Sunday, October 27, 2013

August and September jobs data inconsistencies; August trade data

the report on employment situation for September, delayed two and a half weeks due to the shutdown, was finally released by the Bureau of Labor Statistics on Tuesday, and as many have noted, it wasn't worth the wait...showing weak job creation, barely enough to keep up with the increase in the working age population, the survey data for this summary was gathered during the week of the 9th of September, well before the prospect of a shutdown and debt ceiling crisis was even mentioned it the media, so it's unlikely this recent government dysfunction influenced employment decisions that early in the month....for the employment impact of the shutdown, we'll have to wait for the October report, which will not only be distorted by the late surveys, but will be also complicated by a method that classifies the furloughed workers as employed in the establishment survey, but counts them as “unemployed, on temporary layoff” in the household survey...

FRED Graph

the establishment survey for September indicated payroll employment increased by a seasonally adjusted 148,000 to 136,290,000, while the change in payroll employment for August was revised from a net gain of 169,000 jobs to an increase of 193,000 and July's job creation was revised downward from a gain of 104,000 jobs to just 89,000...the unadjusted data for September showed an increase of 612,000 jobs, which was due in part to the 882,600 seasonal increase in employment at local school districts, which was adjusted down to a net payroll jobs gain of just 9,500, and the 468,000 seasonal decrease in jobs in leisure and hospitality, as most temporary summer jobs wound down...our adjacent FRED bar graph shows the seasonally adjusted change in payroll jobs monthly since the beginning of 2008; you might note that payroll jobs gains over the 3rd quarter of this year are the weakest since the 2nd quarter of 2012..

although 148,000 additional jobs was weak compared to most months of the recovery, at least for once they weren't mostly just retail and fast food jobs; the professional and business services category saw an increase of 32,000 payroll jobs, of which 20,200 were in temporary help services; a net of 23,400 jobs were added in the transportation and warehousing sector, with 17,900 of those working in ground passenger transportation services, such as bus drivers; and state governments added a seasonally adjusted 22,000 jobs, 19,800 of which were in state level education; another 20,800 net jobs were added in retail trade, with food and beverage stores adding 7,700 and clothing stores shedding 7,200 employees, while wholesale trade added 16,100 jobs, with 8,700 of those involved in wholesale non-durable goods...in addition, 20,000 jobs were added in construction, of which 10,900 were created by specialty trade contractors, with 6,800 of those non-residential...the only significant seasonally adjusted job losses were in the leisure and hospitality category, where the net employment loss was 13,000 more than a normal September; 7,100 of those were in food services, reversing the trend we've seen in recent months wherein most of the net job gains were in food service or retail...

our FRED bar graph below shows some of these seasonally adjusted trends over the last 13 months; in each monthly grouping of 8 bars, the monthly change in manufacturing employment for that month is indicated in blue, the change in monthly construction employment is in red, the change in retail employment is in dark green, the monthly change in government jobs is in yellow, and the change in employment in professional and business services, which includes everything from accounting services to garbage collection, is in grey; also included are the BLS employment subcategories of jobs in bars and restaurants, the major component of the leisure and hospitality category, in light green, and the two major subcategories of the education and health services category, health care jobs in orange, and jobs in education shown in violet...it's clear from this that a significant portion of the jobs created over the past year are in the two categories shaded green, retail sales and food services, and one other area of major jobs creation - professional and business services in grey - is indicative of mostly clerical and temporary help, while creation of higher paying jobs in manufacturing - blue - and education - violet - have lagged...(a net of just 100 new education jobs were created in September, hence the violet bar is invisible in the last group below)

FRED Graph

one additional graphic we’ll add here to put it all in perspective comes from Robert Oak of the Economic Populist; the pie graph below shows the percentage of payroll jobs by industry as of September, making it clear where the largest proportion of jobs in our current economy are at...in his graphic coverage of this report, Robert pairs this graph with a similar pie graph from 2008, in an effort to show that the wedges for the decent paying jobs in manufacturing and construction have both shrunk by 1.1% of the total each since the recession started...our purpose here is just to show the percentages of each by way of general overview... a clarifying footnote we should add is that the large green government wedge - 17% of all payroll jobs - includes jobs in education at the state and local levels, while the CES category of education and health services is mostly jobs in health care; just one-sixth of that are those in educational services, which includes jobs at private colleges, occupational training services and the like, while nearly half of the government jobs are in education at the state and local levels.. 

payrollspie913
the establishment survey also details seasonally adjusted data on average weekly hours by industry sector and average hourly and weekly earnings by industry sector...in September, the average workweek for all private payroll employees remained at 34.5 hours, the same level as it was at in August and In September a year ago; the average workweek for nonsupervisory employees was also unchanged from August and a year ago at 33.7 hours, while the manufacturing the workweek was at 40.8 hours, the same as August, but up .2 hours from the year ago 40.6 hours...the average hourly earnings on all private nonfarm payrolls rose 3 cents to $24.09, after rising 5 cents last month...for production and nonsupervisory employees, the average hourly increase was 4 cents to $20.24, the same increase as in August....

next, in looking at the monthly employment data that's extrapolated from the household survey, we'd do well to recall these national numbers are derived from a survey of just 60,000 households, and they have a margin of error of +/- 300,000 in the monthly change in the number unemployed and an 90% accuracy range of +/- 0.2 percentage points in the unemployment rate; in September, the seasonally adjusted extrapolation from this survey indicated that 144,303,000 of us were employed, 133,000 more than in August, and 11,255,000 of us were unemployed, 61,000 less that August, giving us a civilian labor force of 155,559,000 and thus resulting in the widely reported September unemployment rate of 7.2%, down 0.042% from the 7.3% unemployment rate in August....in addition, the number of us "not in the labor force" and hence not counted in this survey's calculation rose by 136,000 to 90,609,000, a new record, as the civilian non-institutionalized population rose by 209,000...

FRED Graph

there was no improvement in the two metrics computed from this survey that we watch; our adjacent FRED graph shows that the labor force participation rate, which is the percentage of us working or actively looking for work, remains at its lowest level since the 70s (when women didn't need to work) at 63.2%, while the employment population ratio, or the equivalent of an employment rate (graphed in blue), remains at 58.6%, stuck roughly at the same level that it's tracked over the past 4 years, as job creation has barely kept up with increases of the population…

recognizing the larger margin of error in the smaller demographic samplings, the employment summary reports that the unemployment rates for adult men at 7.1 percent, adult women at 6.2 percent, teenagers at 21.4 percent, whites at 6.3 percent, blacks at 12.9 percent, and Hispanics at 9.0 percent showed little or no change in September; however, with the sample size available to them, they do show a decline of 1.3% in the teenage unemployment rate from the 22.7% teenage unemployment reported in August; that breaks out to an unemployment rate of 19.3% for white teenagers and an unemployment rate of 35.1% for black teenagers....the seasonally adjusted unemployment rate also fell by a full percent for those without a high school diploma, from 11.3% in August to 10.3% in September, while it rose from 3.5% to 3.7% with a bachelor's degree or more education...

