Americans’ Confidence Higher Now Than It Has Been in Over a Decade: What We Learned During the Week of December 26 – 30

The final holiday gift was a report that consumer sentiment surged during the last 2 months of 2016. Here are the 5 things we learned from U.S. economic data released during the week ending December 30.

#1Another measure of consumer sentiment jumped in December. The Conference Board’s Consumer Confidence Index added 4.3 points during the month to a seasonally adjusted reading of 113.7 (1985 = 100). This follows an 8.5 point bump in November and puts the measure at its highest reading in nearly 15 years. The expectations index surged by 11.1 points during the month to a reading of 105.5 (its highest point in 13 years) while the present conditions index shed 5.9 points to a reading of 126.1. The percentage of survey respondents who expect business conditions will improve over the short-term surged from 16.4% in November to 23.6% in December. Only 8.7% of survey respondents anticipate economic conditions will deteriorate in the coming months. The press release noted that older survey respondents were more likely to have had a “post-election surge in optimism for the economy, jobs and income prospects” while also pointing out that the high level of confidence will continue depending “on whether or not their expectations are realized.” Last week we learned that another confidence survey–the University of Michigan’s Index of Consumer Sentiment–also has surged in the time since the election. That measure hit a 13-year high in December.

#2One reason: the pace of layoffs remained slow for all of 2016. The Department of Labor reports that there were a seasonally adjusted 265,000 first-time claims made for unemployment insurance benefits during the week ending December 24. This was down 10,000 claims from the week before and 20,000 claims under the count from the same week a year earlier. First-time jobless claims have been below 300,000 for an impressive 95 consecutive weeks, a streak not seen for more than 45 years. The 4-week moving average for first-time jobless claims slipped by 750 to 263,000 claims, 5.1% below the moving average of a year ago. 2.140 million people were receiving some form of unemployment insurance benefits during the week ending December 10, 8.4% below the count from the same week in 2015.jobless-claims-123016

#3Increasing interest rates may have sapped home sales activity in November. The National Association of Realtors’ Pending Home Sales Index (PHSI) lost 2.7 points during the month to a seasonally adjusted reading of 107.3 (2001 = 100). This was only off 0.4% from its November 2015 reading. The index fell in 3 of 4 Census regions during the month: West (-6.7%), Midwest (-2.5%), and South (1.2%). The PHSI edged up 0.6% during the Northeast.  There was a similar pattern for the 12-month comparables. That is, the index was below its November 2015 readings in the Midwest (-2.4%), South (-1.3%), and the West (-1.0%). The index, which measures home purchase contract signings, was up 5.7% in the Northeast versus its November 2015 mark. The press release blamed the decline in sales to a “quick ascension of [interest] rates immediately after the election” and tight inventories of homes “in the affordable price range.”

#4Home prices continued to rise in October. The 20-city Case-Shiller Home Price Index jumped 0.6% on a seasonally adjusted basis during the month following a 0.5% gain during September. Prices increased in all 20 metro areas tracked, led by Atlanta (+1.4%), Cleveland (+1.3%), Tampa (+1.2%), Dallas (+1.0%), and San Francisco (+1.0%). The index has grown 5.1% over the past year but remained 7.1% under the measure’s peak value attained back in July 2006. The national Case-Shiller index gained 0.9% on a seasonally adjusted basis and was 5.6% above its October 2015 reading. This measure of home prices was 0.2% above its pre-recession peak value from June 2006. The press release noted higher interest rates and home prices that are expected to “outpace gains in wages and personal income” could end up cooling off the housing market.

#5Wholesalers tightened inventories during October. The Census Bureau reports that inventories of merchant wholesalers contracted 0.4% during the month to a seasonally adjusted $587.7 billion. This was also 0.4% smaller than that reported for October 2015. Durable goods inventories contracted 0.3% during the month to $352.9 billion (-2.2% vs. October 2015), led by declines in inventories for machinery (-1.0%), metals (-1.0%), and hardware (-0.8%). Inventories of furniture jumped 1.6% during the month. Inventories of nondurables shrank 0.4% during the month to $235.8 billion (+2.5% vs. October 2015). Falling were inventories of drugs (-3.2%) and chemicals (-1.1%) while growing were inventories of petroleum (+1.9%) and alcohol (+1.0%). The inventory-to-sales (I/S) ratio slipped by 2-basis points to 1.30. The I/S ratio for October 2015 was 1.33. The I/S ratios for both durable (1.63) and nondurable (1.00) goods fell by 2-basis points during the month.

Other U.S. economic data released over the past week:
Agricultural Prices (November 2016, Prices Received by Farmers (Index: 2011 = 100), seasonally adjusted): 83.6 (+3.5% vs. October 2016, -8.9% vs. November 2015).

