Job Creation Underwhelmed in August: September 2 – 6

Job creation slowed in August while one measure of manufacturing activity turned negative. Here are the five things we learned from U.S. economic data released during the week ending September 6.

#1Private-sector payrolls growth decelerated in August. The Bureau of Labor Statistics tells us that nonfarm payrolls grew by a seasonally adjusted 130,000 during the month, off from the downwardly revised gains in June and July of 178,000 and 159,000, respectively. The expansion in payrolls also is a bit misleading as 25,000 of net gain is the result of temporary federal government hires to support the 2020 Census. The private sector added 96,000 workers, down from July’s 131,000 net gain and the fewest since May. The industries adding the most jobs in August were professional/business services (+37,000), health care/social assistance (+36,800), financial activities (+15,000), construction (+14,000), and leisure/hospitality (+12,000). Average weekly earnings of $966.98 represented a 2.9 percent increase from a year earlier.private and government payrolls 2017-9 090619.png

A separate survey of households keeps the unemployment rate at 3.7 percent for a third consecutive month. The labor force expanded by a robust 590,000 people, translating into a labor force participation rate of 63.2 percent. The same measure for adults aged 25-54 jumped by 6/10ths of a percentage point to 82.6 percent (tying the post-recession high achieved back in January). The median length of unemployment held steady at 8.9 weeks (August 2018: 9.4 weeks) while the count of part-time workers seeking a full-time job grew by 397,000 to 4.381 million (August 2018: 4.368 million). Finally, the broadest measure of labor underutilization from the BLS (the “U-6” series) increased by 2/10ths of a point to 7.2 percent (August 2018: 7.4 percent).

#2The trade picture improved slightly in July. The Census Bureau and the Bureau of Economic Analysis estimate exports increased by $1.2 billion to a seasonally adjusted $207.5 billion (-0.6 percent versus July 2018) while imports slowed by $0.4 billion to $261.4 billion (virtually unchanged from a year earlier). The resulting deficit of -$54.0 billion was $1.5 billion smaller than that of June but also was 2.9 percent greater than that of a year earlier. Over the first seven months of 2019, the trade deficit has totaled -$373.8 billion, 8.2 percent greater than the gap from the first seven months of 2018. The goods deficit fell by $1.6 billion to -$73.6 billion while the services surplus shrank by $0.1 billion to +$19.7 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

#3Purchasing managers tell us manufacturing slowed in August. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, shed 2.1 points during the month to a reading of 49.1. This was the first time in nearly three years in which the PMI fell below a reading of 50.0, indicative of contracting manufacturing sector. Four of five PMI components fell during the month: employment (down 4.3 points), new orders (down 3.6 points), supplier deliveries (down 1.9 points), and production (down 1.3 points). The component for inventories eked out a small gain. Only nine of 18-tracked manufacturing industries reported growth, led by textiles, furniture, and food/beverage/tobacco. The press release noted survey respondents’ comments indicating that “trade remains the most significant issue,” reflected by declining export orders and negative supply chain impacts.

#4…But they also report that service sector activity picked up over the same time. The NMI, the headline index for the Non-Manufacturing Report on Business, ticked up 2.7 points to a reading of 56.4. This was the NMI’s 115th consecutive month with a reading above 50.0 and its best reading since May. Only two of four NMI components increased in August—business activity and new orders—while measures for employment and supplier deliveries each slumped. Sixteen of 18-tracked industries expanded during the month, led by real estate, accommodation/food services, and public administration. The press release noted continued concerns “about tariffs and geopolitical uncertainty,” but also that survey respondents were “mostly positive about business conditions.”

