The Fed Holds Still…For Now: November 5 – 9

The Federal Reserve finds the U.S. economy continuing to strengthen.  Here are the five things we learned from U.S. economic data released during the week ending November 9.

#1The Fed paused last week but appears primed to move again next month. The statement released following this week’s meeting of the Federal Open Market Committee (FOMC) followed that of prior statements in noting the “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.” Also “strong” was consumer spending but the statement indicates that business fixed investment had “moderated.” The committee expects these vibrant business conditions will remain over the “medium term.” So, while the FOMC voted unanimously to keep the fed funds target rate in a range between 2.0 and 2.25 percent, the statement reaffirmed expectations for “further gradual” rate increases. In fact, the general expectation is for a quarter-point rate boost at the final 2018 FOMC meeting next month.

#2The number of available jobs slipped in September but remained near record levels. The Bureau of Labor Statistics estimates that there were 7.009 million job openings (seasonally adjusted) on the final day of September. Even though this represented a drop of 284,000 from the prior month, the count of job openings has grown 12.5 percent over the past year. By comparison, 5.964 million people were unemployed in September. Private sector job openings totaled 6.407 million, up 11.9 percent from September 2017. The biggest year-to-year percentage gains in job openings were seen in construction (+55.3 percent), accommodation/food services (+38.3 percent), health care/social assistance (+17.9 percent), and wholesale trade (+17.3 percent). Hiring also slowed in September, dropping by 162,000 to 5.744 million. Despite September’s decline, hiring remained 6.9 percent ahead of the year-ago pace. Private sector employers hired 5.393 million workers (+7.2 percent), with large 12-month comparables in health care/social assistance (+16.0 percent), retail (+15.1 percent), and financial activities (+14.7 percent). 5.667 million people left their jobs during September, up 6.0 percent from a year earlier. This included 3.648 million people leaving their jobs voluntarily (+10.6 percent versus September 2017) and 1.700 million layoffs (-3.6 percent versus September 2017).

#3Wholesale prices for energy, food, and services rose in October. Final demand Producer Price Index (PPI) jumped 0.6 percent on a seasonally adjusted basis during the month, its largest single-month gain for the Bureau of Labor Statistics measure since late 2012. More than 60 percent of the surge in wholesale prices can be linked to the 1.6 percent jump in PPI for trade services—i.e., retailer and wholesaler margins—that itself appears to be linked to retailers rising prices just prior to the holiday sales season. Also gaining were wholesale prices for energy (+2.7 percent) and food (+1.0 percent). Gasoline PPI rose 7.6 percent, with higher prices also seen for diesel fuel, vegetables, and beef. Net of energy, food, and trade services, core final demand PPI increased 0.2 percent during October, half of the previous month’s gain. Over the past year, final demand PPI has risen 2.9 percent, while the core measure has a 12-month comparable of +2.8 percent.

#4The service sector expanded at a slightly slower rate in October. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business—the NMI—shed 1.3 points during the month to a reading of 60.3. Despite the decline, this was the NMI’s second best reading of 2018 and was the 105th time the measure was above a reading of 50.0 (indicative of an expanding service sector). Three of four NMI component declined during the month: business activity (down 2.7 points), employment (down 2.7 points), and new orders (off 1/10th of a point). The supplier deliveries measure added a half point. Seventeen of 18 tracked industries expanded during the month, led by real estate, information, and transportation/warehousing. While most survey respondents’ comments were “positive,” the press release noted “continued concerns about capacity, logistics, and tariffs.”

#5Wholesale inventories expanded again in September. The Census Bureau estimates inventories of merchant wholesalers widened 0.4 percent during the month to a seasonally adjusted $644.6 billion. This matched August’s 0.4 percent gain and left wholesale inventories up 5.2 percent from a year earlier. Wholesale durable goods inventories grew 0.8 percent during the month to a seasonally adjusted $393.4 billion (+6.8 percent versus September 2017) while inventories of nondurables contracted 0.4 percent to $251.2 billion (+2.8 percent versus September 2017). Inventories grew for every major category of durable goods while the nondurables figure was pulled down by shrinking inventories of farm goods, drugs, and paper. The inventory-to-sales ratio for wholesalers held firm during September at 1.26, although this represented a three-basis point decline from a year earlier. Rising a basis point was the I/S ratio for durable goods (1.59) while shedding a basis point was the I/S ratio for nondurables (0.95).

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 3, 2018, First-Time Claims, seasonally adjusted): 214,000 (-1,000 vs. previous week; -23,000 vs. the same week a year earlier). 4-week moving average: 213,750 (-8.6% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (November 2018-preliminary, Index of Consumer Sentiment (1966Q1=100, seasonally adjusted): 98.3 (vs. October 2018: 98.6; vs. November 2017: 98.5).
Consumer Credit (September 2018, Outstanding Consumer Credit Balances (net of real estate-backed loans), seasonally adjusted): $3.950 trillion (+$11.0 billion vs. August 2018, +4.8% vs. September 2017).

