A Record Number of Job Openings: October 15 – 19

Employers continued to have difficulty filling job openings in August. Here are the five things we learned from U.S. economic data released during the week ending October 19.

#1The number of job openings jumped to another record high in August. Nonfarm employers had a seasonally adjusted 7.136 million job openings on the final day of August, up 59,000 for the month and 18.1 percent from a year earlier. (By comparison, there were 6.234 million people unemployed during the same month.) Among the industries that the Bureau of Labor Statistics reported having the biggest year-to-year percentage gains in job openings were construction (+38.6 percent), financial activities (+28.7 percent), wholesale trade (+19.6 percent), accommodation/food services (+19.4 percent), retail (+18.0 percent), and manufacturing (+17.3 percent). Employers continued to struggle in filling these jobs as 5.784 million people were hired during August. While lagging the number of job openings, the number of people hired was up 71,000 for the month and 5.0 percent from August 2017. Industries with the greatest year-to-year percentage increases in hiring were retail (+18.6 percent), wholesale trade (+10.9 percent), and accommodation/food services (+6.2 percent). 5.706 million people left their jobs during August, up 110,000 for the month and 6.8 percent from a year earlier. 3.577 million workers voluntarily departed their jobs during the month, 12.7 percent ahead of a year-ago and indicative of workers confident about their job marketplace. Layoffs affected 1.622 million people, down 10.1 percent from the count of 12 months earlier.JOLTS August 18 101918

#2Manufacturing output grew modestly in September. The Federal Reserve reports that manufacturing output grew 0.2 percent on a seasonally adjusted basis during the month, following matching 0.3 percent gains in both July and August. Manufacturing output has increased 3.5 percent over the past 12 months. Durable goods manufacturing jumped 0.6 percent (led by motor vehicles, wood products, primary metals, and aerospace). Nondurable goods output slipped 0.1 percent, pulled down by textiles and apparel. Overall industrial production gained 0.3 percent in September and has risen 5.1 percent over the past year. Mining output jumped 0.5 percent for the month and 13.4 percent since September 2017, boosted by continued strength in both oil and gas extraction. Output at utilities was unchanged during September but has a 12-month comparable of +5.4 percent over the past year.

#3September was a weak month for retail sales. The Census Bureau estimates U.S. retail and food services sales inched up 0.1 percent during the month to a seasonally adjusted $509.0 billion. Even with the modest increase during September, sales have grown 4.7 percent over the past year. Sales at auto dealers/parts stores jumped 0.8 percent while gas station sales slowed 0.8 percent. Net of both, core retail sales were unchanged during September but have expanded 5.0 percent over the past 12 months. Sales improved during the month at retailers focused on furniture (+1.1 percent), electronics/appliances (+0.9 percent), sporting goods/hobbies (+0.7 percent), apparel (+0.5 percent), and building materials (+0.1 percent). Sales slumped, however, at restaurants/bars (-1.8 percent), department stores (-0.8 percent), and grocery stores (-0.1 percent).

#4Existing home sales sputtered again in September. The National Association of Realtors reports that sales of previously owned homes fell 3.4 percent during the month to a seasonally adjusted annualized rate of 5.15 million homes. This was not only a 4.1 percent drop from the same month a year earlier, it also was the measure’s seventh consecutive decline and the slowest pace of existing home sales in nearly three years. Sales failed to increase in all four Census regions, although transaction volume managed to hold even with August levels in the Midwest. All four Census regions had negative 12-month comparables: West (-12.2 percent), Northeast (-5.6 percent), Midwest (-1.5 percent), and the South (0.5 percent). A part of the problem remained a lack of homes on the market—there were 1.88 million homes available for sale at the end of September, down 1.6 percent from August but up 1.1 percent from a year earlier. This was the equivalent to a paltry 4.4 month supply of homes. The resulting median sales price has risen 4.2 percent over the past year to $258,100. NAR’s press release also ties recent sales weakness to “a decade’s high mortgage rates” that it says were “preventing consumers from making quick decisions on home purchases.”

#5The U.S. budget deficit surged 17.0 percent during the just-completed fiscal year. The U.S. Treasury Department reports that the federal government collected $3.329 trillion in receipts during the just completed FY2018, up 0.4 percent from FY2018. Outlays, however, jumped 3.2 percent during the same 12 months to $4.108 trillion. The resulting budget deficit of -$778.996 billion represented a 17.0 percent jump from FY2017. A closer look at receipts finds individual tax collections surged 6.1 percent during FY2018 while corporate tax receipts plummeted 31.1 percent. The U.S. government had accumulated a total debt of $21.460 trillion by September 30, 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 13, 2018, First-Time Claims, seasonally adjusted): 210,000 (-5,000 vs. previous week; -20,000 vs. the same week a year earlier). 4-week moving average: 211,750 (-13.9% vs. the same week a year earlier).
Housing Market Index (October 2018, Index (>50= Greater Percentage of Homebuilders Viewing Housing Market as “Good,” seasonally adjusted): 68 (vs. September 2018: 67, vs. October 2017: 68).
Housing Starts (September 2018, Starts, seasonally adjusted annualized rate): 1.201 million units (-5.3% vs. August 2018, +3.7% vs. September 2017).
State Employment (September 2018, Nonfarm Payrolls, seasonally adjusted): Payrolls declined significantly vs. July 2018 in 3 states and were essentially unchanged in 47 states and the District of Columbia. Payrolls grew significantly vs. August 2017 in 37 states.
Treasury International Capital Flows (August 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$77.1 billion (vs. July 2018: +$32.4 billion, vs. August 2017: +$40.6 billion).
FOMC minutes

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

Home Sales Steady, Leading Indicators Firm: September 17 – 21

Existing home sales stalled while housing starts picked up. Here are the five things we learned from U.S. economic data released during the week ending September 21.

