Hiring and Business Activity Rose in January: February 3 – 7

Both the labor market and business sentiment started 2020 on a high note. Here are the five things we learned from U.S. economic data released during the week ending February 7.

#1Hiring continued in January. The Bureau of Labor Statistics finds nonfarm payrolls expanded by a seasonally adjusted 225,000 in January, following gains of 261,000 and 147,000 in November and December, respectively. Private-sector employers added 206,000 workers, split between 32,000 in the goods-producing side of the economy and 174,000 in the service sector. Industries adding the workers in January included health care/social assistance (+47,200), construction (+44,000), leisure/hospitality (+36,000), transportation/warehousing (+28,300), and professional/business services (+21,000). (The same report featured a revision to 2019 payrolls data that now shows employers added 2.096 million workers during the year, down 12,000 from the prior estimate). Hourly wages averaged $28.44 in January, up 3.1 percent from a year earlier.

A separate household survey finds the unemployment rate edging up 1/10th of a percentage point to a still very low 3.6 percent. The labor force participation rate jumped 2/10ths of a percentage point to 63.4 percent. The participation rate for adults aged 25-54 rose by 2/10ths of a percentage point to 83.1 percent, its best reading since September 2008. The median length of unemployment inched up 3/10ths of a week to 9.3 weeks, while the count of part-time workers seeking full-time work grew by 36,000 to 4.182 million. The broadest measure of labor underutilization—the U-6 series—added 2/10ths of a point to 6.9 percent (still very close to its post-recession low).

#2A slowdown in trade activity led to a trade deficit contraction in 2019. Per the Census Bureau and the Bureau of Economic Analysis report that 2019 exports totaled $2.500 trillion (off $1.5 billion from 2018) while imports summed to $3.117 trillion (off $12.5 billion from 2018). The resulting trade deficit for 2019 of -$616.8 billion was $10.9 billion smaller than that of 2018, its first decline since 2013 and the equivalent to 2.9 percent of U.S. GDP. The goods deficit for all of 2019 narrowed by $21.4 billion to -$866.0 billion while the services surplus shrank by $10.4 billion to +$249.2 billion. These figures include the December trade data, which found the trade deficit growing by $5.2 billion during the month to a seasonally adjusted -$48.9 billion.

#3Purchasing managers indicate that business activity gained in January. The Institute for Supply Management’s PMI—the headline index from its Manufacturing Report on Business—surged by 3.1 points to a reading of 50.9. This was the first time since last July that the PMI was above a reading of 50.0, the threshold between an expanding and contracting manufacturing sector. Four of five PMI components advanced in January: production (up 9.5 points to 54.3), new orders (up 4.4 points to 52.0), employment (up 1.4 points to 46.6), and supplier deliveries (up 7/10ths of a point to 52.9). The inventories component shed 4/10ths of a point to 48.8. Only eight of 18-tracked manufacturing industries expanded during the month, led by furniture, wood products, and food/beverage goods. The press release noted that “global trade remains a cross-industry issue” for many companies.

The NMI—the headline index from the ISM’s Non-Manufacturing Report on Business—added 6/10ths of a point in January to 55.5, its best reading since last summer. Two of four NMI components improved during the month:  business activity (up 3.9 points to 60.9) and new orders (up 9/10ths of a point to 56.2). Slumping were measures for inventories (down 4.5 points to 46.5) and supplier deliveries (down 8/10ths of a point to 51.7). Twelve of 18 service sector industries expanded during the month, led by agriculture, management of companies/support services, and health care/social assistance. While “mostly positive” about business conditions, survey respondents noted that they “continue to have difficulty with labor resources.” 

#4Factory orders expanded for the second time in three months in December. The Census Bureau indicates new orders for manufactured goods rose 1.8 percent during the month to a seasonally adjusted $499.3 billion. Durable goods orders jumped 2.4 percent while those for nondurables advanced 1.1 percent. A proxy for business investment—civilian non-aircraft orders—fell 0.8 percent. Shipments increased or a third straight month with a 0.5 percent rise, including a 1.1 percent bounce in nondurables shipments (durable shipments, however, fell 0.2 percent). Unfilled orders mostly held steady at $1.156 trillion while inventories expanded for the 12th time in 13 months (rising 0.5 percent to $704.9 billion). Even with December’s advance, last year was not a great year for manufacturing: factory orders totaled $5.957 trillion for all of 2019, down 0.6 percent from 2018.