the number of us employed part time "for economic reasons" in September rose by 15,000 to 7,926,000; these are those who reported that either their workplace cut their hours or they could only find part time work; nonetheless, U-6, the broadest measure of labor underutilization, still fell from 13.7% in August to 13.6% in September...those who were working part time who didn't indicate that they wanted full time work fell by a seasonally adjusted 372,000 to 18,967,000; oddly, the unadjusted data shows the opposite; that those who are working part time voluntarily rose by 1,472,000 to 18,848,000...of course, some of those part time workers may be holding two jobs; the number of multiple jobholders was up by 56,000 in September to 3,393,000; note that the establishment survey does not distinguish between full and part time jobs and includes no data on the individuals holding the reported payroll jobs...

the number of us officially unemployed more than 27 weeks fell by 144,000 in September to 4,146,000; this doesn't necessarily mean those who are no longer in this metric found work; they may have simply not looked for work during the reference period and hence weren't counted...those of us unemployed 5 weeks or less, ie, the newly unemployed, rose by 33,000 from August's level to 2,596,000...among those of us not officially in the labor force and hence not counted in any of these metrics, an additional 5,775,000 reported that they still want a job; of those, 2,302,000 are categorized as "marginally attached to the labor force" because they've  looked for work sometime during the last year, but not during the 30 day period covered by the September household survey...852,000 of those are further characterized as "discouraged workers, because they say that they havent looked for work because they believe there are no jobs available to them...the number of "discouraged workers" has increased by 50,000 from September a year ago...

Inconsistent Adjustments and Reports

lastly, we have to again point out that there still is a major incongruity in the seasonal adjustments between the two surveys; you may recall that last month we noted that the seasonal adjustments subtracted more than 200,000 jobs from the August establishment survey but added nearly 500,000 to the August household survey; although that was disturbing, we were advised that it would likely be at least partially reversed with this release; that didn't happen; instead, the seasonal adjustment continued to subtract hundreds from the the number of payroll jobs reported, while it only subtracted a trivial 9,000 jobs from the household survey count of those employed; to recap, taking the latest revisions into account: last month the unadjusted payroll data showed a gain of 411,000 jobs in August; the seasonal adjustment lowered that to 193,000 jobs gained, while this month's unadjusted establishment survey data showed an increase of 612,000 jobs, which was lowered by the seasonal adjustment to the headline 148,000 job gain...conversely, the household survey showed a 604,000 drop in the count of the employed in August, which was raised to a loss of just 115,000 in the employed, while in this September household survey we've just looked at, unadjusted employment rose 142,000 to 144,651,000, and the seasonally adjustment lowered that to an increase of 133,000 employed...so, over the course of the past two months, the seasonal adjustment subtracted 682,000 from the payroll jobs recorded by the establishment survey, while the adjustment on the household survey added 480,000 to the count of those employed...while we wouldn't expect the seasonal adjustments in the two surveys to move in lockstep, this much of a divergence just doesn't make sense...

while we’re talking about data that doesn't make sense, we should also point out that the Job Openings and Labor Turnover Summary for August, originally scheduled for release on October 8th, was also released this week; you may recall that this report, which generally lags the broader employment summary by a month, includes data on hiring and total separations for the month from a survey of establishments, in addition to the data on job openings...in August, JOLTS showed 4,488,000 hires, down 9,000 from July, and 4,376,000 total separations, up 103,000 from July; the difference between hires and separations, which includes both layoffs and quits, was 112,000, and that should be equal to the total net job creation that the broader employment summary shows...except that it isnt; as we noted earlier, the change in payroll employment for August was revised from a net gain of 169,000 jobs to an increase of 193,000 with the release of the employment summary...so one or both reports are off by a total of 81,000 jobs...the job category details don't match as well; you might recall that according to the August jobs report, retail trade saw the most job creation with 44,000 net additional jobs; JOLTS shows 672,000 retail hires in August, and 669,000 retail separations, for a net creation of just 3,000 retail jobs....similarly, the August employment summary indicated net job creation of 22,000 in manufacturing; August JOLTS shows 229,000 manufacturing separations and 231,000 manufacturing hires for a net of just 2,000 new manufacturing jobs...hopefully, future revisions to one or both reports will correct this divergence, but right now there's no way of telling which is most correct...

August Trade Deficit Virtually Unchanged from July at Levels Above 2nd Quarter

in addition to the jobs reports, the August report on our International Trade in Goods and Services (pdf), originally scheduled for release on October 8th, was released by the Commerce Dept on Thursday morning...it showed a slight widening of our trade deficit, as our exports fell a bit and our imports were virtually unchanged; total August exports of $189.2 billion, up from $189.1 billion in July and imports of $228.0 billion, essentially the same as July's number, resulted in a goods and services deficit of $38.8 billion, up from the revised trade deficit of $38.6 billion recorded in July...exports of goods fell $0.3 billion to $132.4 billion, while exports of services increased $0.1 billion to $56.8 billion; and imports of goods decreased $0.1 billion to $190.7 billion, while imports of services increased $0.2 billion over July to $37.4 billion....since the trade deficit in July represented a 13.3% increase over June's figures, that August was unchanged from that means we're now two thirds of the way to seeing a significant hit from net trade when 3rd quarter GDP figures are released...our FRED bar graph below shows the monthly change in exports in blue, imports in red, and the balance of trade in brown over the past two years…although our net trade is always a deficit, it is the change over the quarter shown in brown that influences the GDP calculation…in the 2nd quarter of this year, the increase in exports matched the increase in imports, resulting in no change to GDP from our international trade..
FRED Graph
major changes in our August goods exports from July's include a $1.3 billion decrease in our exports of industrial supplies and materials, headed up by a $880 million decrease in exports of non-monetary gold down to $2.47 billion, a $527 million decrease in exports of "other" petroleum products, to $4.85 billion, and a $410 million decrease in exports of organic chemicals to $2.83 billion, which was slightly offset by a $283 million increase in exports of fuel oil...August also saw a $0.4 billion decrease in exports of foods, feeds, and beverages; a $187 million decrease in wheat exports and a $147 million decrease in soybean exports accounted for the lions share of that....on the other side of the export ledger, August saw a $0.7 billion increase in exports of automotive vehicles, parts, and engines, a $0.3 billion increase in exports of consumer goods, topped by a $424 million increase in exports of gem diamonds diminished by a $147 million decrease in exports of pharmaceuticals, a $0.2 billion increase in exports of capital goods, topped by a $418 million increase in exports of civilian aircraft, which counted as $5.26 billion of our August exports, and which were offset by decreases of $232 million in telecommunications equipment and $222 million of computer accessories...

