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.

Employers Expanded Payrolls During the Final Days of 2016: What We Learned During the Week of January 2 – 6

Repeating a monthly trend that had started back in October 2010, employers added workers in December. Survey data also indicated that both the manufacturing and service sectors grew at the end of 2016.  Here are the 5 things we learned from U.S. economic data released during the week ending January 6.

#12016 ended with the pace of job creation slowing slightly. Per the Bureau of Labor Statistics, nonfarm payrolls expanded by 156,000 jobs during December. This was below the 204,000 jobs created in November but represented the 75th straight month with job growth. Private sector employers added 144,000 jobs during the month, led by gains in health care/social assistance (+63,300), leisure/hospitality (+24,000), manufacturing (+17,000), professional/business services (+15,000), transportation/warehousing (+14,700), and government (+12,000). Average hourly wages hit $26.00, 2.9% above year ago hourly wages. The average number of hours worked held steady at 34.3 hours (December 2015: 34.5), so median weekly earnings were “only” up 2.3% from a year earlier to $891.90. payroll_wage_gains_010617

The separate survey of households indicates the unemployment rate edged up 1/10th of a point during December to 4.7% (December 2015: 5.0%).  184,000 people entered the labor market during the month, leading to a 1/10th of a point gain in the labor force participation rate to 62.7% (matching the year ago reading). The median length of unemployment inched up 1/10th of a week to 10.3 weeks (December 2015: 10.7 weeks) while the count of part-time workers seeking a full-time job slipped by 61,000 to 5.598 million (December 2015: 6.057 million). Finally, the broadest measure of labor underutilization published by the BLS (the U-6 series) dropped to another post-recession low at 9.2% (December 2015: 9.9 weeks).

#2Purchasing managers indicate both the manufacturing and service sectors of the economy expanded during December. The Institute for Supply Management’s Purchasing Managers Index (PMI) added 1.5 points during the month to a seasonally adjusted reading of 54.7, its best reading for 2016. This was the 4th straight month in which the PMI was above a reading of 50.0, indicative of an expanding manufacturing sector. 3 of 5 components of the PMI improved from their November marks: new orders (+7.2 points to 60.2), production (+4.3 points to 60.3), and employment (up 8/10ths of a point to 53.1). Declining were index components that track supplier deliveries (-2.8 points to 52.9) and inventories (-2.0 points to 47.0). 11 of 18 tracked manufacturing industries expanded during the month, led by petroleum/coal products and primary metals. The press release noted that “forward-looking comments from the panel [were] largely positive.”

Meanwhile, the headline index from the ISM’s Non-Manufacturing Report on Business was unchanged for the month as it remained its 2016 high of 57.2. This was the measure of service sector activity 89th straight month above a reading of 50.0. Of the measure’s 4 components, only that for new orders (+4.6 points to 61.6) improved during the month. The index for employment lost 4.4 points (to 53.8) while the measure of business activity/product slipped 3/10ths of a point to 61.4. The supplier deliveries measure remained at 52.0. 12 of 18 tracked nonmanufacturing industries expanded during the month, including mining, retail trade, and finance/insurance. The press release indicated that survey participants’ comments were “mostly positive about business conditions and the overall economy.”

#3A big drop in orders for civilian aircraft pulled down factory orders in November. The Census Bureau reports the value of new orders for manufactured goods fell 2.4% during the month to a seasonally adjusted $458.3 billion (-0.3% vs. November 2015). This was the first drop in new orders after 4 straight months of increases. The primary culprit for the decline was the 73.8% freefall in orders for civilian aircraft (note that aircraft sales tend to be very volatile month-to-month). Orders for all transportation goods fell 13.2% during the month, even as orders for motor vehicles gained 1.3%. Net of transportation goods, factory orders edged up 0.1% during November. This included month-to-month order gains for primary metals (+2.2%), machinery (+1.4%), computers/electronics (+0.5%), and furniture (+0.4%). Nondefense capital goods orders excluding aircraft—a proxy measure of business investment—grew 0.9% during the month.

