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.

Inflation Moderates While Business Sentiment Stays Hot: October 8 – 12

Consumer prices grew less quickly while wholesale prices firmed in September. Here are the five things we learned from U.S. economic data released during the week ending October 12.

#1Consumer prices cooled during the last days of summer. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) inched up 0.1 percent on a seasonally adjusted basis in September following two consecutive months of 0.2 percent gains. Energy prices dropped 0.5 percent, pulled down by price decreases for utility delivered gas (-1.7 percent), electricity (-0.5 percent), and gasoline (-0.2 percent). Food prices were unchanged. Net of energy and food, core CPI increased 0.1 percent during the month. Falling were prices for vehicles—both used cars/trucks (-3.0 percent) and new vehicles (-0.1 percent)—and medical care commodities (-0.1 percent). Prices increased for apparel (+0.9 percent), transportation services (+0.5 percent), shelter (+0.2 percent), and medical care services (+0.2 percent). CPI has risen 2.3 percent over the past year while core CPI has a 12-month comparable of +2.2 percent.Consumer Prices Mar-Sep 18 101218

#2…But wholesale prices rebounded. The Producer Price Index (PPI) for final demand grew for the first time in three months with a seasonally adjusted 0.2 percent increase, per the Bureau of Labor Statistics. The core measure—PPI less energy, food, and trade services, jumped 0.4 percent for its largest increase since January. Final demand PPI for goods slipped 0.1 percent, pulled down by significant declines in both energy and food prices. PPI for goods net energy and food gained 0.2 percent. PPI for final demand services jumped 0.3 percent (its biggest gain since June), fueled by a 1.8 percent bounce in wholesale prices for transportation/warehousing services. Over the past year, the headline PPI measure had grown 2.6 percent while the 12-month comparable for core wholesale prices has surged 2.9 percent.

#3Small business owner optimism remained new record highs in September. The Small Business Optimism Index from the National Federation of Independent Business lost 9/10ths of a point during the month (giving back exactly what it had gained in August) to lead the index at a seasonally adjusted 107.9 (1986=100). Six of ten index components pulled back from their August readings, including a seven-point drop for plans to increase inventories and three-point decreases for indices tied to plans to increase employment and make capital outlays. Only three index components improved during the month: expected real sales (up three points), current inventories (up two points), and expected credit conditions. The press release noted that small business owners were indicating that “business is booming and prospects continue to look bright.

#4Wholesalers expanded their inventories more rapidly during August. The Census Bureau reports that merchant wholesalers inventories swelled 1.0 percent during the month to a seasonally adjusted $642.7 billion. This left wholesale inventories 5.3 percent larger than what it was a year earlier. Durable goods wholesale inventories grew 0.9 percent while that of nondurables rose 1.2 percent. The former was boosted by sharp increases in the automotive (+3.5 percent), computer equipment (+1.6 percent), and hardware (+1.0 percent) sectors. Wholesale inventories of nondurables expanded thanks to substantial increases for farm products (+4.9 percent), chemicals (+2.2 percent), and drugs (+2.1 percent). Wholesale sales rose 0.8 percent in August to a seasonally adjusted $511.1 billion (+9.2 percent versus August 2017). The resulting inventory-to-sales ratio of 1.26 matched that of July but was down four basis points from a year earlier.

#5Layoffs remained near multi-decade lows. The Department of Labor indicates the first-time claims for unemployment insurance benefits grew by 7,000 during the week ending October 6 to a seasonally adjusted 214,000. Even with the modest increase, initial jobless claims remained 27,000 below that of a year earlier. The four-week moving average inched up by 2,500 to 209,500 claims. This was 16.9 percent below the year-ago moving average and just above the 49-year low achieved just a few weeks ago. 1.422 million people were receiving some form of unemployment insurance benefits during the week ending September 22, 14.0 percent below the count from the same week a year earlier.

Other U.S. economic data released over the past week:
University of Michigan Surveys of Consumer (September 2018—preliminary, Index of Consumer Sentiment): 99.0 (vs. August 2018: 100.1, vs. September 2017: 100.7).
Import Prices (September 2018, Import Prices, not seasonally adjusted): +0.5 % vs. August 2018, +3.5% vs. September 2017. Nonfuel imports: Unchanged vs. August 2018, +0.6% vs. September 2017.
Export Prices (September 2018, Export Prices, not seasonally adjusted): Unchanged vs. August 2018, +2.7% vs. September 2017. Nonagricultural exports: +0.2% vs. August 2018, +3.3% vs. September 2017.

