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.

Job Creation Surprises to the Upside: December 2 – 6

Job creation accelerated in November while trade activity slackened in October. Here are the five things we learned from U.S. economic data released during the week ending December 6.

#1Employers added more workers in November than in any other month since January. Nonfarm payrolls expanded by a seasonally adjusted 266,000 workers during the month, up from the 193,000 added in September and October’s 156,000 gain. The now-settled General Motors strike held down job creation during those two months—employment in motor vehicles/parts rose by 41,300 in November as strikers returned to their jobs. The Bureau of Labor Statistics has private-sector employment blooming by 254,000 workers, split between gains of 206,000 in the service sector and 48,000 in the goods-producing side of the U.S. economy. Industries reporting the biggest job gains included health care/social assistance (+60,200), manufacturing (+54,000), leisure/hospitality (+45,000), and professional/business services (+38,000). Average weekly earnings have risen 3.1 percent over the past year to $973.18.Nonfarm payrolls November 2018 - November 2019

A separate survey of households has the unemployment rate falling back to a multi-decade low of 3.5 percent (it also was at 3.5 percent in September). A modest 40,000 people entered the labor force during November while the labor force participation rate slipped 1/10th of a point to 63.2 percent. The labor force participation rate for adults 25 to 54 held steady at 82.8 percent. The median length of unemployment crept up by 1/10th of a week to 9.4 weeks (November 2018: 9.0 weeks), while the count of part-time workers mostly held steady at 4.322 million workers (although down 9.6 percent from a year earlier). The BLS’s broadest measure of labor underutilization (the “U-6” series) slipped by 1/10th of a point to 6.9 percent, matching the multi-decade low achieved in September.

#2The trade deficit narrowed significantly in October as overall trade activity slowed. The Census Bureau and the Bureau of Economic Analysis indicate that imports fell by $4.3 billion during the month to a seasonally adjusted $254.3 billion (-4.7 percent versus a year earlier) while exports slipped $0.4 billion to $207.1 billion (-1.4 percent versus the previous year). The resulting trade deficit of -$47.2 billion was $3.9 billion smaller than the prior month and off 16.7 percent from a year earlier. The goods deficit contracted by $3.7 billion to -$68.0 billion (October 2018: -$77.3 billion) while the services surplus grew by $0.2 billion to +20.8 billion (October 2018: +$20.6 billion). The former not only included sharp declines in imports of both consumer goods and automobiles, but also fewer exports of cars and both consumer and capital goods. The U.S. had its biggest goods deficits with China (-$27.8 billion), the European Union (-$14.3 billion), and Mexico (-$7.8 billion).

#3Factory orders and shipments showed some life in October. The Census Bureau reports that new orders for manufactured goods grew 0.3 percent during the month to a seasonally adjusted $497.0 billion (-0.4 percent versus October 2018). Durable goods orders jumped 0.5 percent (helped by a 0.7 percent bounce in transportation orders) while nondurable goods orders held steady. Also stemming a decline were shipments, which grew by less than 0.1 percent to $500.2 billion (+0.8 percent versus October 2018). Unfilled orders inched up 0.1 percent to $1.164 trillion (-1.6 percent versus October 2018), while inventories expanded 0.1 percent to $698.8 billion (+2.3 percent versus October 2018).

#4Purchasing managers say that the manufacturing sector contracted for a fourth straight month in November. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, slipped by 2/10ths of a point to a seasonally adjusted 48.1. This was the fourth straight month in which the PMI was under a reading of 50.0, which is the threshold between a growing and contracting manufacturing sector. Among the five PMI components, two (production and supplier deliveries) improved during November, while the other three (inventories, employment, and new orders) fell. Only five of 18-tracked manufacturing industries reported growth during the month, led by apparel, food/beverage/tobacco, and paper products. The press release noted that survey respondents’ sentiment was “neutral regarding near-term growth.”

#5Growth in the service sector slowed in November. The headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business—the NMI—lost 8/10ths of a point to a reading of 53.9. Even with the drop, the NMI has been over a reading of 50.0 for 118 consecutive months, indicative of an expanding service sector. Among the four index components, the one tied to business activity fell sharply while that for supplier delivers suffered a smaller decline. Rising were NMI components for employment and new orders. Twelve of 18-tracked service sector industries grew in November, led by real estate, health care/social assistance, and arts/entertainment/recreation. Commenters to ISM’s survey said they were “hampered by constraints in labor resources.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 30, 2019, First-Time Claims, seasonally adjusted): 203,000 (-10,000 vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 217,750 (-4.3% vs. the same week a year earlier).
Construction Spending (October 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.291 trillion (-0.8% vs. September 2019, +1.1% vs. October 2018).
Consumer Credit (October 2019, Outstanding Non-Real Estate Back Credit Balances, seasonally adjusted): $4.165 trillion (+$18.9 billion vs. September 2019, +4.8% vs. October 2018).
Wholesale Trade (October 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $675.6 billion (+0.1% vs. September 2019, +3.8% vs. October 2018).

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

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).
Senior Loan Officer Opinion Survey

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