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.

Big Job Gains, Wider Trade Deficit: What We Learned During the Week of February 29-March 4

February featured robust job creation, although the average number hours worked and average weekly earnings both declined during the month. Here are the 5 things we learned from U.S. economic data released during the week ending March 4.

#1The service sector led a robust month for job creation in February. The Bureau of Labor Statistics estimates nonfarm employers added 242,000 workers (on a seasonally adjusted basis) to their payrolls in February, the 4th time over the past 5 months in which employment grew by at least 200,000 jobs. Private sector employment increased by 230,000 jobs, with the service sector adding 245,000 workers. Among major industry sectors, the biggest job gains were seen in health care/social assistance (+57,400), retail (+54,900), leisure/hospitality (+48,000), professional/business services (+23,000) and construction (+19,000). Not everything in the report was good, however. While employers added workers, the average number of weekly hours worked and average weekly earnings both declined from their January readings. The former was off 2/10ths of an hour to 34.4 hours (vs. 34.6 hours in February 2015) while the latter dropped $6.11 to $872.04/week (up by only 1.6%. vs. February 2015).030416

 A separate survey of households keeps the unemployment rate at its post-recession low of 4.9% and finds 555,000 people entering the labor force. The resulting labor force participation rate grew to 62.9%, having risen by a half percentage point since last September but still low by historic standards. Also growing was the median length of unemployment, up 3/10ths of a week to 11.2 weeks. Unchanged for the month was the count of “involuntary” part-time workers at 5.988 million (-9.7% vs. February 2015). And falling once again was the broadest measure of labor underutilization from the BLS (the U-6 series), having dropped 2/10ths of a percentage point to a post-recession low of 9.7%. 

#2The January trade report shows continued weakness in export activity. The Census Bureau and the Bureau of Economic Analysis report that the U.S. trade deficit grew by $1.0 billion during the month to -$45.7 billion, which was its highest point since last August. Exports declined by $3.8 billion to $176.5 billion, down 6.6% from January 2015 levels. Also falling was import activity, decreasing by $2.9 billion to $222.1 billion (4.5% below year ago levels). The former contracted thanks to lower exports for capital goods, industrial supplies/materials (including fuel oil) and consumer goods. Import activity slowed for industrial supplies/materials (including crude oil) and capital goods (including civilian aircraft). The goods deficit expanded by $1.1 billion to -$63.7 billion while the services surplus inched up by $0.1 billion to +$18.0 billion. The “real” trade deficit, based on 2009 chained dollars, grew by $1.9 billion to -$62.0 billion (+14.1% vs. January 2015).

#3Purchasing managers tell us manufacturing shrank again in February while service sector growth slowed. The Purchasing Managers’ Index from the Institute for Supply Management added 1.3 points during the month to a seasonally adjusted 49.5. This was the diffusion index’s 5th straight month below a reading of 50.0, indicative of a contracting manufacturing sector. 3 of 5 PMI components improved during the month (production, inventories and employment), 1 held steady (new orders) and 1 contracted (supplier deliveries). 9 of 18 tracked manufacturing industries expanded during February; including, textiles, wood products and furniture. The press release stated that survey respondents were reporting “a more positive view of demand.”

The headline index from the ISM’s Report on Business—Nonmanufacturing declined for the 6th time in 7 months as it slipped 1/10th of a point to 53.4. Even with the recent weakness, the index of service sector activity has remained above a reading of 50.0 (and, therefore, consistent with an expanding service sector) for 72 straight months. Of the 4 index components, only that for business activity improved from its January mark. Falling were measures for new orders, supplier deliveries and employment. The employment reading of 49.7 was its 1st sub-50 reading in 2 years, hinting at possible weakness in the labor market (although the aforementioned employment report above would seem to suggest otherwise). 14 of 18 service sector industries expanded during the month, led by accommodation/food services, management of companies/support services and real estate. Even with the recent declines in the headline index, the press release stated that survey respondents were “projecting a slight optimism in regards to the overall economy.” 

#4Construction spending picked up in January. The Census Bureau estimates the value of construction put into place during the month was at a $1.141 trillion on a seasonally adjusted annualized basis, up 1.5% for the month and 10.4% from a year earlier. Private sector construction spending gained 0.5% to $827.3 billion (+9.5% vs. January 2015). While private sector residential spending was unchanged for the month, it was up 7.7% from a year earlier. While new single-family home construction spending slipped 0.2%, the same for new multi-family units jumped 2.6%. Private sector nonresidential spending gained 1.0% during January and was 11.5% above the year ago pace. Meanwhile, public sector construction spending jumped 4.5% during the month, which put it 13.0% above year ago levels.

#5Auto sales remain a bright spot in the retail market. While essentially flat from January and below the torrid 18+ million seasonally adjusted annualized sales pace of last fall, auto sales remained strong in February. At 17.54 million units SAAR, auto sales were 7.0% above the year ago sales pace and were above 17 million units SAAR for 10 consecutive months, according to manufacturer sales reports collected by Autodata. Car sales were at 7.39 million units SAAR, virtually matching both the January 2016 and February 2015 sales pace. The 10.16 million unit annualized sales rate for light trucks/SUVs was unchanged from the previous month but up 13.0% from a year earlier. But then, cheap gasoline will do that.

Other data released over the past week that you might find of interest:                       
Jobless Claims (week ending February 27, 2016, seasonally adjusted): 278,000 (+6,000 vs. previous week; -49,000 vs. same week a year earlier). 4-week moving average: 270,250 (-11.5% vs. same week a year earlier).
Factory Orders (January 2016, New Orders, seasonally adjusted): $463.9 billion (+1.6% vs. December 2015, -1.9% vs. January 2015).
Agricultural Prices (January 2016, Prices Received by Farmers): -0.7% vs. December 2015, -8.1% vs. January 2015.
Productivity (4th Quarter 2015-revision, Nonfarm Business Output per Hour, seasonally adjusted annualized rate): -2.2% vs. Q3 2015, +0.5% vs. Q4 2014.
Pending Home Sales (January 2016, Index (2001 = 100), seasonally adjusted): 106.0 (-2.5% vs. December 2015, +1.4% vs. January 2015).
Beige Book (March 2016)

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