, indicative of contracting manufacturing sector. Four of five PMI components fell during the month: employment (down 4.3 points), new orders (down 3.6 points), supplier deliveries (down 1.9 points), and production (down 1.3 points). The component for inventories eked out a small gain. Only nine of 18-tracked manufacturing industries reported growth, led by textiles, furniture, and food/beverage/tobacco. The press release noted survey respondents’ comments indicating that “trade remains the most significant issue,” reflected by declining export orders and negative supply chain impacts.

…But they also report that service sector activity picked up over the same time. The NMI, the headline index for the Non-Manufacturing Report on Business, ticked up 2.7 points to a reading of 56.4. This was the NMI’s 115^th consecutive month with a reading above 50.0 and its best reading since May. Only two of four NMI components increased in August—business activity and new orders—while measures for employment and supplier deliveries each slumped. Sixteen of 18-tracked industries expanded during the month, led by real estate, accommodation/food services, and public administration. The press release noted continued concerns “about tariffs and geopolitical uncertainty,” but also that survey respondents were “mostly positive about business conditions.”

Even with the news from above, new factory orders grew in July. The Census Bureau reports that new orders for manufactured goods increased 1.4 percent to a seasonally adjusted $500.3 billion. Even though this was the second consecutive monthly increase, factory orders over the first seven months of the year were tracking only 0.4 percent ahead of that from the same months a year earlier. As we learned last week, transportation orders were a significant driver of the increased orders, jumping 7.0 percent thanks to surges for both civilian (+47.8 percent) and defense (+34.3 percent) aircraft. Durable goods orders jumped 2.0 percent while those of nondurables gained 0.8 percent. Orders of civilian non-aircraft capital goods—a proxy for business investment—increased 0.2 percent in July. Shipments fell for the first time in three months with a 0.2 percent decline to $504.0 billion while unfilled orders mostly held steady after three monthly declines at $1.162 trillion. Inventories expanded for the 11^th time over the past 12 months by growing 0.2 percent to $696.5 billion.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending August 31, 2019, First-Time Claims, seasonally adjusted): 217,000 (+1,000 vs. previous week; +7,000 vs. the same week a year earlier). 4-week moving average: 216.250 (+1.3% vs. the same week a year earlier).
– Productivity (2019Q2, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.3% vs. 2019Q1, +1.8% vs. 2018Q2.
– Construction Spending (July 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.289 trillion (+0.1% vs. June 2019, -2.7% vs. July 2018).
– Beige Book

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

August 9, 2019August 9, 2019Kevin Roth

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.

Job 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).

Core 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.

Expansion 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 114^th 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.”

Consumers 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).

Wholesale 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.

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