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.

Trade Data Holds Steady in July: September 4 – 8

The trade picture barely changed during July, but the service sector perked up in August. Here are the five things we learned from U.S. economic data released during the week ending September 8.

#1The trade deficit held steady during July. The Census Bureau and Bureau of Economic Analysis tell us that exports slowed $0.6 billion to a seasonally adjusted $194.4 billion (+4.9 percent versus July 2016) and that import activity slipped by $0.4 billion to $238.4 billion (+5.1 percent versus 2016). The resulting trade deficit of $43.7 billion was up a mere $0.1 billion from June but was up 5.8 percent from a year earlier. The goods deficit was essentially unchanged at -$65.3 billion while the services surplus shrank by $0.2 billion to +$21.6 billion. While civilian aircraft exports grew by $1.1 billion, exports slowed for consumer goods and automotive vehicles. Capital goods imports increased $1.3 billion (largely of computers and associated accessories) while imports of crude oil and passenger cars both declined. The United States had its largest goods trade deficits in July with China, the European Union, Japan, and Mexico.trade deficit 2013-2017-090817

#2A slowdown in transportation goods pulled down factory orders during July. Per the Census Bureau, new orders for manufactured goods fell 3.3 percent during the month to a seasonally adjusted $466.4 billion. Transportation goods orders plummeted 19.2 percent, thanks to a 70.8 percent drop in orders for manufactured goods and a 0.9 percent decline in orders for automobiles. Net of transportation goods, core factory orders gained 0.5 percent during July to a seasonally adjusted $392.2 billion. Growing during the month were new orders for electrical equipment/appliances (+2.6 percent), computers/electronics (+2.1 percent), furniture (+1.9 percent), fabricated metal products (+0.5 percent), nondurable goods (+0.4 percent), and primary metals (+0.2 percent). Shipments grew 0.3 percent during July, with shipments of non-transportation goods increasing 0.4 percent. Unfilled orders contracted 0.3 percent while inventories expanded 0.2 percent.

#3Business activity in the service sector picked up during August. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business grew by 1.4 points during to a seasonally adjusted reading of 55.3, regaining some of the measure’s losses from July. The NMI has been above a reading of 50.0—indicative of an expanding service sector—for 92 straight months. Three of the NMI’s four components improved during the month: business activity, new orders, and employment. The component for supplier deliveries declined during the month. Fifteen of 18 tracked service sector industries reported growth during the month, led by retail, information, and management of companies/support services. The press released noted that a “majority of respondents are optimistic about business conditions going forward.”

#4Q2 productivity growth was a bit better than previously believed. The Bureau of Labor Statistics upwardly revised its estimate of nonfarm business sector productivity growth from the 0.9 percent gain reported a month ago to a 1.5 percent increase, with output growing 4.0 percent and the number of hours worked rising 2.5 percent. Productivity gains have varied greatly quarter-to-quarter and, as a result, output per hour worked has increased by only 1.3 percent over the past year. Manufacturing sector productivity rose 2.9 percent during the quarter (up from the 2.5 percent previously reported), led by a 3.8 percent bump in output per hour for durable goods (this was unchanged from the initial estimate released a month ago). Nondurable goods production increased 0.5 percent during Q2, an improvement from the original estimate of a 0.1 percent contraction.

#5Hurricane Harvey led to a surge in jobless claims during the final days of August. The Department of Labor estimates that there were a seasonally adjusted 298,000 first time claims made for unemployment insurance benefits during the week ending September 2. This was up 62,000 from the previous week and 41,000 claims from the same week a year earlier. The state of Texas—site of Harvey’s prolonged landfall—suffered from 63,742 first time claims, up a sharp 51,637 claims from the previous week. The state with the second largest biggest week-to-week increase in first-time claims was Michigan, which saw its first-time claims count grow by a mere 3,283. The boost in unemployment resulting from Harvey is expected to be fleeting, but of course, Hurricane Irma will have similar (if also likely temporary) negative impact on the labor market over the coming weeks. Even with the surge in first-time claims, the four-week moving average of first-time claims of 250,250 was still down 3.6 percent from the moving average of the same week a year earlier.

Other U.S. economic data released over the past week:
Consumer Credit (July 2017, Outstanding Consumer Credit Balances-net of real-estate backed loans, seasonally adjusted): $3.754 trillion (+$18.5 billion vs. June 2017, +5.9% vs. July 2016).
Wholesale Inventories (July 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $602.4 billion (+0.6% vs. June 2017, +3.3% vs. July 2016).
Beige Book

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

Hiring Picks Up, Trade Deficit Narrows: July 3 – 7

The labor market rebounded in June with accelerated hiring in health/social assistance and leisure/hospitality. Here are the five things we learned from U.S. economic data released during the week ending July 7.

#1Employers picked up hiring activity during June. The Bureau of Labor Statistics indicates nonfarm payrolls expanded during June by a seasonally adjusted 222,000, the best month for job creation since February. Further, the BLS upwardly revised its April and May employment estimates by a combined 47,000 jobs to +207,000 and +152,000, respectively. Private sector payrolls grew during June by 187,000 while government employers added 35,000 jobs. Private sector industries enjoying the largest payroll gains during the month were health care/social assistance (+59,100), leisure/hospitality (+36,000), professional/business services (+35,000), financial activities (+17,000), and construction (+16,000). Retailers added 8,100 workers following declines in April and May. The average work week grew by 1/10th of an hour to 34.5 hours (June 2016: 34.4 hours) with average weekly earnings up 2.8 percent from a year earlier to $905.63.