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

Home Sales and Durable Goods Orders Take Steps Backward: August 20 – 24

Home sales continued to mellow this summer. Here are the five things we learned from U.S. economic data released during the week ending August 24.

#1Existing home sales slipped for a fourth consecutive month in July. The National Association of Realtors reports that sales of previously owned homes inched down 0.7 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.34 million units, its slowest sales pace since February 2016. During the four-month losing streak, home sales have declined 4.6 percent. Sales dropped during July in three of four Census regions: Northeast (-8.3 percent), Midwest, (-1.6 percent), and South (-0.4 percent). Sales gained 4.4 percent in West. Sales were 1.5 percent below that of a year earlier, with negative 12-month comparables in all four Census regions. The number of homes available for sale held relatively stable versus both June and a year earlier at 1.92 million units, the equivalent to a tight 4.3 month supply. The median sales price of $269,600 represented a 4.5 percent increase from a year earlier. The press release stressed that the supply of homes is “still not at a healthy level, and new home construction is not keeping up to meet demand.”Existing and New Home Sales July 2018 082418

#2New homes slumped for a second straight month. The Census Bureau estimates new home sales were at a seasonally adjusted annualized rate (SAAR) of 627,000 units during July, down 1.7 percent from June but still 12.7 percent ahead of the July 2017 sales pace. New home sales improved in the West (+10.9 percent) and Midwest (+9.9 percent) but fell in the Northeast (-52.3 percent) and South (-3.3 percent). There were 309,000 new homes available for sale at the end of July (+2.0 percent versus June 2018 and +12.0 percent versus July 2017), the equivalent to a 5.9 month supply. The median sales price of $328,700 was up 1.8 percent from a year earlier.

#3Volatility in aircraft purchasing led to a slowdown in durable goods orders. New orders for durable manufactured goods slumped 1.7 percent to a seasonally adjusted $246.9 billion, per the Census Bureau. Transportation goods orders fell 5.3 percent thanks to huge drops in orders for both civilian (-35.4 percent) and defense (-34.6 percent) aircraft (orders of both tend to swing widely month-to-month). Motor vehicle orders gained 3.5 percent. Orders for durable goods other than transportation orders grew 0.2 percent, with increases for computers/electronics (+1.1 percent), machinery (+0.6 percent), and primary metals (+0.3 percent). Electrical equipment/appliances orders slipped 0.2 percent. New orders for civilian capital goods net of aircraft—a measure of business investment—jumped 1.4 percent. Durable goods shipments slipped 0.2 percent during the month to $250.8 billion, with the measure gaining 0.6 percent after removing the shipments of transportation goods.

#4Employers laid off relatively few workers during the late summer. There were 210,000 first-time claims made for unemployment insurance benefits during the week ending August 18, down 2,000 claims from the week earlier and 27,000 claims from the same week a year ago. Only twice has the Department of Labor’s estimate of initial jobless claims been this low since 1969—and both times have been within the past four months. The four-week moving average of first-time claims dropped to 213,750, down 10.8 percent from a year earlier and (also) just above its 49-year low. 1.704 million people (not seasonally adjusted) were receiving some form of unemployment insurance benefits during the week ending August 4, down 11.3 percent from a year earlier

#5House prices grew at a slower rate in June. The Federal Housing Finance Agency (FHFA) indicates that its purchase-only House Price Index (HPI) grew 0.2 percent on a seasonally adjusted basis during the month. (This measure tracks sales prices of homes purchased using mortgages that were sold to or guaranteed by Fannie Mae and Freddie Mac.) The HPI increased in seven of nine Census regions, led by a 0.7 percent gain in the Mountain region, a 0.6 percent rise in the East North Central region, and a 0.5 percent bump in the Middle Atlantic. Prices declined 0.4 percent in both New England and the South Atlantic. Home prices have risen 6.5 percent over the past year, with positive 12-month comparables in all nine Census regions. The largest year-to-year percentage price gains were in the Mountain (+9.6 percent), Pacific (+7.0 percent) and South Atlantic (+6.7 percent) regions.

Other U.S. economic data released over the past week:
FOMC Minutes

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