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

Quiet Economic Data in a Week of Political Change: What We Learned During the Week of November 7 – 11

During a week of much political news, economic data pointed to stability. Here are the 5 things we learned from U.S. economic data released during the week ending November 11.

#1The number of job openings grew slightly while hiring slowed in September. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 5.486 million job openings at the end of September. This was up 33,000 from August and 2.4% from a year earlier. The year-to-year growth rate in private sector job openings was slightly slower—the 4.987 million private sector job openings at the end of September represented a 2.2% gain from September 2015. Industries with the largest year-to-year gains in job gains were construction (+112.5%), manufacturing (+7.1%), transportation/warehousing (+6.5%), and retail (+2.1%). 5.081 million people were hired during September, off 187,000 from the prior month and down 0.9% from September 2015’s hiring pace. The largest positive 12-month comparables in hiring were in the government (+12.3%), transportation/warehousing (+4.4%), retail (+3.6%), wholesale trade (+3.0%), and professional/business services (+1.8%). Also falling were separations, dropping by 138,000 to 4.914 million. This was 0.8% below the year ago pace of separations. 3.270 million people voluntarily departed their jobs during September, down 581,000 from August but still 11.6% ahead of the September 2015 rate. Layoffs remained soft–at 1.610 million, layoffs declined 281,000 from August 2016 and was 21.7% below the year ago pace.job-openings-hires-separations-111116

#2Wholesalers’ inventories largely held steady in September. Merchant wholesale inventories inched up 1/10th of a percent to a seasonally adjusted $590.2 billion. This was 0.1% below year ago levels for the Census Bureau measure. Inventories of durable goods contracted 0.4% during the month to $354.9 billion (-1.9% vs. September 2015), with inventory declines greater than 1.0% for metals, computer equipment, machinery, and automobiles. Nondurable goods inventories expanded 0.9% during the month to $235.3 billion (+2.7% vs. September 2015), reflecting sizable gains for petroleum (+3.8%), drugs (+3.3%), and paper (+0.8%). The inventory-to-sales (I/S) was at 1.33 in September, matching the ratios from both August 2016 and September 2015. The I/S ratio for durable goods slipped by a basis point to 1.66 while that for nondurable goods added a basis point to 1.02.

#3Small business owner sentiment edged up to its highest point in a year during October. The Small Business Optimism Index from the National Federation of Independent Business added 8/10ths of a point to a seasonally adjusted reading of 94.9. This was the measure’s best reading since October 2015 when it was at 96.0. The gain occurred even though only 5 of the index’s 10 components improved during the month, led by a big 9-point increase in the measure tracking respondents’ plans to increase inventories.  Also improving from their September readings were index components for current job openings (up 4 points), current inventories (up 3 points), whether it is a good time to expand (up 2 points), and expected credit conditions (up a point). Falling sharply was the expected economic conditions index (down 7 points), with declines also seen for indices tracking expected real sales (down 3 points) and earning trends (down a point). The press release, published on election day, said that business owners “need predictability…that the political climate creates the opposite.”

#4Consumer credit balances grew at a slower pace in September. The Federal Reserve places the value of outstanding non-real estate backed consumer loans at a seasonally adjusted $3.707 trillion, a gain of $19.3 billion from August and 6.0% from a year earlier. Non-revolving consumer credit balances—e.g., car loans, college loans—increased by $15.1 billion to $2.728 trillion (+6.0% vs. September 2015). Outstanding revolving consumer credit balances (including credit cards) expanded by $4.2 billion during September to $978.815 billion. (By comparison, revolving credit balanced increased $5.6 billion during August.) Revolving credit balances have grown 5.9% over the past year.

#5Banks report maintaining current lending standards to their commercial customers. According to survey data collected by the Federal Reserve and published in its latest edition of the Senior Loan Officer Opinion Survey on Bank Lending Practices, domestic banks kept their lending standards to both large/medium sized companies and to small firms “unchanged.” Some banks reported increasing the size of credit lines, shrinking the size of spreads between the cost of borrowed funds and their lending rates, and less frequent use of interest rate floors. At the same time, a small percentage of banks reported weaker demand for commercial loans from large/medium sized companies, but a “modest fraction” of banks reported greater interest in lines of credit from their commercial customers.

Other data released over the past week that you might find of interest:
Jobless Claims (week ending November 5, 2016, First-Time Claims, seasonally adjusted): 254,000 (-11,000 vs. previous week; -22,000 vs. the same week a year earlier). 4-week moving average: 259,750 (-4.2% vs. the same week a year earlier).
University of Michigan Index of Consumer Sentiment (November 2016-preliminary, Index (1966Q1=100, seasonally adjusted): 91.6 (vs. October 2016: 87.2, vs. November 2015: 91.3)
Federal Government Budget (October 2016, Surplus/Deficit): -$44.2 billion (vs. October 2015: -$136.6 billion).