the major month over month changes in our imports of goods included a $1.0 billion increase in imports of capital goods, which included a $642 million increase in imports of computers to $5.56 billion, and a $251 million increase in imports of 'other" industrial machines, which was offset in part by a $168 million decrease in imports of semiconductors and a $167 million decrease in imports of engines for civilian aircraft...August also saw an $0.8 billion decrease in imports of consumer goods, which included $667 less pharmaceuticals, $297 million less artwork and collectibles, and $169 million more cotton apparel imports, and a $0.2 billion decrease in industrial supplies and materials, which notably included $594 million less imports of crude oil, and a $233 million increase in imports of automotive vehicles, parts, and engines...and although the major import category of foods, feeds and beverages was virtually unchanged in August, we did see a $159 million increase in imports of fish and shellfish, offset by a $138 million decrease in imports of edible oils and oilseeds...in a special category tracked separately without seasonal adjustment, our advanced technology products exports were $26.7 billion in August while imports were $32.6 billion, resulting in a high-tech goods deficit of $5.9 billion…

our bilateral deficits in August goods trade, which are also not seasonally adjusted, generally showed modest improvement; our goods deficit with China fell to $29.9 billion, from $30.1 billion in July; our goods trade with the EU shrunk to $9.8 billion, from $13.9 billion, and our goods deficit with OPEC fell slightly from $7.4 billion to $7.3 billion....other larger bilateral goods deficits in August were with Japan at $6.4 billion, Germany at $5.4  billion,  Mexico at $4.9  billion, Saudi Arabia at $3.6 billion, Canada at $2.3 billion, Ireland at $1.9 billion, Korea at $1.7 billion, India at $1.6 billion, and Venezuela at $1.5 billion; meanwhile, we ran small surpluses in August goods trade with Hong Kong at $3.7 billion, Brazil at $1.7 billion, Australia at $1.4 billion, and Singapore at $1.1 billion...the graph below from Bill McBride tracks our total trade deficit in blue for each month since January 1998, and then breaks that into an oil component in black and an “everything else” component in red…note the graphs are shown as a negative amount from the top "$0” bar, ie, the further down, the worse it is…clearly, roughly half our trade deficit has been in oil since the onset of the recession (the pale blue vertical bar); the price of crude averaged $100.26 a barrel in August, up from $97.07 in July, and up from $94.48 a year ago

TradeDeficitAug2013

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Sunday, October 20, 2013

government shutdown: postscript & consequences

Dems vs Reps budget plans

you all know, of course, that a last minute deal was struck on Wednesday to end the government shutdown and raise the debt ceiling, but not before late Tuesday House shenanigans prompted a sell-off of short term US Treasuries by banks and mutual funds, causing T-bill yields to triple, temporarily resulting in an inverted yield curve....the deal itself didn't solve or resolve any of the issues that brought us to the brink of default, either, as it just set three new dates at which the basic elements of this recent crisis are to be replayed again in the near future; first, to end the government shutdown, this 35 page bill includes a continuing resolution to fund the government agencies at their current level until January 15th, a date chosen because it coincides with the initiation of the 2nd round of the across the board spending cuts known as the sequester; then, to avert a default which would have ostensibly been caused by the debt limit, it grants the Treasury the unrestricted power to borrow as needed until Feb 7, and since that already includes unwinding the emergency measures it took, and paying back the other Federal accounts it had used funds from, it would presumably give the Treasury the opportunity to use similar tricks to again extend the limit beyond that date, and lastly, the bill establishes a bipartisan House-Senate committee changed with coming up with a long-term deficit reduction budget by December 13th, with an eye to replacing the across the board sequester with something less brain-dead... 

now, of course, such a legislated budget plan should have been in place long ago...if we had a functioning Congress, it would have taken the president's budget request (usually due the first week of February but late again this year) and passed it out of the budget committees of both houses with their amendments by April 1, after which both houses should have passed a budget resolution for the next fiscal year by April 15th, ultimately producing a binding budget resolution, after reconciling differences in a conference committee between the two houses...but this year, like each of the past three, that budget responsibility was again shirked, leaving us with government by "continuing resolution" which has resulted in as many as seven such short term funding bills in one year...so now this newly formed House-Senate conference committee will attempt to come up with a budget that will set a new long term template to replaced the 10 years of mandated sequestered spending cuts that kicked in when a similar committee failed to produce a compromise in November of 2011... leading the negotiations for the House Republicans will be Paul Ryan, who will start negotiations with his much panned "Ryan plan", which of course rolls back Obamacare, changes medicare to a voucher program, so seniors would buy their health care plan on the private market, converts Medicaid and the food stamp program into block grants to the states, and also includes other cuts to non-defense spending...presenting the Democrat team's plan is Senator Patty Murray, whose proposed long term budget includes $100 billion in infrastructure spending offset by what is effectively $1 trillion in new tax revenues resulting from the elimination of a batch of tax deductions, and nearly $1 trillion in spending cuts including $275 billion to heath and $240 billion to defense…our graphic to the right above, which came from the Washington Post, shows the differences between the two plans in trillions of dollars of budget cuts over 10 years....the schematic bar for the Democrat budget is on the left and it includes $975 billion in increased taxes, $975 billion in spending cuts, slightly offset by the $100 billion in infrastructure spending...the schematic for the Republican Ryan plan is on the right and it shows $4.6 trillion dollars in spending cuts spread out over 10 years...the conference committee has less than two months to merge those plans into one, such that both bars would have to become one and the same, however they compromised...and if they don't come up with such a compromise, then we're again stuck with the default, the second round of across the board sequestered spending cuts as specified by the Budget Control Act of 2011...

there have been several attempts to quantify the economic damage done by this government shutdown debacle...Standard & Poor’s has estimated that the 16 days of shutdown cost the economy $24 billion dollars in lost output, or approximately $1.5 billion a day; that would apparently include everything from delayed mortgages and idled ports to lost revenues at DC restaurants that serve government workers; they also figure it will ultimately shave 0.6% off 4th quarter GDP...likewise, Goldman Sachs has revised its forecast for 4th quarter GDP from 2.5% to 2.0%, as did JP Morgan....Bank of America sees the economic impact from the shutdown and the uncertain resolution continuing into 2014, cutting their growth estimates for the first quarter from 3.3% to 2.8%, while their forecast for the 4th quarter is also at a weak 2.0%...IHS Global Insights, who lowered their 4th quarter growth estimate from 2.2% to an annualized 1.6%, points out that since the debt ceiling issue could return again as soon as February, the yields on 1, 3, and 6-month T-bills will likely stay elevated, so in addition to the $114 million in higher interest costs added to the Federal deficit from this past week's T-bill auctions, we could face another $1.3 billion in elevated interest costs if this impact plays out in a manner similar to the 2011 debt ceiling downgrade...in addition, the shutdown precipitated the worst drop in the Gallup Economic Confidence Index since collapse seen during onset of the global financial crisis in September 2008...and in another widely circulated report, the heavyweight economic research firm Macroeconomic Advisers estimated that a two week shutdown would trim 0.3% off 4th quarter GDP while producing a report that determined that our crisis-driven government and the resulting fiscal policy uncertainty has knocked 1.0% off GDP for each of the past three years, and has increased the unemployment rate by 0.6%, resulting in a loss of 900,000 jobs; then, as if that weren't bad enough, Paul Krugman looked at their report and pointed out that they omitted the effects of the payroll tax hike and unemployment benefit cuts associated with the fiscal cliff deal and concluded that the contraction resulting from perverted fiscal policy has been closer to 1.25 percent of GDP at an annual rate...

