Gas Prices Dropped as 2018 Ended: January 7 – 11

Core consumer prices grew at a steady, moderate pace in December. Here are the five things we learned from U.S. economic data released during the week ending January 11.  

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Consumer prices fell in December, but core prices inched up. The Consumer Price Index (CPI) declined 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This was the first drop in consumer prices since last March, with gasoline prices being the main culprit. Energy CPI slumped by 3.5 percent (its third decline in four months) with gasoline prices plummeting 7.5 percent. Prices for both electricity (+1.8 percent) and utility delivered natural gas (+0.7 percent) both rose. Also rising were food prices (+0.4 percent—its biggest single-month gain since May 2014), pulled up by increased costs for fruit and vegetables. Net of energy and food, core CPI gained 0.2 percent. Rising were prices for medical care services (+0.4 percent) and shelter (+0.3 percent) while prices fell 0.2 percent for transportation services, used cars/trucks, and medical care commodities. Over the past year, CPI has increased by 1.9 percent while core consumer prices have risen 2.2 percent.CPI December 2018 111119.png

#2Even with a decline in November, there were more job openings than the number of unemployed people. The Bureau of Labor Statistics reports that there were 6.888 million open jobs on the final day of November, down 243,000 from October but 16.1 percent ahead of the November 2017 count. This was greater than the BLS’s estimate of 6.018 million unemployed people during the month. Private sector employers had 6.266 million open jobs in November, up 15.5 percent from a year earlier. Most industries reported double-digit percentage increases in job openings, with notable exceptions being retail (-6.2 percent), wholesale trade (+5.4 percent), and financial activities (+8.9 percent). Also dropping during the month was the number of people hired, declining by 218,000 to 5.710 million people (+3.7 percent versus November 2017). Industries reporting particularly large year-to-year percentage increases in hiring included wholesale trade (+31.7 percent), transportation/warehousing (+16.1 percent) health care/social assistance (+14.0 percent), financial activities (+10.9 percent), and manufacturing (+9.9 percent). 

#3Service sector activity chilled a bit as 2018 wrapped up. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, shed 3.1 points to a reading of 57.5. This was the measure’s lowest reading since July but also represented the 107th consecutive month in which it was higher than 50.0 (indicative of an expanding service sector). Three of the NMI’s four components lost ground relative to November: business activity/production (down 5.3 points), supplier deliveries (down 5.0 points), and employment (off 2.1 points). Eking a small gain was the component tied to new orders, which added 2/10ths of a point. Sixteen of 18 tracked nonmanufacturing industries reported growth during December, led by arts/entertainment/recreation, transportation/warehousing, and health care/social assistance. Whereas the comments from survey respondents were “mostly optimistic about overall business conditions,” highlighted comments noted potential adverse effects resulting from the tariffs.

#4Small business owner optimism slipped again in December but remained near post-recession highs. The Small Business Optimism Index shed 4/10ths of a point during the month to a seasonally adjusted 104.4 (1986=100). Even though this was the fourth straight monthly decline, the National Federation of Independent Business’s measure has been above a reading of 100.0 for 25 consecutive months. Four of the index’s ten components improved from their November readings: plans to increase inventories (up six points), current job openings (up five points), current inventories (up four points), and plans to increase employment (up a point). Of the six declining components, the largest decreases were for expected economic conditions (off six points), whether it is a good time to expand (off five points), and plans to make capital outlays (down four points). The press release emphasized that small businesses “need workers to generate more sales, provide services, and complete projects.”

#5Consumer borrowing rose in November. The Federal Reserve estimates consumers held a seasonally adjusted $3.979 trillion in outstanding non-real estate related debt (e.g., mortgages) at the end of November. This represented an increase of $22.2 billion from October and a 4.3 percent gain over the past year. Revolving credit (e.g., credit card) expanded by $4.8 billion to $1.042 trillion (+2.2 percent versus November 2017). Nonrevolving credit balances rose by $17.3 billion in November to $2.937 trillion. Nonrevolving consumer credit balances, which includes both college and auto loans, have increased by 5.1 percent over the past 12 months.

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 5, 2019, First-Time Claims, seasonally adjusted): 216,000 (-17,000 vs. previous week; +31,000 vs. the same week a year earlier). 4-week moving average: 221,750 (-9.4% vs. the same week a year earlier).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Payrolls Surged as 2018 Ended: December 31 – January 4

Employers added more workers in December than they had in any month since February. Here are the five things we learned from U.S. economic data released during the week ending January 4.