#5Productivity improved as 2019 ended. The Bureau of Economic Analysis reports that nonfarm business sector labor productivity grew 1.4 percent during the fourth quarter of 2019, an improvement over the 0.2 percent contraction in Q3. Output increased 2.5 percent during the quarter, fueled by a 1.1 percent gain in hours worked. Manufacturing sector productivity, however, contracted during Q4. The 1.2 percent drop in manufacturing sector productivity was split by declines for durable and nondurable goods of -0.8 percent and -2.2 percent, respectively. Over the past year, nonfarm productivity jumped 1.8 percent (its best annual gain since 2010), while manufacturing productivity slumped 0.7 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 1, 2020, First-Time Claims, seasonally adjusted): 202,000 (-15,000 vs. previous week; -28,000 vs. the same week a year earlier). 4-week moving average: 211,750 -6.1% vs. the same week a year earlier).
Wholesale Trade (December 2019, Total Inventories of Merchant Wholesalers, seasonally adjusted): $674.5 billion (-0.2% vs. November 2019, +2.1% vs. December 2018).
Construction Spending (December 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.328 trillion (-0.2% vs. November 2019, +5.0% vs. December 2018).
Consumer Credit (December 2019, Outstanding Non-Real Estate Consumer Credit Balances, seasonally adjusted): $4.197 trillion (+$22.1 billion vs. November 2019, +4.7% vs. December 2018).
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Job Openings Shrink, Hiring Picks Up: November 4 – 8

Job openings, factory orders, and trade activity all declined in September. Here are the five things we learned from U.S. economic data released during the week ending November 8.

#1The number of job openings fell, but hiring increased in September. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.024 million jobs on the final day of September, down 277,000 for the month and 5.0 percent from a year earlier. (It is worth noting that this is still a large number of available jobs by historical standards.) Private-sector job openings were 7.0 percent below that from a year earlier, with substantial year-to-year percentage declines in retail (-27.0 percent), accommodation/food services (-15.7 percent), health care (-11.2 percent), and wholesale trade (-11.0 percent). Meanwhile, hiring grew by 50,000 during the month to 5.934 million, up 4.7 percent from a year earlier. Private-sector hiring outpaced September 2018 levels by 4.5 percent. 5.808 million people left their jobs in September, up 76,000 for the month and 4.5 percent over the past year. Fewer people voluntarily departed their jobs in September, down 103,000 from August to 3.498 million (+3.1 percent versus September 2018). On the other hand, layoffs jumped by 152,000 to 1.964 million (+8.0 percent versus September 2018).JOLTS 110819

#2Factory orders slowed in September. The Census Bureau estimates new orders for manufactured goods declined 0.6 percent during the month to a seasonally adjusted $496.7 billion. Durable goods orders slumped 1.2 percent while orders for nondurable edged up 0.1 percent. Civilian capital goods orders net of aircraft—a proxy for business investment—slowed 0.6 percent in September. Shipments fell for the third straight month, shedding 0.2 percent to $501.1 billion. Unfilled orders slightly lost ground (-$0.1 billion) after two monthly gains (to $1.163 trillion). Inventories expanded 0.3 percent to $697.9 billion. 

#3Exports and imports decelerated in September. The Census Bureau and the Bureau of Economic Analysis report that exports declined by $1.8 billion during the month to $206.0 billion (-1.8 percent versus September 2018) while imports fell by $4.4 billion to $258.4 billion (-2.8 percent versus September 2018). As a result, the trade deficit narrowed by $2.6 billion in September to -$52.5 billion, down 6.5 percent from a year earlier. The goods deficit contracted by $2.7 billion to -$71.7 billion (-7.2 percent versus September 2018), while the services surplus declined by $0.1 billion to +$19.3 billion (-9.0 percent). The former included the impact of declining exports of both food (soybeans) and automobiles and lower imports of consumer goods (including cell phones, toys, and artwork), capital goods, and automotive vehicles.

#4Service sector activity picked up in October. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, added 2.1 points during the month. The resulting reading of 54.7 signaled the 117th straight month of service sector growth. All four NMI components improved in October: employment (up 3.3 points), new orders (up 1.9 points), business activity/production (up 1.8 points), and supplier deliveries (up 1.5 points). Thirteen of 18 nonmanufacturing industries expanded during the month, led by agriculture, utilities, and professional/scientific/technical services. The press release noted that survey respondents “continue to be concerned about tariffs, labor resources and the geopolitical climate.”

#5Productivity sputtered during the summer. The Bureau of Labor Statistics finds nonfarm business labor production declined 0.3 percent on a seasonally adjusted basis during Q3, after having grown 2.3 percent during the prior quarter. Nonfarm output rose 2.1 percent, with the number of hours worked gained 2.4 percent. Productivity has risen 1.4 percent over the past year. Manufacturing sector production inched down 0.1 percent during Q3, with a 1.1 percent increase in manufacturing output and a 1.3 percent gain in hours worked. Durable goods manufacturing productivity gained 1.2 percent during the quarter while that for nondurables manufacturing contracted 1.5 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 2, 2019, First-Time Claims, seasonally adjusted): 211,000 (-8,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 215,250 (-0.9% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (November 2019-preliminary, Index (1966Q1=100), seasonally adjusted): 95.7 (vs. October 2019: 95.5, vs. November 2018: 97.5).
Consumer Credit (September 2019, Outstanding Consumer Credit Balances, net of mortgages and other real estate-backed mortgages, seasonally adjusted): $4.193 trillion (+$9.5 billion vs. August 2019, +4.9% vs. September 2018).
Wholesale Trade (September 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $676.7 billion (-0.4% vs. August 2019, +4.8% vs. September 2018).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Consumer Spending Wobbled Again: May 27 – 31

Real consumer spending failed to grow in April. Here are the five things we learned from U.S. economic data released during the week ending May 31.