  even though the shutdown began on Oct 1st and was over on the 17th, we've essentially missed three weeks of economic data, since no major reports were released this week nor in the week beginning Sept 30th...last week we mentioned a number of economics reports that had gone by the boards in the first two weeks of the shutdown, including September's jobs report and retail sales and August trade data; this week we've also missed September's reports on industrial production and capacity utilization, consumer prices, and new housing starts...the BLS has published a revised schedule of when delayed reports will be released; notably, the September jobs report will be released this coming Tuesday, the job openings & labor turnover report will be released Thursday, and the consumer price index will be released on Wednesday, October 30....the delay of the CPI data has also delayed computation of cost of living adjustments for Social Security and other pensions that use the same COLA, as the annual increase is based on the average of CPI-W over the months of July, August and September compared to the CPI-W for the same months from last year; in addition, a note from the Cleveland Fed, which uses the BLS CPI data to compute a median and trimmed median price index, reports that the furlough of BLS employees involving in collecting the prices used in computing the CPI has the potential to induce errors in the CPI for as long as seven months, and hence in other programs and data its input is used to adjust, such as Treasury inflation protected securities and the PCE deflator...to compute the CPI for any given month, BLS field reps normally spend the entire month visiting stores, car dealers, doctors’ offices and other outlets to collect the 83,000 prices which are used as a basis for that month's report, normally reported in the middle of the next month...so while that means the crucial September CPI will be OK, computation of the October CPI will be missing more than a half month's worth of data...moreover, while food prices are collected daily, some price points are only checked every other month and batches of home and apartments rents are only collected every six months...so for some of those prices that were missed during the October furlough of CPI data collectors, the reports will not reflect their inclusion until May...

  other data will be skewed as well; the furlough of employees from the bureau of labor statistics not only delayed the employment summary and JOLTS but has also postponed the full week of data collection that should have been undertaken for the October household and establishment surveys, which means that October's job data will not be easily comparable with September's or November's on a month to month basis; that's because the labor department conducted the surveys for September during the week of September 9th, and they'll conduct those surveys for November during the week of November 11th, while the employment data collection for October wont begin until Monday, the week of October 21st; as a result, the September report, when released will report on changes over the 28 days between that survey and August's, the October report will include employment changes over the 42 days between the September surveys and the delayed October surveys, and the November jobs report, which will again be on schedule, will only reflect employment changes over 21 days...we would not be surprised to see similar problems such as this, or as we've seen with the CPI, in other data...for instance, the data on housing starts, as unreliable as they are already, are also collected by census field reps, who visit housing permit offices and conduct road canvasses to gather the small sample of housing activity used in that report, which will now be half the size it normally is in October...

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Sunday, October 13, 2013

more economic reports AWOL; August consumer credit and the LPS Mortgage Monitor for August

  it should go without saying that "non essential" government operations have remained shut down over the past week, and we are rapidly closing in on the October 17th date when the full faith and credit of the United States turns into a pumpkin...the partisan barbs that characterized last week continued early into this week, but by Wednesday House Republicans, perhaps reading opinion polls giving them a 5% approval rating, proposed a 6 week extension to the debt ceiling that would allow the Treasury to continue to issue script after the accounting legerdemain it had been engaged in had run its course, an idea Obama at first seemed open to…but after talks were finally underway Thursday, Obama and Reid backed off that, insisting that a clean debt ceiling increase be accompanied by a bill to a refund the government and end the shutdown...possibly pushed by business leaders, eyeing the possibility that we’d be doing this all over again during Thanksgiving week, the White House then began to insist on a debt ceiling extension that would take us past the holidays…as negotiations between Obama and the House leaders subsequently broke down, the focus has shifted back to the Senate late Saturday, where Harry Reid and Mitch McConnell have been trying to hash out a package that would be acceptable to both parties…if you're interested in a complete review of the news and opinion surrounding these issues as it happened, there are again over a hundred linked summary paragraphs included in this week's globalglassonion, beginning right after the Fed coverage and continuing to encompass the first one-third of the blog post...

of course, with the agencies that produce the monthly economic reports we usually cover in this space shut down or operating with bare bones staffing, those reports are not being issued; you all know we missed the September unemployment report and Factory Orders for August last week, but the shutdown will also delay the data gathering for the October unemployment report; as both the establishment survey and the household survey for October should take place this week; since the 12th of the month, the target date for those surveys, occurred late in the week, it probably wont skew the data that much if there's a quick resolution and the surveys can be conducted this week; but they're delayed any longer, the typical month over month comparisons we and others typically look at in these reports will be meaningless ...similar caveats may also have to be applied to the other reports that have been missed; construction spending for August, the trade balance for August, the Job Openings and Labor Turnover Survey (JOLTS) for August, wholesale trade, sales and inventories for August, business inventories for August and retail sales for September...in addition, the producer price index was to have been issued Friday and the consumer prices index is due this coming Wednesday, and the data collection for those may have gone by the boards as well...and despite the fact that the Fed is opening and functioning, their G-17, the report on industrial production and capacity utilization, will not be released on schedule this coming week because they rely on data collected by other government agencies

Consumer Credit Up at 5.4% Rate as Feds Adds $172 Billion Revision to Student Loans Outstanding 

ALFRED Graph one report that we've been following that was released this week was the Fed's G-19 on Consumer Credit for August, which showed that seasonally adjusted consumer borrowing outstanding at the end of August was up $13.6 billion to $3,036.9 billion, increasing at an annual rate of 5.4% over July's revised $3,023.3 billion total...revolving credit, which is mostly credit card debt, contracted at an annual rate of 1.25%, decreasing from $849.8 billion in July to $848.9 billion in August, while non-revolving debt, which includes long term borrowing for items such as cars and yachts and tuition, but not real estate, rose at an annual rate of 8.0% to a seasonally adjusted $2,188.0 billion from $2,173.5 billion in July...

this release includes a major backward revision extending back to January 2006 that boosted estimates of non-revolving credit from that time forward by adding several items to better reflect outstanding student loan debt; first, Perkins loans, which are low interest rate loans to impoverished students from the Dept of Education, were added to the Federal Government credit sector, as were loans purchased under the Ensuring Continued Access to Student Loans Act of 2008 from nonprofit and educational institutions, all defaulted loans held by the federal government, and accrued interest on all federal student loan balances; this boosted the totals in that credit sector, which we'll look at later, by roughly $110 billion; in addition, they've added a new credit sector to this report under the heading "Nonprofit and Educational Institutions" which encompasses loans directly from those institutions not previously included in this report; as of August, this new non-revolving credit showed $62.9 billion in loans outstanding....our adjacent ALFRED graph shows the cumulative effect of these revisions; in blue, we have the total non-revolving credit outstanding back to 2006 as had been indicated by this G19 report as released on the 9th of September; while the red line shows what this report now shows as non-revolving credit over the same history as it's been revised..

