Job Creation and the Trade Deficit Both Grow: March 5 – 9

Payroll growth surprised to the upside while the trade deficit widened once again. Here are the five things we learned from U.S. economic data released during the week ending March 9.

#1Employers accelerated their pace of hiring during February. Nonfarm payrolls grew by a seasonally adjusted 313,000 workers during the month, the most jobs added since June 2016. Further, the Bureau of Labor Statistics upwardly revised its estimates of December and January job gains by a combined 54,000. Nonfarm employers have added 2.281 million people to their payrolls over the past year, for a monthly average of 190,083 jobs. Private sector employers added 287,000 jobs to their payrolls in February, split between 100,000 in the goods-producing side of the economy and 187,000 in the service sector. The industries adding the most workers during the month included construction (+61,000), retail (+50,300), professional/business services (+50,000), manufacturing (+32,000), health care/social assistance (+29,100), and financial activities (+28,000). The average workweek inched up by 1/10th of an hour to 34.5 hours (February 2017: 34.4) while average weekly earnings grew by $4.06 to $922.88 (up 2.9 percent over the past year).Growth in Employment-030918

Based on a separate survey of households, the employment rate remained at its post-recession low of 4.1 percent for a third consecutive month. An impressive 806,000 people entered the labor force, leading to a 3/10ths of a percentage point increase in the labor force participation rate to 63.0 percent, its highest point since last September. The labor force participation rate for adults aged 25 to 54—arguably a better measure of the number of adults in their prime working years—rose by half of a percentage point to a post-recession high of 82.2 percent. The typical length of unemployment slipped by 1/10th of a week to 9.3 weeks (February 2017: 10.1 weeks). 5.160 million people held a part-time job but were seeking a full-time opportunity, down from the 5.670 million at the same time a year earlier. The broadest measure of labor underutilization published by the BLS—the U-6 series—held firm at 8.2 percent (February 2017: 9.2 percent).

#2The U.S. trade deficit widened for a fifth consecutive month. The Census Bureau and the Bureau of Economic Analysis reports that exports declined 1.3 percent to a seasonally adjusted $200.9 billion while imports shrank by less than 0.1 percent to $257.5 billion. The resulting trade deficit expanded by 5.0 percent to -$56.6 billion. The trade deficit has grown by 16.2 percent over the past year. The goods deficit jumped by $2.8 billion to -$76.5 billion while the services surplus eked out a $0.1 billion increase to +$19.9 billion. The former resulted from a $3.3 billion decrease in exported goods (thanks to a decline in exports of both civilian aircraft and industrial supplies/materials). The U.S. had its largest goods deficits with China (-$35.5 billion), the European Union (-$15.0 billion), Germany (-$6.3 billion), Mexico (-$5.6 billion), and Japan (-$5.6 billion).

#3The service sector continued growing at a solid if slightly slower rate in February. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business shed 4/10ths of a point to a reading of 59.5. This was the 97th straight month in which the NMI was above a reading of 50.0, indicative of an expanding service sector. The NMI slipped because of a sharp 6.6 point drop in the index component associated with employment (to a still expanding reading of 55.0). Two other index components grew during February (business activity/production (up 3.0 points) and new orders (up 2.1 points)) while that for supplier deliveries held firm. Sixteen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, transportation/warehousing, and utilities. The press release noted that a “majority of respondents continue to be positive about business conditions and the economy.”

#4Even with a small upward revision for Q4, productivity gains continued to disappoint. The Bureau of Economic Analysis raised its estimate of nonfarm labor productivity during the final three months of 2017from a 0.1 percent decrease to being unchanged on a seasonally adjusted basis. This was the outcome of output growing 3.2 percent and the number of worked gaining 3.3 percent. Manufacturing sector productivity surged 6.0 percent during Q4, thanks to a 6.6 percent increase in output resulting from a mere 0.5 percent increase in the number of hours worked. Durable goods manufacturing productivity jumped 8.1 percent while that for nondurable goods manufacturing increased 3.4 percent. For all of 2017, nonfarm business productivity gained by a feeble 1.2 percent, which was nevertheless an improvement from being unchanged for all of 2016. Manufacturing sector productivity inched up 0.6 percent during 2017 after having gained by only 0.4 percent and 0.3 percent in 2016 and 2015, respectively.