#1Sales of previously owned homes held constant in August. The National Association of Realtors places the seasonally adjusted annualized sales rate of existing homes at 5.34 million units, matching July’s sales pace and off 1.5 percent from a year earlier. Sales improved during the month in the Northeast (+7.6 percent) and Midwest (+2.4 percent) but slipped in the West (-5.9 percent) and South (-0.4 percent). Only in the South were existing home sales ahead of their year-ago pace. Also unchanged for the month was the inventory of unsold homes—the 1.92 million homes available for sale at the end of August was 2.7 percent larger than that of a year earlier but also represented a very tight 4.3 month supply. The resulting median sales price of homes sold has grown 4.6 percent over the past 12 months to $264,800. The press release was optimistic: “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”Existing Home Sales Aug17-18 092118

#2Housing starts rebounded in August. The Census Bureau reports that housing starts rose 9.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.282 million units. This was 9.4 percent ahead of the August 2017 annualized rate of housing starts. Much of the gain was with multifamily units—starts of buildings with five or more units surged 27.3 percent to 392,000 (SAAR) while single-family unit starts gained a more modest 1.9 percent to 876,000 (SAAR). Looking towards the future, the number of issued construction permits slumped 5.7 percent to an annualized 1.303 million (-5.5 percent versus August 2017). The rate of issued permits fell during the month for single-family (-6.1 percent) and multi-family units (-8.0 percent). Housing completions increased 2.5 percent during August to a SAAR of 1.213 million homes. This represented an 11.2 percent improvement from the August 2017 rate of completions.

#3Homebuilder sentiment remained robust in September. The National Association of Home Builder’s Housing Market Index (HMI) stayed at a seasonally adjusted reading of 67 during the month. This was the 52nd straight month in which the HMI was above a reading of 50, meaning a greater percentage of homebuilders saw the housing market as being “good” as opposed to being “poor.” The HMI improved in the Northeast (61), slipped in the South (69) and Midwest (56), and held steady in the West (73). Gaining during the month were measures for current sales (up a point to 74) and expected sales (up two points to 74) of single-family homes while the measure of traffic of prospective buyers held steady of 49. The press release reported “firm demand for housing” but expressed concerned about both the trade tariffs’ impact on builders’ costs and rising interest rates possibly stemming housing demand.

#4Forward-looking economic indicators continued to point towards more growth this year and into 2019. The Conference Board’s Leading Economic Indicators (LEI) added 4/10ths of a point to 111.2 (2016=100), up 6.4 percent from a year earlier. This was slightly smaller than the 6/10ths and 8/10ths of a point increases during the two prior months. Seven of the ten components that make up the LEI made positive contributions. The coincident index gained by 2/10ths of a point to 104.3 (+2.5 percent versus August 2017). All four components of the coincident index made positive contributions. The lagging index also increased by 2/10ths of a point to 105.4 (+2.3 percent versus August 2017), although only two of seven index components improved during August. While noting that the “strengths among the LEI’s components were very widespread,” the press release pointed out that its “growth trend has moderated since the start of the year.”

#5August’s job gains were centered mainly in just four states. The Bureau of Labor Statistics deeper state-level dive at employment trends for August finds that nonfarm payrolls had statistically meaningful increases in just four states: California, Texas, Arizona, and Florida. Payrolls were “essentially unchanged” in the other 46 states and the District of Columbia. Earlier this month, we had learned that nonfarm payrolls expanded by a seasonally adjusted 201,000 during August. Over the past year, employment had grown in 35 states with the biggest percentage gains in Utah (+3.5 percent), Nevada (+3.3 percent), and Washington state (+3.3 percent).

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 15, 2018, First-Time Claims, seasonally adjusted): 201,000 (-3,000 vs. previous week; -54,000 vs. the same week a year earlier, lowest since November 1969). 4-week moving average: 205,750 (-21.8% vs. the same week a year earlier).
Treasury International Capital Flows (July 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$40.6 billion (vs. June 2018: -$45.5 billion, vs. July 2017: +$0.8 billion)

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

Consumers Spend, Prices Hit a Target: August 27 – 31

Consumers focused their spending on nondurable goods and services during July. Here are the five things we learned from U.S. economic data released during the week ending August 31.  