despite the large cumulative addition to outstanding non-revolving credit from the above revision, the month over month changes from this year reports were for the most part modest; the overall July increase in consumer credit was originally reported at $10.4 billion in July, or a 4.4% seasonally adjusted annual rate of increase; after the revision, the total July increase is still at $10.4 billion, but that's now only a 4.1% rate of increase; that, of course, came from the revision in the aggregate non-revolving amount, as the originally reported $12.3 billion increase in non-revolving credit was unchanged, but its month over month rate of change, originally reported as a 7.4% rate of increase, is now seen to have increased at a 6.8% annual rate...meanwhile, the originally reported $1.8 billion July decrease in credit card debtwas unchanged as a decrease at a 2.6% rate...meanwhile, June's seasonally adjusted consumer credit increase was originally reported at $13.82 billion, then revised to a increase of $11.98 billion with the July report, with non-revolving credit up $15.5 billion and revolving credit down $3.7 billion; and as of this release, June's credit increase has been again revised to show a $14.42 billion month over month increase, with non-revolving credit up $18.14 billion, at a rate of 10.2%, and revolving credit down $3.7 billion from May...our FRED bar graph below shows the monthly change at an annualized rate in overall consumer credit in blue since January 2011, with the revolving credit change monthly shown in red, and the nonrevolving credit change shown in light green...note that we've just seen 3 consecutive monthly declines in revolving credit for the first time since 2010, although that did follow a spike in May, seasonally adjusted revolving credit is now up only 0.25% year over year and still 16.8% below the levels of August 2008...

FRED Graph

now, the reason we've been following this report for the past few years was to keep an eye on the expansion of the student debt bubble, and although the increases in student loans outstanding over the past two months have been modest compared to most months during the recession, the double digit increases we've seen earlier reasserted themselves in August...below we have a screenshot of a portion of the second table in the Fed G-19 release from which we've eliminated the revolving credit details to focus on the non revolving credit, and more specifically student loans held by the federal government...with the simplified table below, you can see all contributions to non revolving credit from each credit sector for every year from 2008 to 2012, and then also the contributions to non revolving credit from those sectors for the first quarter (Q1) the 2nd quarter (Q2), and the monthly aggregates for June, July and August; note also that these totals are not seasonally adjusted....the line labeled "non profit and educational institutions", representing student loans from those institutions, is new with this report as per the revision we discussed earlier, as are the annual and current totals for consumer credit held by the Federal government...(compare the table below to last month’s)...in July, that total was $679.4 billion; by August it had grown to $701.3 billion, a $21.9 billion increase, or at an annual rate of 46.3%; meanwhile the change in total non-revolving credit from July to August  ($2,164.6 billion to $ 2,196.3 billion) was $31.7 billion, so the lion's share, or 69% of the August increase in non-revolving credit, was new student debt, not car loans as bloomberg would have you believe...from August a year ago, student debt owned by the federal government has increased from $582.4 billion, a 20.4% increase…

August Consumer Credit Outstanding selected

August LPS Mortgage Monitor: Average Days to Foreclose at 895 as National Pipeline Ratios Remain Over 3 Years

LPS August delinquencies bar graph another report out this week which we cover for a monthly look at the ongoing mortgage crisis is the August Mortgage Monitor (pdf) released by Lender Processing Services (LPS) ...LPS reported that 1,340,995 loans, or 2.66% of active first lien mortgages, were in the foreclosure process in August, down from 1,406,000, or 2.82% in July and down from 4.04% of all mortgages a year earlier; as you may recall, these are home mortgages where foreclosure proceedings have been started, but the homes had not yet been seized by the bank...in addition to homes in foreclosure, LPS also reports the national delinquent mortgage rates; in August, LPS found that 3,124,000​ home loans, or 6.20% of mortgages outstanding, were at least one payment (30 days) behind; when combined with those in foreclosure, that means 4,465,000​ home mortgages, or more than one in eleven, were either delinquent or in foreclosure at the end of August...of those delinquent, 1,288,000​ were seriously delinquent, or more than 90 days late on their housepayments, and 1,836,000 were more than 30 but less than 90 days delinquent at the end of the month....the bar graph to the right, from the August summary on page 19 of the mortgage monitor (pdf) shows the percentage of homes that were delinquent each month for the past 13 months; you can see that May was the low water mark this year at 6.08%, followed by the large jump in delinquencies in June to 6.68%, driven by an 18.3% spike in new delinquencies which LPS called "seasonal"; also evident it the large spike in delinquencies in September of last year, coinciding with the release of the iphone5...since there was a similar rush to buy the new iphone5c and well as record sales for Grand Theft Auto V in September, we would not be surprised to see another spike of 10% or more in mortgage delinquencies when LPS releases the September mortgage monitor a month from now...

next we'll include this month's table showing the percentages of non-current (NC) mortgages for each state (from page 20 of the pdf); shown for each state are the percentage of home loans that are delinquent (Del%), the percentage of mortgages that are in foreclosure (FC%), the total mortgages that aren't current with their payments (NonCurr%) and the year over year change in the number of non-current mortgages; also note that states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, are marked by a red asterisk ...although the percentage of non-current mortgages in Florida is down 27.2% from last year's 20.7% level, they still lead the nation in the percentage of non-current mortgages at 15.1% and percentage of mortgages in foreclosure at 8.5%, while all the states that still have more than 4% of their mortgaged homes in foreclosure are also all judicial states; New Jersey with 7.2%, New York with 5.6%, Hawaii with 5.3%, Maine with 5.1%, Connecticut with 4.4%, and Illinois with 4.1%...also note that the non-judicial state of Mississippi, the state with the 2nd most non-current mortgage, is something of an outlier here, as they've has a chronic delinquency problem, with 12.6% of homeowners late on their housepayments, while they're still below the national average of homes in foreclose at 2.2%...

August LPS noncurrent states table

the next graph that we'll look at from the mortgage monitor (page 15) shows the historical tracks of monthly foreclosure starts in blue and foreclosure sales in red since the beginning of 2005; foreclosure starts are those mortgages that had the first foreclosure action taken against them in that month, while foreclosure sales are those mortgages that have proceeded through the last legal step in that month, which is typically an auction that transfers the home into the bank REO (real estate owned) portfolio....we can see foreclosure starts in blue beginning to rise from just over 50,000 a month in 2005 to 135,000 in September 2007 to where it peaks at 316,000 foreclosure starts in March of 2009, after which the number of foreclosure starts tended to stay well over 175,000 a month until early this year, falling to a post housing bust low of 108,000 in August, down 4.7% from July's 112,850...completed foreclosures in red, however, have trended much lower throughout the recession; they rose from a pre-crisis 25,000 a month to an average of near 100,000 a month throughout 2009 to peak at 124,000 in September of 2010, then fell back to below well below 100,000 a month after the robosigning foreclosure fraud scandal hit....and although the foreclosure sales line has been trending down, averaging 61,000 a month in 2013 compared to 73,000 a month in 2012, they have remained above 50,000 a month until August, when completed foreclosures jumped 23.7% over July's level to 70,000....