#1Personal spending growth matched price gains in April. Real personal consumption expenditures (PCE) were unchanged on a seasonally adjusted basis during the month, down from a 0.9 percent jump in March. Real spending on goods grew 0.1 percent, as a 0.3 percent bounce in spending of nondurables outweighed a 0.4 percent drop for durables expenditures. Real spending on services slipped 0.1 percent. The same Bureau of Economic Analysis report has the PCE deflator, a measure of inflation, growing by 0.3 percent during the month, which means nominal (not price adjusted) personal spending rose 0.3 percent during the month. The increase in spending was funded by gains in nominal personal and disposable income of 0.5 percent and 0.4 percent, respectively. Real disposable income advanced 0.1 percent. The savings rate edged up by 1/10th of a percentage point to +6.2 percent. Over the past year, real disposable income has grown 2.2 percent, while real spending expanded 2.7 percent.Personal Spending 2018-9 053119

#2A revision finds Q1 economic expansion was slightly less robust than previously believed. The Bureau of Economic Analysis lowered its growth estimate of first quarter 2019 Gross Domestic Product (GDP) from a seasonally adjusted annualized rate (SAAR) of +3.2 percent to +3.1 percent. The downward revision was the result of lower than previously believed levels of business investment and private inventory accumulation. Q1 GDP growth outpaced that of the final three months of 2018 (+2.2 percent) but was slower than that of Q2 (+4.2 percent) and Q3 (+3.4 percent). Contributors to Q1 economic growth were (in declining order) personal spending (adding 90-basis points to the increase in GDP), the change in private inventories (+60-basis points), exports (+58-basis points), imports (+39-basis points), government expenditures (+42-basis points), and fixed nonresidential investment (+31-basis points). Residential fixed investment—i.e., housing—subtracted 13-basis points from Q1 GDP growth. The same report included the BEA’s first estimate of Q1 corporate profits, which sank 2.8 percent from the prior quarter. 

#3Consumer sentiment firmed in May. The Conference Board’s Consumer Confidence Index added 4.9 points during the month to a seasonally adjusted reading of 134.1 (1985=100), near its 18-year high. The present conditions index added 6.2 points to 175.2 while the expectations index grew by 3.9 points to 106.6. 38.3 percent of survey respondents described current business conditions as “good” while only 10.2 percent seeing them as “bad.” Similarly, 47.2 percent of survey respondents viewed jobs as being “plentiful” versus only 10.9 percent sensing jobs were “hard to get.” The press release stated the results “suggest no significant pullback in consumer spending in the months ahead.

#4…But one survey hints that confidence softened towards the end of the month. The Index of Consumer Sentiment from the University of Michigan came in at 100.0 (100=1966Q1), up 2.8 points from April 2019 and 2.0 points from May 2018. All of the increase came from a brighter outlook for the future as the expectations index surged by 5.9 points to 93.5 (May 2018: 89.1). The current conditions slipped 2.3 points to 110.0, which also was 1.8 points below its year-ago mark. The press release noted that even though the index had gained from April, “confidence significantly eroded in the last two weeks of May.”

#5Home purchase contract activity slowed in April. The National Association of Realtors’ Pending Home Sales Index (PHSI) pulled back 1.5 percent during the month to a seasonally adjusted reading of 104.3 (2001=100). This left the measure of contract signings of previously owned homes 2.0 percent below from its year-ago reading. The PHSI grew 1.3 percent in the Midwest but lost ground in the South (-2.5 percent), Northeast (-1.8 percent), and West (-1.8 percent). The measure had negative 12-month comparables in all four Census regions. The press release said that despite the pullback in the PHSI, “it’s inevitable for sales to turn higher in a few months.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 25, 2019, First-Time Claims, seasonally adjusted): 215,000 (+3,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 216,750 (-1.5% vs. the same week a year earlier).
FHFA House Price Index (March 2019, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2019, +4.9% vs. March 2018.
Case-Shiller Home Price Index (March 2019, 20-City Index, seasonally adjusted): +0.1% vs. February 2019, +2.7% vs. March 2018.
Agricultural Prices (April 2019, Prices Received by Farmers): +1.1% vs. March 2019, +0.1% vs. April 2018. 

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