#5Consumers took on credit card debt at a slower rate in January. The Federal Reserve indicates that outstanding consumer credit balances (net of any real estate related loans—e.g., mortgages, home equity loans) totaled a seasonally adjusted $3.855 trillion at the end of the month, up $13.9 billion from December and 5.3 percent from a year earlier. Balances of nonrevolving credit (e.g., student loans, college loans) jumped by $12.8 billion during the month to $2.825 trillion (+5.0 percent versus January 2017). Not rising as much were outstanding revolving credit balances (e.g., credit cards), which inched up by $0.7 billion to $1.030 trillion (+6.1 percent versus January 2017). Revolving balances had risen by $6.1 billion and $11.3 billion during December and November, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 3, 2018, First-Time Claims, seasonally adjusted): 231,000 (+21,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 222,500 (-8.6% vs. the same week a year earlier).
Factory Orders (January 2018, New Orders for Manufactured Goods, seasonally adjusted):$491.7 billion (-1.4% vs. December 2017, -6.6% vs. January 2017).
Wholesale Trade (January 2018, Inventories of Merchant Wholesalers, seasonally adjusted): $619.1 billion (+0.8% vs. December 2017, +4.8% vs. January 2017).
Beige Book

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

Payrolls Expand for the 86th Straight Month: December 4 – 8

Employers continued to expand their payrolls this fall. Here are the five things we learned from U.S. economic data released during the week ending December 8.

#1Hiring remained solid in November. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 228,000 during the month, following a gain of 244,000 during October. In all, payrolls have expanded by 2.071 million over the past year and have increased in each of the past 86 months. The goods-producing side of the economy added 62,000 jobs during November, led by manufacturing (+31,000) and construction (+24,000). The private service sector added 159,000 workers, with large increases seen in professional/business services (+46,000), health care/social assistance (+40,500), retail (+18,700), and leisure/hospitality (+14,000). The average workweek length increased by 1/10th of an hour to 34.5 hours (November 2016: 34.3 hours) while average weekly earnings grew by $4.38 to $915.98 (+3.1 percent versus November 2016).Payroll Gains 2011-2017 120817

Meanwhile, a separate household survey finds the unemployment rate held steady at its 17-year low of 4.1 percent (seasonally adjusted) The civilian labor force grew by 148,000, but the labor force participation rate remained at 62.7 percent. The labor force participation rate for adults aged 25 to 54 increased by 2/10ths of a percentage point to 81.8 percent (matching September as its highest point in nearly seven years). The median length of unemployment fell by 3/10ths of a week to 9.6 weeks (November 2016: 10.2 weeks) while the count of part-time workers seeking a full-time job grew slightly by 48,000 to 4.801 million (November 2016; 5.659 million). Finally, the broadest measure of labor underutilization (the U-6 series) inched up by 1/10th of a percentage point to 8.0 percent, just above its post-recession low.

#2Rising imports in October led to the largest trade deficit since January. Exports essentially held steady during the month at $195.9 billion (+5.6 percent versus October 2016) while imports jumped by $3.8 billion to $244.6 billion (+7.0 percent versus October 2016). As a result, the trade deficit expanded by $3.8 billion to -$48.7 billion according to the Census Bureau and Bureau of Economic Analysis. The goods deficit also grew by $3.8 billion to -$69.1 billion (+9.0 percent versus October 2016) while the services surplus held firm at +$20.3 billion (also virtually unchanged from a year earlier). In the case of the former, imports grew for crude oil (+$1.5 billion) and consumer goods (+$0.8 billion). Meanwhile, a $2.6 billion rise in industrial supplies/materials exports was counterbalanced by declining exports of soybeans (-$1.4 billion) and civilian aircraft (-$1.1 billion). The U.S. has its largest goods deficits with China (-$31.9 billion), the European Union (-$12.0 billion), Mexico (-$6.0 billion), and Japan (-$5.3 billion).