August LPS foreclosure starts vs sales

now what you should also notice from this graph is that foreclosure starts have been running well ahead of foreclosure completions, by as much as 200,000 a month from 2009 through 2011, and more than normal (defined by the gap of less than 50,000 a month in 2005) throughout the crisis....so what happened to all those homeowners who had foreclosure actions taken against them early in the crisis? while some who had foreclosures started against them may have cured their mortgage by making the missing payments, negotiated a short sale or otherwise worked out a mortgage modification, the lions share of them appear to still be in foreclosure limbo...in the table below (from page 20) we have the total loan counts of delinquent mortgages by days delinquent, the number in foreclosure (FC) and the foreclosure starts for each January since  2008 and each month since 01/2012...but what we want to look at it is the last column, which lists the "average days delinquent for foreclosure" for each month listed; you can see that by the beginning of 2012 those in foreclosure had been delinquent for an average of 668 days, and some obviously much longer, since a number of those in foreclosure probably first has theirs initiated in 2011...by June of last year, those in foreclosure had been delinquent on their mortgages for over 2 years, and that duration continued to lengthen to 876 days by July of this year and increase by another 19 days with this August report...when an average length in foreclosure jumps as much as 19 days over a month even as new foreclosures are started, it's obvious that most of those who've been in foreclosure for years aren't going anywhere...

August LPS delinquent and foreclosure count table

we would also note on the above table the second column from the right, which similarly shows the average of how may days those who've been delinquent for more than 90 days have remained in their homes without being foreclosed on...in a reversal of the trend, the average length of time that those seriously delinquent have remained in their homes without being foreclosed on has fallen to 505 days, down from 517 days in July and at a 4 month low...since foreclosure starts are at a new crisis low, we'd have to guess many of those who left that long term delinquency status in August either exited via a short sale or a mortgage modification of some kind; nonetheless, of the 1,347,000 plus homeowners who were seriously delinquent in July, a significant portion of them likely lived in their homes without making payments for 2 years or more before making that exit...

returning to the predicament where we see that the average homeowner who is in the foreclosure process has been in that situation for nearly 900 days, we'll now look at a bar graph below (from page 17) that shows the pipeline ratios for 10 select judicial states in red and 10 non-judicial states in blue...the foreclosure "pipeline' is the duration that a mortgage spends in the foreclosure process between the foreclosure start and the foreclosure sale, which completes the process; in computing the pipeline ratio, the industry takes the sum of all those mortgages that are seriously delinquent or in foreclosure in a given state and divides it by the average number of completed foreclosures per month over the last 6 months....what this number gives us is the number of months it would take for all those in the foreclosure inventory and the pre-foreclosure inventory to clear at the current rate foreclosures are being completed in that state…thus, for the judicial states, where a foreclosure must go through the courts, at the rate at which foreclosures are being processed nationally, it would take more than 4 years - 49 months to be exact, for all those seriously delinquent and in foreclosure homes to be adjudicated...but as you see by the red bars; the pipeline ratio in some states is much longer; in New York at the rate foreclosures are being processed, it would take 323 months, yes, nearly 27 years to clear the backlog; New Jersey at 211 months, or 17 and a half years, and Hawaii, at 201 months, aren't much faster...but overall the foreclosure pipeline in these judicial states has been dropping, from an average of 118 months in early 2011 too the current 49 months now...however, the non-judicial states, where foreclosures have always been faster, have not seen much change, because several of them have passed laws protecting homeowners and levying fines for foreclosure fraud...so we now see a nonjudicial state such as Massachusetts with a pipeline ratio of 168 months, up 136% from the second quarter a year ago, meaning it would now take 14 years to clear that state's foreclosure backlog; the ostensible reason? last year Massachusetts passed a law giving judges the power to decide whether a bank can foreclose or must modify the mortgage; similarly, California, a non judicial atate where foreclosures had been executed rapidly, has now seen a 68% increase in the foreclosure pipeline with the passage of a homeowners Bill of Rights, written to curtail lender abuses; likewise, Nevada passed a law in 2011 making it a felony if a mortgage servicer made fraudulent representations concerning a title, and imposed fines up to $5,000 for falsifying documents, which temporarily brought foreclosures in that state to a standstill... although foreclosure proceedings in Nevada have since resumed, they're at a slower pace, and hence the foreclosure pipeline for that state at 42 months is still 56% higher than it was before the law was passed...

August LPS pipeline ratios by state

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Sunday, October 6, 2013

September jobs reports from ADP and Gallup; September ISM manufacturing and non-manufacturing reports

you all probably already know that all non-essential government operations have been shut down since Monday midnight, and a little over 800,000 civilian government workers out of a total of around 2 million government employees have been furloughed since then...this is, of course, because the republican controlled House refused to pass a continuing resolution to fund government operations without an attachment either defunding or delaying obamacare, something the Senate and Obama would have no part of...although some might think it's not all bad to see those who are charged with reading our emails and monitoring our phone calls off the job, or that 91% of IRS employees were furloughed, the latter does mean that potential home purchases may have to wait until mortgage bankers can access 2 years worth of borrowers income transcripts from the IRS before they can approve the home loans...among the other immediate impacts outside of the 800,000 federal workers who're without a paycheck include layoffs announced by defense contractors including Lockheed and United Technologies and turning away 200 patients who otherwise would be admitted to the NIH Clinical Center, including 30 children with cancer....we're sure there's dozens of similar stories to be told, and so far there's been no progress towards resolving the lapse in appropriations that caused all this; so far the only measures the Republican house have advanced are piecemeal funding bills for veterans’ programs, national parks and garbage collection in Washington DC, which have been turned back by a Senate that's looking for a complete package...and we're also getting closer to the October 17th date when the Treasury's spending runs up against the statutory debt limit and threatens a default that could turn into a financial crisis with catastrophic consequences...we would bet that before it comes to that, we'd see unilateral action on the part of the administration, which would lead to a protracted court battle and possibly even a supreme court decision on what is ultimately a constitutional issue, and not a fiscal one...the whole story defies telling in a short summary; if you want more details, there are probably around a hundred linked paragraphs relating to the shutdown and the debt ceiling included in this week's global glass onion, including the play by play leading up to the shutdown Tuesday....

there was also no September employment report from the Labor Department this week due to the shutdown, something which last happened in January of 1996, when that report was delayed two weeks in a similar protracted shutdown...and it's not only the new reports that we're missing, all the archived data from the census bureau, the Bureau of Economic Analysis, and several other government agencies is unavailable as well, and reports that were online a week ago have been taken down, such that if you click the link for the full GDP revision we looked at last week, ( http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.pdf ) you'll get the following message "Due to the lapse in government funding, www.bea.gov will be unavailable until further notice. This includes access to all data and the e-File system."...however, reports and data from the Fed are still available, as is the FRED website, from which some data associated with the charts can be downloaded....in addition, there are several private reports from which we can glean a reasonable amount of information; to that end, we'll look at the National Employment Report from ADP...