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

Inflation Moderates While Business Sentiment Stays Hot: October 8 – 12

Consumer prices grew less quickly while wholesale prices firmed in September. Here are the five things we learned from U.S. economic data released during the week ending October 12.

#1Consumer prices cooled during the last days of summer. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) inched up 0.1 percent on a seasonally adjusted basis in September following two consecutive months of 0.2 percent gains. Energy prices dropped 0.5 percent, pulled down by price decreases for utility delivered gas (-1.7 percent), electricity (-0.5 percent), and gasoline (-0.2 percent). Food prices were unchanged. Net of energy and food, core CPI increased 0.1 percent during the month. Falling were prices for vehicles—both used cars/trucks (-3.0 percent) and new vehicles (-0.1 percent)—and medical care commodities (-0.1 percent). Prices increased for apparel (+0.9 percent), transportation services (+0.5 percent), shelter (+0.2 percent), and medical care services (+0.2 percent). CPI has risen 2.3 percent over the past year while core CPI has a 12-month comparable of +2.2 percent.Consumer Prices Mar-Sep 18 101218

#2…But wholesale prices rebounded. The Producer Price Index (PPI) for final demand grew for the first time in three months with a seasonally adjusted 0.2 percent increase, per the Bureau of Labor Statistics. The core measure—PPI less energy, food, and trade services, jumped 0.4 percent for its largest increase since January. Final demand PPI for goods slipped 0.1 percent, pulled down by significant declines in both energy and food prices. PPI for goods net energy and food gained 0.2 percent. PPI for final demand services jumped 0.3 percent (its biggest gain since June), fueled by a 1.8 percent bounce in wholesale prices for transportation/warehousing services. Over the past year, the headline PPI measure had grown 2.6 percent while the 12-month comparable for core wholesale prices has surged 2.9 percent.

#3Small business owner optimism remained new record highs in September. The Small Business Optimism Index from the National Federation of Independent Business lost 9/10ths of a point during the month (giving back exactly what it had gained in August) to lead the index at a seasonally adjusted 107.9 (1986=100). Six of ten index components pulled back from their August readings, including a seven-point drop for plans to increase inventories and three-point decreases for indices tied to plans to increase employment and make capital outlays. Only three index components improved during the month: expected real sales (up three points), current inventories (up two points), and expected credit conditions. The press release noted that small business owners were indicating that “business is booming and prospects continue to look bright.

#4Wholesalers expanded their inventories more rapidly during August. The Census Bureau reports that merchant wholesalers inventories swelled 1.0 percent during the month to a seasonally adjusted $642.7 billion. This left wholesale inventories 5.3 percent larger than what it was a year earlier. Durable goods wholesale inventories grew 0.9 percent while that of nondurables rose 1.2 percent. The former was boosted by sharp increases in the automotive (+3.5 percent), computer equipment (+1.6 percent), and hardware (+1.0 percent) sectors. Wholesale inventories of nondurables expanded thanks to substantial increases for farm products (+4.9 percent), chemicals (+2.2 percent), and drugs (+2.1 percent). Wholesale sales rose 0.8 percent in August to a seasonally adjusted $511.1 billion (+9.2 percent versus August 2017). The resulting inventory-to-sales ratio of 1.26 matched that of July but was down four basis points from a year earlier.

#5Layoffs remained near multi-decade lows. The Department of Labor indicates the first-time claims for unemployment insurance benefits grew by 7,000 during the week ending October 6 to a seasonally adjusted 214,000. Even with the modest increase, initial jobless claims remained 27,000 below that of a year earlier. The four-week moving average inched up by 2,500 to 209,500 claims. This was 16.9 percent below the year-ago moving average and just above the 49-year low achieved just a few weeks ago. 1.422 million people were receiving some form of unemployment insurance benefits during the week ending September 22, 14.0 percent below the count from the same week a year earlier.

Other U.S. economic data released over the past week:
University of Michigan Surveys of Consumer (September 2018—preliminary, Index of Consumer Sentiment): 99.0 (vs. August 2018: 100.1, vs. September 2017: 100.7).
Import Prices (September 2018, Import Prices, not seasonally adjusted): +0.5 % vs. August 2018, +3.5% vs. September 2017. Nonfuel imports: Unchanged vs. August 2018, +0.6% vs. September 2017.
Export Prices (September 2018, Export Prices, not seasonally adjusted): Unchanged vs. August 2018, +2.7% vs. September 2017. Nonagricultural exports: +0.2% vs. August 2018, +3.3% vs. September 2017.

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

Job Openings Fall, Remain Near Record High: April 9 – 13

There were fewer available jobs in February, although employers continued struggling to fill openings. Here are the five things we learned from U.S. economic data released during the week ending April 13.  