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Job creation accelerated in December. The Bureau of Labor Statistics estimates nonfarm employers added 312,000 on a seasonally adjusted basis during the month, the most since last February. In addition, the BLS added a combined 58,000 jobs to its previously reported estimates of October and November job creation. The resulting 2.64 million workers added over the past 12 months made 2018 the best year for job creation since 2015 and continued the nine-year winning streak in terms of employment gains. The private sector added 301,000 jobs during December, with health care/social assistance, leisure/hospitality, professional/business services, construction, and manufacturing leading the way. Average hourly earnings have risen 3.2 percent over the past year to $27.48. Average weekly earnings also have grown 3.2 percent over the past year, in this case to $948.06.job gains 2008 - 2018

Based on a separate household survey, the unemployment rate increased by 2/10ths of a percentage point to 3.9 percent. But this gain is more of a good news story as 419,000 people had entered the labor market during the month. The labor force participation rate also grew by 2/10ths of a percentage point to 63.1 percent (December 2017: 62.7 percent). The median length of unemployment edged up by 1/10th of a week to 9.1 weeks (December 2017: 8.9 weeks) while the number of part-time workers seeking a full-time opportunity dropped by 24,000 to 4.657 million (December 2017: 4.986 million). Finally, the broadest measure of labor underutilization by the BLS (the U-6 series) stayed near its post-recession low at 7.6 percent (December 2017: 8.1 percent).

#2Payroll company data showed the same. Private sector employment expanded by a seasonally adjusted 271,000 jobs in December, per the ADP National Employment Report. The report, based on data flowing through payroll systems of 411,000 ADP clients, finds jobs growth among large (+54,000 jobs), medium (+129,000), and small-sized (+89,000) businesses. The service sector added 224,000 workers while the goods-producing side of the economy added 47,000 jobs. The press release noted, “the busy holiday season greatly impacted both trade and leisure and hospitality.”

#3Jobless claims grew during Christmas week but remained very low. The Department of Labor reports that the number of first-time claims made for unemployment insurance benefits increased by 10,000 during the week ending December 29 to a seasonally adjusted 231,000. Relative to the same week a year earlier, this was down by 17,000 claims. The four-week moving average of first-time claims was at 218,750, 8.9 percent below the moving average of the final week of 2017. A total of 1.794 million people were receiving some form of unemployment insurance benefits during the week ending December 15, down 11.2 percent from the same week a year earlier.

#4An outplacement firm reports rising job cuts in 2018. The 2018 Challenger Report indicates that announced job cuts rose 28.6 percent during the year to 538,659. This was the most announced job cuts since 2015 but well under the nearly 1.3 million announced layoffs in 2009. The count of announced layoffs during the final quarter of 2018 was 42.8 percent ahead of that from the final three months of 2017. The sectors with the largest number of reported job cuts in 2018 were retail, telecommunications, health care/products, and financial. The press release noted that most of the announced job cuts result from company restructuring, closings, and “voluntary” severance. It stressed that “large-scale job cut announcements due to these tariffs have yet to be announced, it seems.”

#5Manufacturing growth cooled in December, per purchasing managers. The Purchasing Managers Index (PMI), the headline index from the Institute for Supply Management’s Manufacturing Report on Business, dropped by 5.2 points to a reading of 54.1. This was the biggest single-month drop in the PMI in more than ten years and the measure’s lowest reading since 2016. Yet despite the drop, this was the 28th straight month in which the measure was above a reading of 50.0, indicative of an expanding manufacturing sector. All five components of the PMI declined during the month: new orders (down 11.0 points), production (down 6.3 points), supplier deliveries (down 5.0 points), employment (off 2.2 points), and inventories (down 1.7 points). Eleven of 18 tracked manufacturing industries grew during December, led by textiles, apparel, and transportation equipment. The press release states respondents’ comments noted “continued expanding business strength, but at much lower levels.”

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

Retail Shines, Factory Activity Does Not: December 10 – 14

Consumers started the holiday season with gusto, while manufacturing took another break.  Here are the five things we learned from U.S. economic data released during the week ending December 14.  

#1Retail sales were solid in November. U.S. retail and food services sales totaled a seasonally adjusted $513.5 billion, according to the Census Bureau. This was up a modest 0.2 percent for the month, but one should note that the headline figures were pulled down by falling gasoline prices (sales at gas stations plummeted 2.3 percent). Net of sales at gas stations and car dealers/parts stores (where sales increased 0.2 percent), core retail sales gained 0.5 percent for the month and were up 4.6 percent over the past year. Rising during the month were sales at retailers focused on electronics/appliances (+1.2 percent), furniture (+1.2 percent), health/personal care (+0.9 percent), and groceries (+0.4 percent), and at department stores (+0.4 percent). Sales slowed at restaurants/bars (-0.5 percent), building material stores (-0.3 percent), and apparel retailers (-0.2 percent). Nonstore retailers (e.g., internet retailers) saw sales jump 2.3 percent during the month, with a year-to-year sales increase of 10.8 percent).Retail Sales 2012-2018 121418

