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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Payroll Growth Moderated: September 30 – October 4

The U.S. economy continued to create jobs in September, albeit at a more restrained rate. Here are the five things we learned from U.S. economic data released during the week ending October 4.

#1Job creation slowed, but the unemployment rate fell to a 50-year low in September. Nonfarm payrolls expanded by a seasonally adjusted 136,000 during the month, its smallest increase in four months and below 2018’s 223,000 average monthly job gain. The same Bureau of Economic Analysis report upwardly revised previously reported job gain estimates by 7,000 for July and 38,000 for August. The private sector added 114,000 workers in September, with all but 5,000 of the added job gains coming from the service sector. Industries added the most jobs were health care/social assistance (+41,400), professional/business service’s (+34,000), leisure/hospitality (+21,000), and transportation/warehousing (+15,700). Meanwhile, retailers shed 11,400 workers. Average weekly earnings of $966.30 were up 2.6 percent from a year earlier.

A separate household survey finds the unemployment rate falling by 2/10ths of a percentage point to 3.5 percent, its lowest reading since December 1969. 117,000 people entered the job market during the month, leading the labor force participation rate at 63.2 percent (the measure for adults 25 to 54 also held steady during the month at 82.6 percent). Also, mostly unchanged was the count of part-time workers seeking full-time work (4.350 million people) while the median length of unemployment grew by a half week to 9.4 weeks. Dropping to a data series low was the broadest measure of labor underutilization (the “U-6” series), shedding 3/10ths of a point to 6.9 percent.

#2Purchasing managers report that manufacturing contracted again in September while the service sector’s advance was less robust. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business failed to exceed 50.0—the threshold between an expanding and contracting manufacturing sector—for a second straight month. The PMI came in at 47.9, off 1.3 points from August as only one of five PMI components made a positive contribution (new orders). Dragging down the PMI were lower readings for inventories, production, employment, and supplier deliveries. Only three of 18-tracked manufacturing industries expanded in September: “miscellaneous” manufacturing, food/beverage/tobacco, and chemical products. The press release noted that “global trade remains the most significant issue” affecting manufacturing with sentiment being “cautious regarding near-term growth.”

The headline measure from the Non-Manufacturing Report on Business stayed above a reading of 50.0 as it has for the past 116 months. But the NMI slumped by 3.8 points to a reading of 52.6, its worst mark since August 2016. The supplier deliveries index was the only one of the four NMI components to make a positive contribution, as new orders, business activity/production, and employment lost ground in September. Thirteen of 18 tracked industries reported growth during the month, led by utilities, retail, construction. The press release noted that “respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

#3Factory orders edged down in August. The Census Bureau estimates new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $499.8 billion. New factory orders over the first eight months of 2019 also off 0.1 percent of that of the same period in 2018. Durable goods spending increased 0.2 percent during August but orders on nondurables pulled back 0.3 percent. Net of transportation goods, core factory orders held steady during the month while orders of core civilian nonaircraft capital goods—a proxy for business investment—declined 0.4 percent. Shipments fell for a second straight month, losing 0.1 percent to $503.0 billion. Unfilled orders, on the other hand, gained for a second consecutive month (+0.1 percent to $1.163 trillion). Inventories contracted by less than 0.1 percent to $695.9 billion.

#4The trade deficit widened in August. The Census Bureau and the Bureau of Economic Analysis reports that while exports grew 0.2 percent (to a seasonally adjusted $207.9 billion, virtually matching that of August 2018) during the month, imports bloomed 0.5 percent (to $262.8 billion, also essentially matching that of a year earlier). The resulting trade deficit of -$54.9 billion was 1.6 percent greater than that of July but equaled that of the same month a year ago. The goods deficit expanded by $0.8 billion to -$74.4 billion (2.7 percent versus August 2018) while the services surplus narrowed by less than $0.1 billion to +$19.5 billion (-9.6 percent versus August 2018). Rising were exports of fuel oil, nonmonetary gold, and soybeans, while civilian aircraft exports slowed. On the import side, there were increases for consumer goods (including cell phones) and capital goods but also a substantial decline for industrial supplies/materials.

#5Construction spending was soft in August. The Census Bureau places the seasonally adjusted annualized value of construction put into place during the month at $1.287 trillion, up 0.1 percent from July but 1.8 percent under the year-ago pace. Private sector spending mostly held steady in August at $955.0 billion (-4.0 percent versus August 2018), with residential sector spending rising 0.9 percent but nonresidential spending slumping 1.0 percent during the month. Public sector construction spending gained 0.4 percent in August to an annualized $332.3 billion, up 4.6 percent from a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 28, 2019, First-Time Claims, seasonally adjusted): 219,000 (+6,000 vs. previous week; +1,000 vs. the same week a year earlier). 4-week moving average: 212,500 (Unchanged vs. the same week a year earlier).

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

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.