#4Auto manufacturers ended a record year with strong sales in December. Sales of light vehicles rose 3.1% during the month to a seasonally adjusted annualized rate (SAAR) of 18.43 million units. This was 5.2% above the December 2015 sales pace. Consumers continued to show an increased preference for SUVs and trucks over automobiles. Sales of light trucks and SUVs grew 4.3% during the month to 11.17 million units (+11.4% vs. December 2015). Sales of automobiles increased a less robust 1.4% during the month to 7.26 million units. This was 3.2% below the December 2015 sales pace. Autodata Corporation’s analysis places vehicles sales at 17.550 million units for all of 2016, up 0.4% from what had previously been the all-time highest sales pace in 2015.

#5Construction spending enjoyed broad-based gains in November. The Census Bureau estimates the seasonally adjusted annualized value of construction put into place grew 0.9% during the month to $1.192 trillion. This was up 4.1% from a year earlier and was its highest point since April 2006. Private sector construction spending jumped 1.0% during November to a SAAR of $892.8 billion (+4.6% vs. November 2015). Residential construction gained 1.0% during the month while nonresidential spending increased 0.8%. (The 12-month comparables were +3.0% and +6.4%, respectively.) Public sector spending gained 0.8% during November to hit a SAAR of $282.5 billion (+2.6% vs. November 2015).

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 31, 2016, First-Time Claims, seasonally adjusted): 235,000 (-28,000 vs. previous week; -42,000 vs. the same week a year earlier). 4-week moving average: 256,750 (-7.1% vs. the same week a year earlier).
FOMC minutes

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

Employers Expand Payrolls, Purchasing Managers Report More Activity: What We Learned During the Week of October 3 – 7

Employers added jobs at a moderate pace during September. Here are the 5 things we learned from U.S. economic data released during the week ending October 7.

#1Job creation was at a solid but not spectacular pace during September. Nonfarm employers added 156,000 jobs on a seasonally adjusted basis during the month, according to the Bureau of Labor Statistics. In the same report, the BLS downwardly revised its July estimate of job creation by 23,000 to +252,000 but added 16,000 jobs to its August payroll estimate to +167,000. Private sector employers expanded their payrolls by 167,000 jobs during September, split between 10,000 new jobs in the goods producing side of the economy and 157,000 new jobs in the service sector. Industry sectors with the most added jobs included financial services (+67,000), temporary help services (+29,000), construction (+23,000), retail (+22,000), and health care/social assistance (+21,800). The average weekly hours worked crept up by 1/10th of an hour to 34.4 hours while average weekly earnings were at $887.18 (+2.3% vs. September 2015).nonfarm_payroll_gains_100716

A separate survey of households puts the unemployment rate at 5.0%, up 1/10th of a percentage point from August. A huge 444,000 adults entered the labor force during the month while the labor force participation rate added 1/10th of a percentage point to 62.9%. The typical unemployed person had been out of work for 10.3 weeks, down 9/10ths of a week from August and a full week from a year earlier. 5.894 million people held part-time jobs but were seeking a full-time opportunity, down 159,000 from August and 140,000 from September 2015. The broadest measure of labor underutilization from the BLS (the U-6 series) held steady during the month at 9.7%. A year ago, the same measure was at 10.0%. 

#2The trade deficit widened slightly during August. The Census Bureau and Bureau of Economic Analysis reports that exports grew $1.5 billion to $187.9 billion (+0.7% vs. August 2015) while imports increased $2.6 billion to $228.6 billion (-1.2% vs. August 2015). The resulting trade deficit of -$40.7 billion was $1.2 billion larger than that in July but down 8.8% from a year earlier. The goods deficit essentially held steady at -$60.3 billion (8.7% below the August 2015 deficit) while the services surplus shrank by $1.2 billion to +$19.6 billion (-8.5% vs. August 2015). The former reflected a $1.2 increase in exported goods (including gains in industrial supplies/materials and automobiles and a decline in civilian aircraft exports) and a $1.1 billion increase in goods imports (including greater imports of capital goods). The U.S. had its largest goods trade deficits with China, European Union, Japan, Germany, and Mexico.