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

Job Openings Growing, Hiring Does Not: What We Learned During the Week of June 6 – 10

There are many jobs openings on the market. Unfortunately, employers are not filling those positions. Here are the 5 things we learned from U.S. economic data released during the week ending June 10.

#1Employers have many job openings but are not having success finding workers to fill those jobs. The Bureau of Labor Statistics estimates there were a seasonally adjusted 5.788 million job openings at the end of April, an increase of 118,000 from March, up 3.7% from a year earlier and at a post-recession high. Private sector employers were seeking to fill 5.289 million positions at the end of April, up 4.1% from a year earlier. Industry segments with the largest year-to-year percentage increases in available jobs included wholesale trade (+40.3%), manufacturing (+23.1%), construction (+17.1%), and retail (+16.4%).

But it appears that 061016companies are having difficulty finding workers to fill these positions as hiring slowed by 198,000 in April to 5.092 million jobs. This was up a mere 0.4% from April 2015 and was the softest pace of hiring in 2 years. Private sector hiring was at 4.743 million jobs, up 0.3% from a year earlier. Sectors with the biggest year-to-year percentage gains in hiring were education services (+28.8%), manufacturing (+7.5%), and accommodation/food services (+6.2%). While separations slipped by 108,000 during the month to 4.988 million people, the count of voluntary quits was up 8.6% from a year earlier at 2.912 million. An increase in the number of people voluntarily leaving their jobs is indicative of a labor force that is optimistic about their job prospects. Also positive is the continuing trend of slow layoff activity—more on that below.

#2Productivity slowed during the 1st 3 months of 2016. The Bureau of Labor Statistics reports that nonfarm business labor productivity (output per hours worked) dropped 0.6% during Q1 of this year. This is a revision from the initial Q1 productivity report that had shown a 1.0% decline. This was the 2nd straight quarter of declining output per hours worked. Output increased by only 0.9% during the quarter while the number of hours worked grew 1.5%. Perhaps a signal of some future inflationary pressure is that unit labor costs jumped 4.5% during the 1st 3 months of 2016 thanks to a 4.2% gain in real hourly compensation. Manufacturing labor productivity increased 1.3% during Q1, with nondurable goods productivity up 4.2% while durable goods productivity declined 0.6%. Versus a year earlier, nonfarm business labor productivity grew a feeble 0.7% as a 2.3% increase in output came from a 1.6% increase in the number of hours worked.

#3Consumer took on more debt again in April, albeit at a slower pace. The Federal Reserve estimates outstanding consumer credit balances (not including real estate-back loans) expanded by $13.4 billion during the month to $3.602 trillion. This was up 6.2% from April 2015, its smallest 12-month comparable in more than 2 years. Outstanding revolving credit balances (e.g., credit cards) grew by $1.6 billion (its smallest month-to-month increase since January) to $951.5 billion. This was up 1.7% from a year earlier. Non-revolving credit balances—including loans for college and vehicle purchases—expanded by $11.8 billion to $2.650 trillion, representing a 6.5% increase since April 2015.

#4Wholesalers added to their inventories for a 2nd straight month in April. Inventories at merchant wholesalers grew 0.6% during the month to a seasonally adjusted $587.9 billion. This was 0.9% above year ago levels for the Census Bureau data series. Inventories of durable goods grew 0.2% to $355.0 billion, led by increases for lumber, machinery, electrical equipment, and hardware. Durable inventories remained 1.8% below year ago levels. Nondurable inventories expanded 1.3% during the month to $232.9 billion, with greater than 1 percent inventory gains for farm products, drugs, and apparel. Nondurable inventories have grown 5.5% since April 2015. The inventory-to-sales (I/S) ratio slipped a basis point to 1.35. A year earlier, the I/S ratio was at 1.31.

#5Even though hiring remains uneven, employers are keeping layoff activity in check. The Department of Labor estimates that there were a seasonally adjusted 264,000 1st time claims made for unemployment insurance benefits during the week ending June 4th, down 4,000 claims from the week before and 13,000 from the same week in 2015. 1st time jobless have been below 300,000 for an absolutely impressive 66 consecutive weeks and for 88 of the past 91 weeks. In fact, 1st time claims were once again approaching the post-recession lows that we were seeing back in February and March.

Other data released over the past week that you might find of interest:
CoreLogic Home Price Index (April 2016, Single-Family Home Index, seasonally adjusted): +1.75% vs. March 2016, +6.15% vs. April 2015.
University of Michigan Index of Consumer Sentiment (June 2016-preliminary, Index: 100 = 1966Q1, seasonally adjusted): 94.3 (down  4/10ths of a point from May 2016, down 1.8 points from June 2015).

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