Employers Hire, The Fed Cuts: March 2 – 6

While not impacting the labor market yet, the coronavirus pushed the Fed to take action and weighed on purchasing managers’ business outlook. Here are the five things we learned from U.S. economic data released during the week ending March 6.

#1Hiring activity surged in February. Nonfarm payrolls rose by a seasonally adjusted 273,000 during the month, matching January’s gain as the most since early 2018. The same Bureau of Labor Statistics’ report also presented upward revisions for January and December payrolls that reflected the addition of 85,000 more workers that previously reported. (One caution to the February figures is that the BLS collected most of its February data by mid-month and may not reflect a possible hiring slowdown as the impact of coronavirus was spreading across the nation and world.) The goods-producing side of the economy added 61,000 jobs while service sector employment swelled by 167,000 workers. Industries experiencing the biggest payrolls gains included health care/social assistance (+56,500), leisure/hospitality (+51,000), government (+45,000), construction (+42,000), and professional/business services (+41,000). Average hourly wages of $981.09 were up 3.0 percent from a year earlier.

Based on a separate households survey, the unemployment rate slipped 1/10th of a point to 3.5 percent (a multi-decade low hit several times over the past year). Contracting was the labor force, shedding 60,000 people. The labor force participation rate held steady at 63.4 percent while the same measure for adults aged 25 to 54 backed off by 1/10th of a point to 83.0 percent. The median length of unemployment dropped by 2/10ths of a week to 9.1 weeks, while the number of part-time workers seeking a full-time job grew 136,000 to 4.318 million.

#2The Federal Reserve cut its short-term interest rate target to offset economic impacts from the coronavirus. The statement released from this past week’s emergency meeting of the Federal Open Market Committee stressed that “[t]he fundamentals of the U.S. economy remain strong. But due to “evolving risks to economic activity” from COVID-19, the committee unanimously voted to cut the fed funds target rate by a half-point to a range of 1.00 and 1.50 percent. The statement also stressed that the FOMC was “closely monitoring” the situation and “will use its tools and act as appropriate to support the economy.”

#3Trade activity slowed in January. The Census Bureau and Bureau of Economic Analysis report that exports declined $0.8 billion to $208.6 billion (up 1.1 percent from January 2019) while imports dropped $4.2 billion to $253.9 billion (down 2.4 percent from January 2019). The resulting trade deficit of -$45.3 billion was $3.3 billion smaller than that of January and 15.8 percent from a year earlier. The goods deficit narrowed by $2.6 billion to -$67.0 billion while the services surplus expanded by $0.6 billion to +$21.7 billion. Weighing on January export activity were declines for civilian aircraft and crude oil. The U.S. had its biggest goods deficits with China, the European Union, and Mexico.

#4Supply managers report a flat manufacturing sector and growth in services during February. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, shed 8/10th of a point to 50.1. This was the second month in which the PMI was above the critical growth/contraction threshold of 50.0. The most notable among the PMI components was the measure of supplier deliveries, adding 7/10ths of a point to 51.7. Readings above 50.0 for this measure are indicative of slowing deliveries with some comments from survey respondents reporting delayed shipments from “coronavirus-impacted countries.” Fourteen of 18-tracked manufacturing industries expanded in January, led by wood products, furniture, and plastic/rubber products. The press release stated that despite the current challenges, respondents’ comments were “marginally positive regarding near-term growth.”

The ISM’s service sector measure of business activity, the NMI, added 1.8 points to a reading of 57.3. This was the 121 consecutive month in which the service sector had expanded. Three of our NMI components—new orders, employment, and supplier deliveries—grew during the month, while the mark for business activity fell. Sixteen of 18 service sector industries reported growth in February, led by accommodation/food services and management of companies/support services. The press release indicated the survey respondents were “concerned about the coronavirus and its supply chain impact.”

#5Factory orders slowed in January. The Census Bureau estimates new orders for manufactured goods declined 0.5 percent to a seasonally adjusted $497.9 billion. Transportation goods orders slipped as a slowdown in orders for defense aircraft and ships/boats counterbalanced a jump for civilian aircraft and motor vehicles. Net of transportation goods, core factory orders slowed 0.1 percent. Rising were orders for primary metals (+2.1 percent), and machinery (+2.1 percent), and fabricated metal products (+1.1 percent). Falling were orders for electrical equipment/appliances (-1.1 percent), nondurable goods (-0.8 percent), and computers/electronics (-0.2 percent). A proxy for business investment (orders for civilian nonaircraft capital goods) grew 1.1 percent. Shipments fell for the third straight month, losing 0.5 percent to $501.8 billion, while inventories contracted 0.1 percent to $703.4 billion. Unfilled orders essentially held steady at $1.157 trillion.