#5Even with the news from above, new factory orders grew in July. The Census Bureau reports that new orders for manufactured goods increased 1.4 percent to a seasonally adjusted $500.3 billion. Even though this was the second consecutive monthly increase, factory orders over the first seven months of the year were tracking only 0.4 percent ahead of that from the same months a year earlier. As we learned last week, transportation orders were a significant driver of the increased orders, jumping 7.0 percent thanks to surges for both civilian (+47.8 percent) and defense (+34.3 percent) aircraft. Durable goods orders jumped 2.0 percent while those of nondurables gained 0.8 percent. Orders of civilian non-aircraft capital goods—a proxy for business investment—increased 0.2 percent in July. Shipments fell for the first time in three months with a 0.2 percent decline to $504.0 billion while unfilled orders mostly held steady after three monthly declines at $1.162 trillion. Inventories expanded for the 11th time over the past 12 months by growing 0.2 percent to $696.5 billion.

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 31, 2019, First-Time Claims, seasonally adjusted): 217,000 (+1,000 vs. previous week; +7,000 vs. the same week a year earlier). 4-week moving average: 216.250 (+1.3% vs. the same week a year earlier).
Productivity (2019Q2, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.3% vs. 2019Q1, +1.8% vs. 2018Q2.
Construction Spending (July 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.289 trillion (+0.1% vs. June 2019, -2.7% vs. July 2018).
Beige Book

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

Hiring Rebounded in March: April 1 – 5

Employers resumed hiring in March while consumers stayed away from stores in February. Here are the five things we learned from U.S. economic data released during the week ending April 5.  

#1Job creation picked back up in March. Nonfarm payrolls grew a seasonally adjusted 196,000 during the month, per the Bureau of Labor Statistics. This was a big improvement from the upwardly revised, but still weak 33,000 jobs added in February. Private sector employers’ payrolls expanded a net 182,000 workers in March, with 170,000 new jobs in the service sector. Industries adding the most workers were health care/social assistance (+61.200), professional/business services (+37,000), leisure/hospitality (+33,000), and construction (+16,000). The same report places average hourly earnings at $27.70 and average weekly earnings at $955.65, both up 3.2 percent from a year earlier.Nonfarm Payrolls 2010-19 040519

Based on a separate household survey, the unemployment rate held steady at 3.8 percent. The labor force shrank by 224,000 people during the month while the labor force participation rate slipped 2/10ths of a percentage point to 63.0 percent. Holding steady, however, was the labor force participation rate for adults aged 25 to 54 at 82.5 percent. The median length of unemployment edged up by 3/10ths of a week to 9.6 weeks while the number of part-time workers seeking a full-time opportunity expanded by 189,000 to 4.499 million. Still at its post-recession low was the broadest measure of labor underutilization (the “U-6” series) at 7.3 percent.

#2Retail sales disappointed in February. The Census Bureau estimates U.S. retail and food services sales declined 0.2 percent to a seasonally adjusted $506.0 billion. The same report upwardly revised January’s sales increase from +0.2 percent to +0.7 percent and left retail sales 2.2 percent ahead of that of February 2018. Sales at both auto dealers/parts stores (+0.7 percent) and gas stations (+1.0 percent) both surged during the month. Net of both, core retail sales sank 0.6 percent for the month but have grown 2.9 percent from a year earlier. In February, sales weakened at retailers focused on building materials (-4.4 percent), electronics/appliances (-1.3 percent), furniture (-0.5 percent), and apparel (-0.4 percent). Also losing track were sales at department stores, which decreased 0.5 percent. Retailers focused on health/personal care (+0.6 percent), hobbies/sporting goods (+0.5 percent), and restaurants/bars (+0.1 percent) each enjoyed sales increases. The shift to online stores continued as nonstore retailers’ sales grew 0.9 percent in February and were up 10.0 percent from a year earlier. 

#3Durable orders slumped in February. The Census Bureau reports that new orders for manufactured durable goods fell 1.6 percent during the month to a seasonally adjusted $250.6 billion. Transportation goods orders declined 4.8 percent, hurt by a sharp 31.1 percent decrease in orders for civilian aircraft and a much smaller 0.1 percent drop in auto orders. Net of transportation goods, core durable goods orders inched up 0.1 percent. Growing were new orders for electrical equipment/appliances (+1.0 percent), primary metals (+0.7 percent), and fabricated metal products (+0.3 percent) while orders slowed 0.3 percent for both machinery and computers/electronics. Durable goods shipments grew for the third time in four months (+0.2 percent). Inventories expanded 0.3 percent while the value of unfilled orders shrank 0.3 percent.