#3The service industry grew at a slower pace during November. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business slumped 2.7 points during the month to a reading of 57.4. Despite the decline, this was the 95th straight month in which the NMI was above a reading of 50.0 (indicative of a growing service sector). All four components of the measure fell during the month: new orders (-4.1 points), supplier deliveries (-4.0 points), employment (-2.2 points), and business activity/production (8/10ths of a point). Sixteen of 18 tracked service sector industries expanded during November, led by retail, wholesale trade, and utilities. The press release noted that survey respondents’ comments “indicate that the economy and sector will continue to grow for the remainder of the year.”

#4Factory orders sputtered in October. The Census Bureau reports that new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $479.6 billion. Even with the decline, this represented a 3.7 percent increase from the same month a year earlier. Transportation orders fell 4.2 percent as orders for civilian and defense aircraft slumped 18.5 percent and 7.6 percent, respectively. Net of transportation goods, orders jumped 0.8 percent for the month and was 6.8 percent ahead of year-ago levels. Growing for the month were new orders for machinery (+1.9 percent), electrical equipment/appliances (+0.8 percent), computers/electronics (+0.7 percent), and nondurable goods (+0.7 percent). New orders for nondefense capital goods net of aircraft (a proxy for business investment) gained 0.3 percent during October and has risen 9.6 percent over the past year. Shipments grew for the tenth time in 11 months with a 0.6 percent increase to $484.2 billion. Unfilled orders were essentially unchanged for the month at $1.135 trillion while inventories grew for the 11th time in 12 months with a 0.2 percent increase at $661.6 billion.

#5Q3 productivity growth remained solid after a revision The Bureau of Labor Statistics indicates nonfarm business sector productivity grew 3.0 percent during the quarter, matching the previous estimate of Q3 productivity reported a month earlier and the most significant gain in productivity since Q3 2014. This was the result of a 4.1 percent rise in output generated by a 1.1 percent gain in the number of hours worked during the quarter. Even with the bounce during the quarter, productivity has grown by a mere 1.5 percent over the past year. Manufacturing sector production fell 4.4 percent during the quarter, split by falls of -4.7 percent and -4.4 percent for durable and nondurable manufacturing, respectively. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 2, 2017, First-Time Claims, seasonally adjusted): 236,000 (-2,000 vs. previous week; -15,000 vs. the same week a year earlier). 4-week moving average: 241,500 (-3.4% vs. the same week a year earlier).
Consumer Credit (October 2017, Outstanding Consumer Credit Balances (net of mortgages and other real estate-backed loans), seasonally adjusted): $3.802 trillion (+$20.5 billion vs. September 2017 +5.4% vs. October 2016).
University of Michigan Consumer Sentiment (December 2017-preliminary, Index (1966Q1=100), seasonally adjusted): 96.8 (vs. November 2017: 98.5; vs. December 2016: 98.2).
Wholesale Inventories (October 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $605.3 billion (-0.5% vs. September 2017, +3.9% vs. October 2016).

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

Job Openings Hit a New Record: August 7 – 11.

Employers have many unfilled jobs while inflation remains subdued. Here are the five things we learned from U.S. economic data released during the week ending August 11.

#1Even with a record level of job openings, the pace of hiring sputtered in June as employers are unable to fill Thomas roles. There were a seasonally adjusted 6.163 million job openings on the final day of June, up 461,000 from May, 11.3 percent from a year earlier, and the most reported in the 17-year history of the Bureau of Labor Statistics data series. This included 5.588 million private sector job openings, which represented a 12.0 percent increase from June 2016. Industries reporting the largest percentage gains in job openings over the past year include construction (+31.6 percent), wholesale trade (+28.5 percent), financial activities (+22.6 percent), professional/business services (+16.0 percent), and accommodation/food services (+11.9 percent). Yet, employers were struggling to fill those positions. Hiring declined by 103,000 during the month to 5.356 million. This was up 3.5 percent from the number of people hired during June 2016. Private sector employers hired 5.026 million people during the month, up 4.3 percent from a year earlier. The industries with the largest year-to-year percentage increases in hiring included manufacturing (+25.2 percent), construction (+15.0 percent), and professional/business services (+14.6 percent). 5.224 million people left their job during June, off by 21,000 for the month, but 5.7 percent the year ago count. 3.314 million people voluntarily quit their jobs (+5.2 percent versus June 2016) while the 1.701 million people laid off was up 5.7 percent from the same month a year earlier.Nonfarm Job Openings 2007-2017 081117