#1The number of job openings shrinks from its all-time high while hiring slightly edged down. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 6.052 million job openings on the final day of February, down 176,000 from January’s 6.228 million openings (itself a data series record) but still 7.7 percent ahead of its February 2017 count. Private sector employers were searching to fill 5.476 million jobs at the end of February, 7.0 percent more than they had been seeking a year earlier. Industries with large percentage year-to-year increases in job openings included transportation (+46.0 percent), state/local governments (+24.0 percent), retail (+21.9 percent), manufacturing (+21.0 percent), construction (+16.0 percent), and finance/insurance (+12.8 percent). Employers hired 5.507 million people during February, down 33,000 from January but still up 4.6 percent from a year earlier. Private sector employers expanded payrolls by 5.161 million workers, a 5.0 percent improvement from a year earlier. Industries with large year-to-year percentage gains in payrolls included manufacturing (+27.9 percent), finance/insurance (+19.2 percent), professional/business services (+12.4 percent), and health care/social assistance (+6.4 percent). Fewer workers left their jobs during February, declining 127,000 from the prior month to 5.192 million (+3.2 percent versus February 2017). This included 3.210 million people who quit their jobs (+6.4 percent versus February 2017) and 1.647 million who were laid off (-0.6 percent versus February 2017).job openings and hiring 041318

#2Core consumer prices remained on target even as gasoline prices fell in March. The Bureau of Labor Statistics’ Consumer Price Index (CPI) slipped 0.1 percent on a seasonally adjusted basis during the month but was still 2.4 percent ahead of year-ago levels. Energy prices slumped 2.9 percent as gasoline prices dropped 4.7 percent. Food prices eked out a 0.1 percent gain. Netting out both energy and food, core CPI increased 0.2 percent during March and has risen 2.1 percent over the past year. Rising were prices for medical care services (+0.5 percent), shelter (+0.4 percent), transportation services (+0.2 percent), and medical care commodities (+0.1 percent). Prices fell during the month for apparel (-0.6 percent) and used cars/trucks (-0.3 percent).

#3Wholesale prices had a sizable gain for the second time in three months. The final demand Producer Price Index (PPI) grew by a seasonally adjusted 0.3 percent during March following a 0.2 percent bump in February and a 0.4 percent increase in January. Final demand PPI net energy, food, and trade services (a measure of core wholesale prices) rose 0.4 percent for a third consecutive month. Food PPI jumped 2.2 percent while energy PPI slumped 2.1 percent. Net of energy and food, core wholesale goods prices increased 0.3 percent. PPI for final demand services gained 0.3 percent, with rising wholesale prices for in transportation/warehousing (+0.6 percent) and trade services (+0.3 percent). Over the past year, final demand PPI has jumped 3.0 percent while wholesale prices net of energy, food, and trade services have risen 2.9 percent.

#4Small business owner optimism chilled slightly in the March winds. The Small Business Optimism Index from the National Federation of Independent Business lost 2.9 points during the month to a seasonally adjusted 104.7 (1986=100). Even with the decline, this was the 16th straight month in which the measure was above a reading of 100.0. Eight of ten components to the index lost ground from their February readings, including significant drops for future expectations for the economy, expected real sales, and whether it was a good time to expand. Only two index components—plans to increase employment and current job openings—improved in March. The press release noted that March index reading was “among the 20 best in survey history.”

#5Wholesale inventories swelled in February. Merchant wholesalers expanded their inventories 1.0 percent during the month to a seasonally adjusted $625.6 billion, per the Census Bureau. Wholesale inventories have grown 5.5 percent over the past year. Inventories of durable goods jumped 1.7 percent during February to a seasonally adjusted $240.5 billion (+8.6 percent versus February 2017), including gains for furniture (+4.5 percent), metals (+4.4 percent), machinery (+3.9 percent), and automobiles (+1.4 percent). Nondurable goods inventories expanded by a more modest 0.4 percent to $255.4 billion (+5.2 percent versus February 2017), including sizable gains for apparel (+5.0 percent), farm products (+3.3 percent), alcohol (+2.4 percent), and chemicals (+2.0 percent). The wholesale inventory-to-sales (I/S) ratio held firm during the month at 1.26. This I/S ratio for durable goods shrank by one basis point to 1.58 while that for nondurables inched up by a basis point to 0.96.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 7, 2018, First-Time Claims, seasonally adjusted): 233,000 (-9,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 230,000 (-7.0% vs. the same week a year earlier).
Import Prices (March 2018, All Imports, not seasonally adjusted): Unchanged vs. February 2018, +3.6% vs. March 2017. Nonfuel imports: +0.2% vs. February 2018, +2.1% vs. March 2017.
Export Prices (March 2018, All Exports, not seasonally adjusted): +0.3% vs. February 2018, +3.4% vs. March 2017. Nonagricultural exports: -0.1% vs. February 2018, +3.4% vs. March 2017.
Monthly Federal Treasury Statement (March 2018, Budget Surplus/Deficit): -$208.7 billion. First 6 months of FY2018: -$599.7 billion (vs. First 6 months of FY2017: -$526.9 billion).
University of Michigan Consumer Sentiment (April 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 97.8 (vs. March 2018: 101.4, vs. April 2017: 97.0).
FOMC Minutes

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