ADP Shows 166,000 Private Payroll Jobs Added in September

ADP Sept monthly change ADP, or Automatic Data Processing, is a private company that provides payroll services and administrative help with other employee data for companies representing about 10% of the U.S. workforce...from their proprietary data, they provide a monthly estimate of nonfarm private sector employment that should roughly correspond to the data we'd normally get from the BLS establishment survey, or the Current Employment Statistics (CES), which surveys more than one-fourth of businesses and agencies...for September, ADP's private payroll jobs report showed an increase of 166,000 jobs over August job levels, while they revised their August job figures down by 17,000, from the previously reported 176,00 to 159.000; ADP indicates that of the jobs created in September, a net 147,000 were in service providing sectors, while just 19,000 were in goods-producing industries; in a metric that the BLS doesn't track, ADP records that 74,000 of Septembers jobs were created by small businesses with under 49 employees, with establishments with less than 20 employees adding 46,000 of those, while mid-sized companies, defined as having 50 to 499 employees, added 28,000, and companies employing over 500 increased their employment levels by 64.000...

the graph to the right above is from the ADP press release and it shows the number of payroll jobs created monthly over the last 13 months…if you click to enlarge it, you’ll see that the ADP job creation readings over last three months were 190,000 for June, 161,000 for July, and 159,000 for August; that contrasts with the private job creation levels of 194,000, 127,000, and 152,000 for those months reported by the BLS establishment survey (note that doesn't include changes in government employment)...since the overhaul of ADP’s methodology last fall, the initial readings on the two reports have had an difference of plus or minus 38,000…since the BLS itself has a 46,000 average revision from first to third estimate, whatever inaccuracies that appear in the ADP report are likely no greater than would appear in the first estimate of non-farm payrolls that we should have recovered from the labor department this Friday..the graph below, also from ADP, gives us a long term overlay of the number jobs added monthly in the ADP report in grey, comparing it to the BLS monthly payroll job change from the BLS in maroon...although they aren't an exact match, it's obvious that both have marked the same trend..

ADP Historical-Trend-Change-in-Total-Nonfarm-Private-Employment-September-2013
the ADP report also includes the number of jobs added in 5 select industries; construction, manufacturing,  trade, transportation & utilities, professional & business services, and financial services; thus they omit job numbers in BLS categories for mining & logging, information tech, health care & education, and leisure and hospitality, likely because their employer base doesn't have a large enough sample in those areas to generate an accurate estimate...in September, ADP showed 16,000 jobs were added in construction, 1,000 jobs added in manufacturing, 54,000 new jobs in trade, transportation & utilities (many of which are probably retail sales), 27,000 additional jobs in professional & business services, and a loss of 4,000 jobs in financial services...the bar graph below from ADP shows a representation of those new September jobs in each of those areas in the far right bar, and jobs added in each of the previous 12 monthly bars before that, where red represents jobs added in professional & business services, dark grey are jobs added in trade, transportation & utilities, light green are jobs added in construction, orange is net job creation in manufacturing, and blue represents jobs added in financial services, where any color appearing below the “0” line meaning jobs in that category were lost that month..
ADP Change-in-Total-Nonfarm-Private-Employment-by-Selected-Industry-September-2013

to compare that ADP graph above to BLS data over the same time period for the same job categories, we have created the FRED bar graph below which includes jobs added or lost according to the establishment survey in each of those ADP selected industries, maintaining the color scheme from ADP with roughly the same colors from the FRED palate; again, each cluster of five bars below represents jobs added or subtracted in each month between September of last year and August this year (but not the missing current report), with red representing jobs added in professional & business services, grey representing jobs added in trade, transportation & utilities, light green representing jobs added in construction, orange representing jobs added in manufacturing, and blue representing jobs added in financial services…from here it looks like ADP jobs data above and BLS jobs data below are fairly close for trade, transportation & utilities in grey, construction in orange, and financial services in blue…but ADP doesn't match where BLS show weak manufacturing job creation (green) in recent months, and both show some inconsistent swings in jobs added in professional & business services, shown in red on both graphs…
FRED Graph

Gallup Polling Finds No Growth in Percentage Employed Full Time Since 2010

in lieu of the household survey from the BLS, we'll also take a look at a few of the employment metrics produced from Gallup polling data...Gallup tracks the number of adults 18 and older who are employed, unemployed, and underemployed with a survey of 30,000 households monthly, in contrast to the survey of about 60,000 eligible households conducted by Census for the Labor Department; Gallup's survey is conducted daily over the month and also generates a daily unemployment rate from a 30 day moving average of responses, whereas the BLS household survey is conducted each month during the week of the 12th to generate the monthly data for that month..since the margin of error on the unemployment rate from BLS is plus or minus 0.2%, we'd have to figure Gallup's smaller survey has at least that much variability...also note that BLS includes all those 16 and over in their household survey metrics...

in computing an unemployment rate, Gallup figures the percentage of the workforce that are unemployed over a given month, with the "workforce" definition similar to the BLS's "labor force", ie, those adults who are working or actively looking for work and available for employment at the time they're surveyed...as collected and originally reported, Gallup's unemployment rate is not seasonally adjusted; thus their unemployment metric shows quite a bit volatility due to seasonal factors; Gallup's unadjusted unemployment rate fell to 7.7% in September, after a 18 month high at 8.7% in August, so it's now back near the same levels of June and July and the lowest it's been since April...they also generate a seasonally adjusted unemployment rate using a rather unsophisticated method; they apply the percentage of seasonal adjustment as computed in the previous year's BLS adjustment for that month to this year's data; so, since last year's BLS report adjusted September's unemployment rate upward by 0.2%, they applied that change to this years data to generate a seasonally adjusted unemployment rate for September of 7.9%, down from the 8.6% rate in August, adjusted by the same method...the graph below from Gallup shows their unadjusted monthly unemployment rate from the beginning of 2011 in dark green, with an overlay of their seasonally adjusted unemployment rate computed by that method in light green; it's obvious that both are fairly volatile, some of which might be due to the small sampling...but it does look like the unemployment rate in both metrics has been stuck in the same range over the past year and a half...

Gallup Sept U3

Gallup also generates an underemployment rate without seasonal adjustment...this would correspond to the Labor Department's U-6 unemployment metric, where those who want full time work but are working part time for economic reasons, ie, either their hours were cut or they could only find part time work, are included in this broadest measure of unemployment...in September, Gallup found that 9.4% of us were just working part time but wanted a full time job; that was up from 8.7% involuntary part time workers in August, but down from 9.5% in July...adding those who are working part time who want full time work to those unemployed works out to an underemployment rate of 17.1% in September, down from 17.4% in August, but up from 16.5% in September 2012...in contrast, the underemployment rate from the BLS was at a new recession low of 13.7% in August, down from 14.7% a year earlier...the Gallup graph below shows their monthly underemployment rate since the beginning of 2011; you'll note they're at their low for this year too, as February, April and May all registered part time for economic reasons rates at 10.1%…however, they also showed somewhat lower underemployment rates for several months last year...