#2Consumer prices eke out a small gain during July. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) increased 0.1 percent during the month, after having been unchanged during June. Energy CPI declined for the fifth time in six months, albeit with a small 0.1 percent drop. Gasoline prices were unchanged during July while electricity prices grew 0.4 percent. Food prices gained 0.2 percent during July, the fifth time over the past six months with a monthly increase of at least 0.2 percent. Net of energy and food, core CPI gained 0.1 percent for a fourth consecutive month. Growing were prices for medical care commodities (+1.0 percent), medical care services (+0.3 percent), apparel (+0.3 percent), and transportation services (+0.2 percent). Meanwhile, prices for both new and used cars/trucks dropped 0.5 percent. Both headline and core CPI have grown 1.7 percent over the past year, each under the Federal Reserve’s two-percent target rate for inflation.

#3Wholesale prices declined during July. The final demand Producer Price Index (PPI) slipped 0.1 percent during the month, following a 0.1 percent increase in June. The core measure, which nets out energy, food, and trade services, held steady during the month. PPI for final demand goods edged down 0.1 percent. The measure for wholesale energy goods decreased 0.3 percent (wholesale gasoline prices fell 1.3 percent) while that for food was unchanged during July. Meanwhile, final demand PPI for services dropped 0.2 percent, pulled down by declines for transportation/warehousing (-0.8 percent) and trade (i.e., retailer and wholesaler margins, -0.5 percent). Over the past year, both the headline and core measure of final demand PPI has grown just under the Federal Reserve’s target with a 1.9 percent increase.

#4Productivity growth was soft during Q2, which was an improvement over Q1’s stagnation. The Bureau of Labor Statistics finds nonbusiness labor productivity edged up 0.9 percent on a seasonally adjusted annualized basis during April, May, and June, a gain from the productivity being unchanged during the first quarter. Output grew 3.4 percent during the quarter while hours worked gained 2.5 percent. Unit labor costs edged up 0.6 percent during the quarter. Over the past year, nonfarm productivity grew by a tepid 1.2 percent. The manufacturing sector presented a bright picture with a 2.5 percent productivity gain, led by a sharp 3.8 percent surge in durable goods manufacturing productivity. Productivity of nondurable manufacturing slipped 0.1 percent during Q2.

#5Small Business Owner Sentiment Rebounded During July. The Small Business Optimism Index from the National Federation of Independent Business improved for the first time in six months with a 1.6 point increase to a seasonally adjusted 105.2 (1986 = 100). This was the measure’s best reading since February and up 10.6 points from a year earlier. Seven of the index’s ten components improved from their June readings, led by measures for current job openings (up five points), expected real sales (up five points), plans to increase employment (up four points), and expected future economic conditions (up four points). Only two of the index components declined during the month: plans to make capital outlays (down two points) and expected credit conditions (off a point). The press release noted that “Main Street was buoyed by stronger customer demand despite the dysfunction in Washington, D.C.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 5, 2017, First-Time Claims, seasonally adjusted): 244,000 (+3,000 vs. previous week; -19,000 vs. the same week a year earlier). 4-week moving average: 241,000 (-8.2% vs. the same week a year earlier).
Consumer Credit (June 2017, Outstanding Consumer Credit Balances (net of mortgages and other real-estate backed debt, seasonally adjusted): $3.856 trillion (+$12.4 billion vs. May 2017, +5.7% vs. June 2016).
Federal Government Treasury Budget (June 2017, Surplus/Deficit): -$42.9 billion (vs. June 2016: -$90.2 billion, July 2017 -$112.8 billion). 1st ten months of FY2017: -$566.0 billion (vs. 1st ten months of FY2016: -$512.0 billion).
Wholesale Inventories (June 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $599.4 billion (+0.7% vs. May 2017, +2.8% vs. June 2016).

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