#1Consumers continued spending in July while inflation hits the Fed’s target. Real personal consumption expenditures (PCE) increased at a seasonally adjusted 0.2 percent rate during the month. This was down from the 0.3 percent gains reported by the Bureau of Economic Analysis for the three prior months. Spending on goods and services each grew by 0.2 percent during July, with the latter split by a 0.6 percent bump in nondurable goods spending and a 0.5 percent drop in durable goods spending. Nominal (non-price adjusted) PCE grew 0.4 percent for a second consecutive month. Nominal personal and disposable income gained 0.3 percent, with real disposable income rising 0.2 percent. The savings rate slipped by 1/10th of a percentage point to +6.7 percent. Over the past year, real disposable income has increased 2.9 percent while real PCE has expanded 2.8 percent. The same report includes data on inflation—the PCE deflator growing 0.1 percent during July with the core PCE deflator (removing energy and food) gained 0.2 percent. Over the past year, the two price measures have grown by 2.3 percent and 2.0 percent, respectively, with the latter matching the Federal Reserve’s two-percent inflation target.Consumer Spending April - July 2018 083118

#2GDP expanded a smidge faster than previously believed during Q2. The Bureau of Economic Analysis’ second estimate of gross domestic product (GDP) for the months of April, May, and June has the U.S. economy expanding 4.2 percent on a seasonally adjusted annualized basis. This was up from the 4.1 percent gain reported a month earlier and was the best quarter for GDP growth since the third quarter of 2014. The small upward revision was the result of higher than previously believed levels of business investment and private inventory accumulation partially offset by lower than the previously thought level of consumer spending. The sectors of the economy making positive contributions to GDP growth were (in declining order of contribution) were: personal spending (+255-basis points), fixed nonresidential investment (+107-basis points), exports (+110-basis points), government expenditures (+41-basis points), and imports (+7-basis points). Negative contributions came from private inventory accumulation (-97-basis points) and fixed residential investment (-6-basis points).

#3Economic growth “moderated” in July. The Chicago Fed National Activity Index (CFNAI) lost 35-basis points to +0.13 (June 2017: -0.18). Since the CFNAI is a weighted averaged 85 economic measure indexed such that a reading of 0.00 is indicative of the U.S. economy growing at its historical rate, July reading suggests the economy continued to expand during the month but at a slower pace than it had in June. Thirty-four of the 85 indicators improved during the month while 51 had weakened. The components related to production made a total contribution to CFNAI of +0.05 (versus a +0.45 contribution in June). Also making positive contributions were measures related to employment (+0.12 versus a +0.03 contribution in June) and sales/orders/inventories (+0.03 versus a +0.06 contribution in June). The measures linked to personal consumption/housing had a negative contribution of -0.07 (versus -0.06 in June). The CFNAI’s three-month moving average remained positive at +0.05 despite losing 15-basis points from June (June 2017: -0.07).

#4One measure of consumer sentiment surged to an 18-year high while another pulled back. The Conference Board’s Consumer Confidence Index jumped 5.5 points in August to a seasonally adjusted 133.4 (1985=100). The index has not been this high since October 2000. Measures tracking both current and expected business conditions improved—the current conditions index increased from 166.1 to 172.2 while the expectations index added 5.4 points to 107.6. 40.3 percent of survey respondents described current business conditions as “good” while only 9.3 percent see them as “bad.” Similarly, 42.7 percent of respondents saw the availability of jobs as “plentiful” with only 12.7 percent described jobs as being “hard to get.” The press release states that the strong sentiment among consumers “should continue to support healthy consumer spending in the near-term.

Meanwhile, the Index of Consumer Sentiment from the University of Michigan lost 1.7 points during August to a seasonally adjusted 96.2 (1966Q1=100), its worst reading since January. While down 6/10ths of a point from a year earlier, this was a 9/10ths of a point improvement from the preliminary August reading reported several weeks ago. The measure tracking current business conditions shed 4.1 points to its lowest points since November 2016 at 110.3 (August 2017=110.9) while the expectations index slipped by only 2/10ths of a point to 87.1 (August 2017=87.7).

#5Contract signings to purchase a home slipped in July. The National Association of Realtors’ Pending Home Sales Index lost 8/10ths of a point to a seasonally adjusted reading of 106.2 (2001=100), leaving the measure 2.3 percent below its July 2017 reading. The index, which tracks contracts signed to purchase a previously owned home but have not yet closed, improved during the month in the Northeast (+1.0 percent) and Midwest (+0.3 percent), but lost ground in the South (-1.7 percent) and West (-0.9 percent). The index has negative 12-month comparables in all four Census regions: West (-5.8 percent), Northeast (-2.3 percent), Midwest (-1.5 percent), and South (-0.9 percent). NAR’s press release continued to express concern about “inadequate supply” leading to many homebuyers being “unable to afford” homes in some markets.

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 25, 2018, First-Time Claims, seasonally adjusted): 213,000 (+3,000 vs. previous week; -25,000 vs. the same week a year earlier). 4-week moving average: 212,250 (-10.9% vs. the same week a year earlier).
Agricultural Prices (July 2018, Prices Received by Farmers): -3.8% vs. June 2018, -4.3% vs. July 2017).
Case-Shiller Home Price Index (June 2018, 20-City Index, seasonally adjusted): +0.1% vs. May 2018, +6.3% vs. July 2017). 

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