#4Purchasing managers continued to report economic growth in March. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added 1.1 points during the month to a reading of 55.3. This was the 31st consecutive month in which the measure has been above a reading of 50.0, the threshold between a growing and contracting manufacturing sector. Three of the five PMI components improved from the February readings: employment (up 5.2 points to 57.5), new orders (up 1.9 points to 57.4), and production (up a full point to 55.8). Slipping, however, were measures tracking inventories (off 1.6 points to 51.8) and supplier deliveries (down 7/10ths of a point to 54.2). Sixteen of 18 tracked manufacturing industries expanded during the month, led by printing, textiles, and food/beverages.

Meanwhile, the ISM’s measure of service sector activity lost 3.6 points in March to a reading of 56.1. Despite the decline, this was the 110th straight month in which the NMI was above a reading of 50.0. Three of four NMI components pulled back during the month: business activity (down 7.3 points to 57.4), new orders (down 6.2 points to 59.0), and supplier deliveries (down a full point to 50.0). Sixteen of 18 tracked nonmanufacturing industries expanded in March, led by construction and professional/scientific/technical services. The press release characterized survey respondents’ comments as “mostly optimistic,” but noted that purchasing managers expressed “concerns about employment resources and capacity constraints.”

#5Construction spending rose again in February. The Census Bureau reports that the value of construction put in place jumped 1.0 percent during the month to a seasonally adjusted annualized rate (SAAR) of $1.320 trillion (+1.1 percent versus February 2018). Private-sector construction spending inched up 0.2 percent to an annualized $994.5 billion, which was nevertheless 1.9 percent below its February 2018 annualized pace. Private residential spending grew 0.7 percent in February while nonresidential expenditures declined 0.5 percent. Public sector construction spending soared 3.7 percent and has risen 12.1 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 30, 2019, First-Time Claims, seasonally adjusted): 202,000 (-10,000 vs. previous week; -29,000 vs. the same week a year earlier; fewest since December 6, 1969). 4-week moving average: 213,500 (-4.2% vs. the same week a year earlier).
Business Inventories (January 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.014 trillion (+0.8% vs. December 2018, +5.3% vs. January 2018).
Consumer Credit (February 2019, Outstanding Consumer Credit (non-real estate) Balances, seasonally adjusted): $4.046 trillion (+$15.2 billion vs. January 2019, +5.0% vs  February 2018).

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

Employers Slammed on the Brakes: March 4 – 8

The U.S. economy had its worst month for job creation in a year and a half in February. Here are the five things we learned from U.S. economic data released during the week ending March 8.

#1Job creation slowed to a crawl in February. The Bureau of Labor Statistics reports that nonfarm employers added a mere 20,000 workers to their payrolls in February, the fewest jobs added in a single month since September 2017 (then caused by hurricanes disrupting economic activity). Over the past three months, payroll gains have averaged 186,000. Private sector employers added 25,000 workers, split between a 57,000 increase in the service sector and a 32,000 job loss in the goods-producing side of the U.S. economy. Among the industries reporting job gains were professional/business services (+42,000), health/social assistance (+22,500), and wholesale trade (+10,900). Dragging down the payrolls report was the 31,000 jobs lost in construction (following a 53,000 gain in January) and an unchanged count of workers in leisure/hospitality following January’s 89,000 gain. The same report finds average hourly wages growing by 11 cents to $27.66 (up 3.4 percent over the past year) and average weekly earnings increasing by $1.02 to $951.50 (up 3.1 percent over the past year).