#2Manufacturing output failed to grow for a second consecutive month. The Federal Reserve’s report on industrial production finds manufacturing output was unchanged (on a seasonally adjusted basis) in November, following a 0.1 percent drop during the prior month. Durable goods output inched up 0.2 percent, boosted by a 2.5 percent increase for primary metals. Nondurable output slowed 0.2 while that of “other manufacturing” (which includes publishing and logging) slumped 0.9 percent. Overall industrial production jumped 0.6 percent during November (its biggest gain since August) and has increased 2.5 percent over the past year. Rising during the month were output both in mining (+1.7 percent) and at utilities (+3.3 percent, boosted by cold weather driving demand for utility-delivered natural gas).

#3Job openings remained at near-record levels in October. The Bureau of Labor Statistics estimates there were 7.059 million (seasonally adjusted) available nonfarm jobs at the end of October, up 119,000 from September and 16.8 percent from the same month a year ago. Private sector job openings have risen 17.7 percent over the past 12 months to 6.489 million. The industries with the largest double-digit year-to-year percentage increases in job openings were wholesale trade (+52.0 percent), manufacturing (+27.3 percent), accommodation/food services (+26.0 percent), construction (+25.3 percent), and retail (+22.4 percent). Hiring picked up in October, rising by 196,000 to 5.892 million hires (+5.2 percent versus October 2017), with larger 12-month comparables in transportation/warehousing (+49.5 percent), retail (+14.0 percent), and manufacturing (+12.0 percent). Even though dropping by 85,000 during October, the number of people leaving their jobs was up 5.4 percent over the past year to 5.556 million. This included 3.514 million people who quit their jobs (+9.0 percent versus October 2017) and 1.691 million layoffs (-1.2 percent versus October 2017).

#4Consumer prices failed to rise in November. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) held steady during the month on a seasonally adjusted basis, the first month not to show a rise since March. Energy CPI slumped 2.2 percent as gasoline prices fell 4.1 percent. On the flip side, food CPI gained 0.2 percent, its largest single-month increase since June (boosted by higher prices for cereals/bakery and meat). Net of both energy and food, core CPI grew 0.2 percent, matching its October increase. Rising were prices for used cars/trucks (+2.4 percent), medical commodities and services (both +0.4 percent), and shelter (+0.3 percent). Prices fell for apparel (-0.9 percent) and transportation services (-0.3 percent). Both the headline and core CPI measures have risen 2.2 percent over the past year.

#5Wholesale prices also moderated in November. The Producer Price Index (PPI) for final demand grew by a seasonally adjusted 0.1 percent during the month following a 0.6 percent surge in October. At the same time, the Bureau of Labor Statistics’ core measure (netting out prices for energy, food and trade services) gained 0.3 percent, greater than October’s 0.2 percent increase. PPI for final demand goods dropped 0.4 percent, pulled down a 5.0 percent decline in energy PPI (final demand gasoline PPI: -14.0 percent). PPI for final demand food jumped 1.0 percent (pulled up by rising prices for fresh/dry vegetables). Net of energy and food, final demand goods PPI gained 0.3 percent. Final demand PPI for services also increased 0.3 percent, with rising margins at gas stations a significant factor. Final demand PPI has risen 2.5 percent over the past year (the smallest 12-month comparable since last December) while core final demand PPI has expanded 2.8 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 8, 2018, First-Time Claims, seasonally adjusted): 206,000 (-27,000 vs. previous week; -23,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-4.6% vs. the same week a year earlier).
Import prices (November 2018, All Imports, not seasonally adjusted): -1.6% vs. October 2018, +0.7% vs. November 2017. Nonfuel imports: -0.3% vs. October 218, +0.3% vs. November 2017.
Export prices (November 2017, All Exports, not seasonally adjusted): -0.9% vs. October 2018, +1.8% vs. November 2o17. Nonagricultural Exports: -1.0% vs. October 2018, +2.2% vs. November 2017.
Business Inventories (October 2018, Manufacturing and Trade Inventories, seasonally adjusted): $1.982 trillion (+0.6% vs. September 2018, +5.2% vs. October 2017).
NFIB Small Business Optimism (November 2018, Index (1986=100), seasonally adjusted): 104.8 (vs. October 2018: 107.4, vs. November 2017: 107.5.
Monthly Treasury Statement (November 2018, Federal Budget Surplus/Deficit): (first two months of FY2019) -$306.4 billion (vs. first two months of FY 2018: -$201.8 billion). 

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