Based on a separate survey of households, the unemployment rate edged up by 1/10th of a percentage point to 4.4 percent. This was a half point below the year ago unemployment rate of 4.9 percent, leaving it near its post-recession low point. 361,000 people entered the labor force during the month, resulting in a 1/10th of a percentage point gain in the labor force participation rate to 62.8 percent. The median length of unemployment fell by 8/10ths of a week to 9.6 weeks (June 2016: 10.2 weeks). While the number of part-time workers seeking a full-time opportunity (“involuntary” part-time workers) increased by 107,000 during June, it was still 8.5 percent below the count of a year earlier. Finally, the broadest measure of labor underutilization (the “U6” series) increased 2/10ths of a percentage point to 8.6 percent, a full percentage point below the measure’s year-ago reading.Unemployment Rate Trend 2006 2017-070717

#2The trade deficit narrowed during May. The Census Bureau and Bureau of Economic Analysis report exports grew by $0.9 billion during the month to $192.0 billion (+5.4 percent vs. May 2016) while imports narrowed by $0.2 billion to $238.5 billion (+6.6 percent vs. May 2016). This left the trade deficit at $46.5 billion, $1.1 billion smaller than that of April but up 12.0 percent over the past year. The goods deficit contracted by $0.9 billion to -$67.5 billion while the goods surplus widened by $0.2 billion to +$21.0 billion. Exports grew during the month for automotive vehicles (+$0.6 billion) and cell phones/other household goods (+$0.5 billion) but slowed for soybeans (-$0.6 billion). Imports fell for consumer goods (-$1.5 billion, including -$0.9 billion for cell phones), automotive vehicles (-$0.7 billion), but grew by $1.3 billion for capital goods. The trade deficit for the first five months of 2017 was 13.1 percent larger than that of 2016, the result of exports growing 6.0 percent and imports expanding 7.3 percent.

#3The decline in new factory orders accelerated in May. The Census Bureau reports that new orders for manufactured goods fell 0.8 percent during the month following a 0.3 percent drop in April. The resulting seasonally adjusted value of new orders of $464.9 billion was up 4.2 percent from a year earlier. Both durable and nondurable goods orders slowed by a similar 0.8 percent rate while those of nondefense, nonaircraft capital goods (a measure of business investment) edged up 0.2 percent. Shipments grew for the fifth time in six months with a 0.1 percent increase to $471.5 billion. Durable goods shipments rose 1.0 percent while nondurable goods shipments slowed 0.8 percent. Unfilled order shrank 0.2 percent to $1.120 trillion while inventories contracted 0.1 percent to $648.9 billion.

#4Purchasing managers report that both manufacturing and service sector business activity grew during June. The Purchasing Managers Index (PMI) from the Institute for Supply Management gained 2.9 points during June to a seasonally adjusted 57.8. This was the 10th straight month in which the measure was above a reading of 50.0, indicative of an expanding manufacturing sector. Four of five PMI components improved during the month: production (up 5.3 points to 62.4), new orders (up 4.0 points to 63.5), supplier deliveries (up 3.7 points to 57.2), and employment (up 3.7 points to 57.2). The index tracking inventories shed 2.5 points to a contractionary reading of 49.0. Fifteen of 18 tracked manufacturing industry segments expanded during the month, led by furniture, nonmetallic mineral productions, and paper products. The press release indicated that survey respondent comments noted “expanding business” but that “supplier deliveries and inventories [were] struggling to keep up with the production pace.”

The ISM’s measure of nonmanufacturing economic activity added a half point during June to 57.4, the 90th consecutive month in which the NMI was above a reading of 50.0. Three of four index components improved from their June marks: new orders (up 2.8 points to 60.5), supplier deliveries (up a full point to 52.5), and business activity/production (up 1/10th of a point to 60.8). The employment index shed two full points to 57.8. Sixteen of 18 tracked service sector industries expanded during June, led by agriculture, wholesale trade, management of companies/support. The press release said that the “majority of respondents’ comments are positive about business conditions and the overall economy.”

#5Vehicle sales continued to slacken in June. Per automaker sales data compiled by Autodata, the seasonally adjusted annualized rate of vehicle sales was below 17 million units for a fourth straight month. The annualized sales rate of 16.50 million vehicles was down 1.0 percent from May and 1.8 percent from a year earlier. Car sales continued to slump, dropping 4.7 percent during the month and 13.2 percent from June 2016 to an annualized rate of 5.91 million vehicles. Light truck/SUV sales inched up 1.3 percent during June to an annualized rate of 10.60 million vehicles. This was 5.8 percent above light truck/SUV sales of a year earlier

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 1, 2017, First-Time Claims, seasonally adjusted): 248,000 +4,000 vs. previous week; -11,000 vs. the same week a year earlier). 4-week moving average: 243,000 (-8.4% vs. the same week a year earlier).
Construction Spending (May 2017, Value of Construction Put in Place, seasonally adjusted annual rate): $1.230 trillion (unchanged vs. April 2017, +4.5% vs. May 2016).
FOMC minutes

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