A separate survey of households paints a better employment picture, including showing that the unemployment rate declined by 2/10ths of a percentage point to 3.8 percent—the measure has stayed within a tight band between 3.7 percent and 4.0 percent over the past year. While 45,000 people left the labor market during the month, the labor force participation rate remained at 63.2 percent. Labor force participation among adults aged 25 to 54 lost a tenth of a percentage point to 82.5 percent, just off from its highest point since April 2010. The count of part-time workers seeking a full-time opportunity dropped to a post-recession low at 4.310 million while the broadest measure of labor underutilization (the “U-6” series) declined to its lowest point since 2001 at 7.3 percent.labor force participation 2008-18 030819

#2The trade deficit widened in 2018. The Census Bureau and the Bureau of Economic Analysis report that export activity slowed by $3.9 billion in December to $264.9 billion (virtually unchanged from December 2017) while imports accelerated by $5.5 billion to $264.9 billion (+3.1 percent versus December 2017). This left the goods and services trade deficit at -$59.8 billion, its largest since 2008. The goods deficit grew by $9.0 billion to -$81.5 billion while the services surplus shrank by $0.5 billion to +$21.8 billion. The trade deficit for all of 2018 totaled -$621.0 billion, up 12.5 percent from 2017 and the equivalent to 3.0 percent of the U.S. gross domestic product (GDP). The 2017 trade deficit of -$552.3 billion was the equivalent to 2.8 percent of that year’s GDP. Export activity grew $118.5 billion in 2018 to $1.672 trillion while imports were $2.563 trillion (up $292.2 billion from their 2017 total). 

#3The service sector expanded more robustly in February. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, jumped three full points to a reading of 59.7. This was the NMI’s 109th straight month with a reading above 50.0, the threshold between an expanding and contracting service sector. Three of the NMI’s four components improved during the month: new orders (up 7.5 points), business activity/production (up 5.0 points), and supplier deliveries (+2.0 points). The component tracking employment shed 2.6 points during the month. All 18 nonmanufacturing sectors expanded during February, led by transportation/warehousing, management of companies/support services, and wholesale trade. While staying “most optimistic,” survey respondents were “concerned about the uncertainty of tariffs, capacity constraints and employment resources.”

#4Construction spending slowed in December. The Census Bureau places the seasonally adjusted annualized value of construction put into place at $1.293 trillion, representing a 0.6 percent drop from November but still a 1.6 percent advance from a year earlier. Private sector construction spending also slowed 0.6 percent in December to an annualized rate of $991.2 billion (+0.8 percent versus December 2018). Private residential construction spending slumped 1.4 percent while nonresidential spending edged up 0.4 percent. Public sector construction spending suffered a matching 0.6 percent drop during the month to an annualized $296.0 billion (+4.8 percent December 2017).

#5New home sales rebounded in December. The partial federal government shutdown delayed report on December new home sales found the annualized count of transactions grew 3.7 percent during the month to 621,000 units. While this was the best month for the Census Bureau data series since last May, new home sales remained 2.4 percent below the year-ago pace. Sales grew during the month in three of four Census regions during December, with the Midwest being the negative outlier. There were 344,000 new homes available for purchase at the end of December, up 3.0 percent for the month and 17.0 percent from December 2017 and the equivalent to a 6.6 month supply. The former was dragged down by declines in exports of petroleum/crude oil and aircraft while the latter blossomed because of increased imports of computers/accessories and consumer goods.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 2, 2019, First-Time Claims, seasonally adjusted): 223,000 (-3,000 vs. previous week; -7,000 vs. the same week a year earlier). 4-week moving average: 226,250 (+0.7% vs. the same week a year earlier).
Monthly Treasury Statement (January 2019, Federal Government Budget Surplus/Deficit): +$8.7 billion. First 4 months of FY19: -$310.3 billion (76.6% larger than the deficit from the first 4 months of FY18).- New Home Starts (January 2019, Privately-Owned Housing Starts, seasonally adjusted annualized rate): 1.230 million (+18.6% vs. December 2018, -7.8% vs. January 2018).
Productivity (Q4 2018, Nonfarm Labor Productivity, seasonally adjusted annualized rate): +1.9% vs. Q3 2018, +1.8% vs. Q4 2017.
Consumer Credit (January 2019, Outstanding Non-Real Estate Backed Debt, seasonally adjusted): $4.035 trillion (+$17.0 billion vs. December 2018, +5.0% vs. January 2018).
Beige Book

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