#3August featured a small increase in factory orders. The Census Bureau reports new orders for manufactured goods grew 0.2% during the month to a seasonally adjusted $453.1 billion (-1.6% vs. August 2015). Orders for transportation goods increased 0.7% despite a 22.7% decline in civilian aircraft orders. Growing were orders for motor vehicles (+0.7%) and defense aircraft (+26.9%). Net of transportation goods, new orders were unchanged during the month and were 1.6% below the year ago pace. Growing were orders for furniture (+3.5%) and primary metals (+0.4%) while orders for electrical equipment/appliances (-2.3%), computers/electronics (-0.6%), machinery (-0.4%), and fabricated metals (-0.3%) all declined. A measure of business investment (nondefense capital goods net of aircraft) increased 0.9% during the month. Shipments increased for the 5th time over the past 6 months albeit with a less than 0.1% gain to $458.1 billion (-2.0% vs. August 2015). The value of unfilled orders contracted for a 3rd consecutive month (-0.1% to $1.123 trillion) while inventories expanded 0.2% to $622.0 billion.

#4Manufacturing and service sector activity grew in September. The Purchasing Managers Index (PMI) bounced back from a drop in August with a 2.1 point gain in September to 51.5, according to the Institute for Supply Management. This was the PMI’s return to an above 50.0 reading, indicative of an expanding manufacturing sector. 4 of 5 PMI components improved during the month: new orders (+6.0 points to 55.1), production (+3.2 points to 52.8), employment (+1.4 points to 49.7), and inventories (1/2 point to 49.5). The supplier deliveries index shed 6/10ths of a point to 50.3. Just seven of the 18 tracked manufacturing segments expanded during the month, led by nonmetallic mineral products, furniture, and textile mills. ISM’s report also indicates that the PMI reading of 51.5 PMI is consistent with economic expansion at a 2.6% annualized growth rate.

Meanwhile, the headline index from ISM’s nonmanufacturing Report on Business hit its highest reading in 11 months with a 5.7 gain to 57.1. This was the measure’s 80th straight month above the expansion/contraction threshold of 50.0. All four index components—business activity, new orders, employment, and supplier deliveries— had readings above 50.0, but the supplier deliveries measure slipped from its August mark. 14 of 18 tracked service sector industries enjoyed growth during September, led by agricultural/fishing/hunting, utilities, and retail. The press release noted that comments from survey participants were “largely positive” but noted “[a] degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election.”

#5Vehicle sales picked back up in September but remained below their year ago pace. Autodata’s estimate of vehicle sales grew 4.5% during the month to a seasonally adjusted annualized rate of 17.76 million units. This was 2nd to only July as the best month for vehicle sales in 2016 based on the SAAR. Sales were off 1.6% from the September 2015 pace, but still among the strongest  readings seen post recession. Sales of automobiles gained 6.9% during the month to a SAAR of 7.24 million cars, its best reading since February. Meanwhile, sales of light trucks/SUVs increased 2.9% during the month to 10.51 million units (SAAR). This was 3.6% above its year ago sales rate.

Other data released over the past week that you might find of interest:
Jobless Claims (week ending October 1, 2016, First-Time Claims, seasonally adjusted): 249,000 (-5,000 vs. previous week; -18,000 vs. the same week a year earlier). 4-week moving average: 258,500 (-6.6% vs. the same week a year earlier).
Construction Spending (August, 2016, Value of Construction Put Into Place, seasonally adjusted annualized rate): $1.142 trillion (-0.7% vs. July 2016, -0.3% vs. August 2015).
Consumer Credit (August 2016, Outstanding Credit Balances (net of real estate backed loans), seasonally adjusted): $3.687 trillion (+$25.8 billion vs. July 2016, +6.3% vs. August 2015).

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