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 29, 2020, First-Time Claims, seasonally adjusted): 216,000 (-3,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 213,000, -3.8% vs. the same week a year earlier).
Productivity (2019 Q4, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +1.2% vs. 2019 Q3, +1.8% vs. 2018 Q4.
Construction Spending (January 2020, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.369 trillion (+1.8% vs. December 2019, +6.8% vs. January 2019).
Wholesale Inventories (January 2020, Total Inventories of Merchant Wholesalers, seasonally adjusted): $671.6 billion (-0.4% vs. December 2019, +0.4% vs. January 2019.
Consumer Credit (January 2020, Outstanding Non-Real Estate-Back Consumer Loan Balances seasonally adjusted): $4.203 trillion (+12.0 billion vs. December 2019, +4.4% vs. January 2019).
Beige Book

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

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).
Senior Loan Officer Opinion Survey

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

Payrolls and the Service Sector Bloom, Manufacturing Struggles: January 6 – 10

The U.S. labor market added 22.6 million jobs during the 2010s. Here are the five things we learned from U.S. economic data released during the week ending January 10.

#12019 was the 10th straight year of job gains. The Bureau of Labor Statistics reports that nonfarm payrolls expanded by a seasonally adjusted 145,000 in December. This was the 111th straight month of job gains, although the smallest single-month gain since last May. The 2.11 million jobs added jobs for all of 2019 also was the fewest for a year since 2011 (although 2017’s count of 2.15 million was not much larger). All of December’s payrolls gain came from the service sector, which added 140,000 jobs, while the goods-producing side of the economy shed 1,000 workers. The industries adding the most jobs during the month were retail (+41,200), leisure/hospitality (+40,000), health care/social assistance (+33,900), and construction (+20,000). Manufacturing employment fell by 12,000 in December. The same report notes that average hourly earnings have grown 2.9 percent over the past year to $28.32.

Nonfarm Payrolls 2009-2019 011020

A separate households survey keeps the unemployment rate at a post-recession low of 3.5 percent and finds 209,000 people entering the labor market during the month. The labor force participation rate held steady at 63.2 percent, with the same measure for adults 25-54 eking out a 1/10th of a percentage point increase to 82.9 percent (its highest point since June 2009). The median length of unemployment declined by 2/10ths of a week to 9.0 weeks (December 2018: 9.4 weeks), while the count of part-time workers seeking a full-time job fell to a post-recession low of 4.148 million (December 2018: 4.655 million). The broadest measure of labor underutilization (the U-6 series) slipped by 2/10ths of a point to 6.7 percent (the lowest ever for the 26-year old data series).

#2Service sector business activity remained robust in December. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, added 1.1 points to a reading of 55.0. Not only was this the NMI’s best mark since last August, but it also represented the 119th consecutive month in which the measure was above a reading of 50.0, the threshold between a growing and contracting service sector. Two of four NMI components improved in December: business activity/production (up 5.6 points to 57.2) and supplier deliveries (up a full point to 52.5). The other two measures fell: new orders (down 2.2 points to 54.9) and employment (down 3/10ths of a point to 55.2). Eleven of 18-tracked service sector industries reported growth in December, led by retail, arts/entertainment/recreation, and management of companies/support services. 

#3New factory orders continued to struggle in November. The Census Bureau finds new orders for manufactured goods dropped for the third time in four months with a $3.6 billion decrease to a seasonally adjusted $493.0 billion. Durable goods orders fell by $5.2 billion to $242.2 billion, while orders for nondurables grew by $1.6 billion to $250.8 billion. On the bright side, new orders for civilian goods rose 0.7 percent while those for civilian non-aircraft capital goods inched up 0.2 percent. Shipments grew by $1.7 billion to $502.2 billion, with gains for durable and nondurable goods of $0.1 billion and $1.6 billion, respectively. Unfilled orders fell for the second time in three months, shrinking by $4.9 billion to $1.159 trillion while inventories expanded by $2.0 billion to $701.0 billion, its 11th gain in 12 months. 

#4The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis state that exports increased by $1.4 billion during the month to a seasonally adjusted $208.6 billion (+0.3 percent versus November 2018) while imports fell by $2.5 billion to $251.7 billion (-3.8 percent versus November 2018). The resulting trade deficit of -$43.1 billion was down $3.9 billion from October and its smallest reading in more than three years. The goods deficit narrowed by $3.9 billion to -$63.9 billion while the service surplus mostly held steady at +$20.8 billion. The U.S. had its largest goods deficits with China (down $2.2 billion to -$25.6 billion), European Union (-$13.5 billion), and Mexico (-$8.5 billion).

#5Consumers took on more debt in November, but credit card balances declined. The Federal Reserve estimates consumers had outstanding non-real estate backed credit balances of $4.176 trillion (seasonally adjusted). This represented an increase of $12.5 billion for the month and 4.5 percent from a year earlier. Consumers shed $2.3 billion in outstanding revolving credit—i.e., credit cards—to $1.086 trillion (+2.9 percent versus November 2018). On the flipside, nonrevolving credit balances, including those for student and auto loans, grew by $14.9 billion to $3.090 trillion, up 5.0 percent from a year earlier. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 4, 2020, First-Time Claims, seasonally adjusted): 214,000 (-9,000 vs. previous week; -7,000 vs. the same week a year earlier). 4-week moving average: 224,000 (+0.1% vs. the same week a year earlier).
Wholesale Trade (November 2019, Merchant Wholesaler Inventories, seasonally adjusted): $674.9 billion (-0.1% vs. October 2019, +3.3% vs. November 2018).

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