Gallup Sept U6

the last Gallup metric we'll look at is the payroll to population rate, or the percentage of the population 18 and older who are working full time (over 30 hours a week); this is similar to the employment-population ratio from the BLS, except that the BLS includes the self employed, part time workers and all those over 16 in their metric...Gallup found that their "payroll to population employment rate"  decreased to 43.5% in September, down from 43.7% in August, and that it was 1.6 percentage points less than the 45.1% employment rate in September of last year, which means Gallup finds that the percentage of us working full time now is 3.5% lower than it was a year ago; this is again in contrast to the BLS employment-population ratio, which was at 58.6 percent in August, near where it had been most of the year and up fractionally from 58.4% a year earlier...assuming a reasonable accuracy in both metrics means that a significant percentage of the population has been shifted from full time to part time work over the past year, something we've noted in covering the household survey earlier this year...for a visualization of that, the graph below from Gallup shows their payroll to population employment rate since the beginning of 2011; although it's not included in the graph, Gallup notes that this metric is still at the same level as it was at in September 2010, meaning there has been essentially no growth in full-time employment in three years...

Gallup Sept payroll to population

ISM Manufacturing Index Indicates Faster Expansion; ISM Services Index Indicates Slower Growth

another report we should have seen this week was the Full Report on Manufacturers’ Shipments, Inventories and Orders for August. which has obviously been replaced by a shutdown notice for all census.gov hosted websites...what we could look at instead is the September Manufacturing ISM Report, issued by the Institute for Supply Management...this is a widely followed report because analysts believe it gives them an advance look at manufacturing conditions and outlook that the government reports wont cover for another several weeks...but we should understand that this report does not track hard data, but merely the present situation in a number of industries as derived from a survey of purchasing managers in those industries; who are queried as to whether conditions in their industry and area are better, worse, or the same as the previous month...there are five major subindexes, each of which accounts for one-fifth of the composite, and each of those is a simple diffusion index; wherein each response of "better" out of a each hundred queries adds one to the index; each response of "the same" adds a half point, and responses of "worse" are not counted; thus a reading over 50 only indicates that a majority of those polled reported that conditions in their industry are improving.....no weighting is given for the different sizes of businesses polled, or whether conditions are a whole lot better, just marginally so, or a whole lot worse...

the September survey indicated faster expansion in September than in August, as the composite purchasing managers index (the PMI) rose to 56.2% in September, up from 55.7% in August and at the highest reading since April 2011....of the five indexes making up the PMI, the new orders index fell to 60.5% in September, down from 63.2% in August, but at a level over 50 still indicating rapid expansion; the production index increased by 0.2%, from 62.4% to 62.6%, the employment index indicated more hiring as it rose from 53.3% in August to 55.4% in September, its highest level since July 2012, while the index for suppliers deliveries rose 0.3% to 52.6% and the inventories index moved up to a neutral 50.0% from a contractionary August reading of 47.5%...other indexes that do not figure into the composite PMI include the prices index, which was up from 54.0% to 56.5%, indicating prices were increasing faster, the orders backlog, which increased 3.0 points to 49.5% but still indicated contraction, the still deeply contractionary customers inventories index which was up from 42.5 to 43.0, and the exports and imports indexes, which fell 3.5% and 3.0% to 52.0% and 55.0% respectively....

although this report includes input from purchasing managers in 18 manufacturing industries, the ISM does not break out the PMIs for specific industries; rather, they just list them in an order from fastest growing to slowest growing and a similar order for those in contraction...those industries that saw the greatest growth in new orders in September were textiles; plastic & rubber products; oil & coal products; fabricated metals; and printing & related activities, in that order; the three industries that saw new orders contraction in September were nonmetallic mineral products; primary metals; and machinery...meanwhile, those that saw the most expansion in production in September were food, beverage & tobacco products; electrical equipment, appliances & components; furniture and paper products, in that order, while 5 industries saw a slowdown in production: textiles; apparel and related products; primary metals; plastic & rubber products; and nonmetallic mineral products...eight industries reported more hiring in September, led by electrical equipment, appliances & components; wood products; printing & related activities, and furniture & related products; meanwhile, 6 industries saw employment contract for the month; apparel and related products; primary metals; nonmetallic mineral products; miscellaneous manufacturing; transportation equipment; and computer & electronic products, in that order...
FRED Graph

the Institute for Supply Management also generates a purchasing managers index for non-manufacturing industries using the same methods as described above; although these service industries are arguably more important than manufacturing in that they generate 5 out of 6 jobs, the ISM has only been surveying purchasing managers and producing this index since 2008, so it really doesn't have a long enough track record to determine if it's a reliable indicator of service sector expansion..the September Non-Manufacturing ISM Report generates a composite Non-Manufacturing Index (NMI) from four equally weighted diffusion indexes: business activity, new orders, employment, and suppliers deliveries...

in September, the composite NMI fell 4.2 percentage points to 54.4%, down from an all time high of 58.6% in August, indicating slower expansion in service industries...the business activity index dropped 7.1%, from 62.2% in August to 55.1% in September, but still indicated increasing activity; the employment index fell 4.3% to 52.7% in September, down from 57.0% in August, and the largest drop in that index since May 2009; in addition, new orders slipped 0.9% to 59.6%, and suppliers deliveries fell 4.5% to a stagnant 50.0%, from 54.5% in August...changes in indexes that are not included the NMI composite include a 1.5% drop in the inventory index to 54.5%, an unchanged orders backlog index at 50.5%, a 3.8% jump in the prices index to 57.2%, indicating prices are increasing faster than they were in August, a jump of 7.0% in the new export orders index to 57.5%, a 3.5% drop in the imports index to 51.5% in September, and a 1.5% decrease in inventories sentiment to 62.0%, whatever that is, which ISM lists as too high...

  of the 11 non-manufacturing industries reporting growth in September, those showing the greatest grow were retail trade; management & support of companies; transportation & warehousing; construction; utilities; information; and finance & insurance, in that order; the 4 service industries reporting contraction in September were arts, entertainment & recreation; educational services; health care & social assistance; and mining...our FRED graph above shows the history of the NMI since it's inception in January of 2008 in blue, and the track of the older manufacturing PMI since 2000 in red, with recessions marked by grey vertical bars; we’ve also included in light grey the track of the older ISM non-manufacturing Business Activity Index, which is now incorporated into the NMI, as a indicator of the historical track of the service industries before the creation of the composite NMI…it's a very short history, but it appears that the manufacturing index tends to lead the non-manufacturing index changes...

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)