Monday, July 6, 2015

June jobs report, May construction spending and factory orders, April’s Case-Shiller Index, et al..

in addition to the Employment Situation Summary for June from the Bureau of Labor Statistics, the past week also saw the release of the Full Report on Manufacturers' Shipments, Inventories and Orders for May and the May report on Construction Spending, both from the Census Bureau, the April Case-Shiller Home Price Index from S&P Dow Jones, and the light vehicle sales report for June from Wards Automotive, which indicated vehicles sold at a 17.11 million annual rate in June, down from their post recession record rate of 17.71 annually in May, but still on track for the highest vehicle sales in 10 years...we also saw the release of several diffusion indexes on June manufacturing: the Texas area manufacturing survey from the Dallas Fed reported their general business activity index rose to -7.0 from to in May, indicating a moderating slowdown in their oil based economy; the May Manufacturing Report On Business from the Institute for Supply Management (ISM), which saw their manufacturing PMI (Purchasing Managers Index) rise from 52.8 in May to 53.5 in June, and the Chicago Business Barometer from the ISM Chicago (pdf) which increased 3.2 points to 49.4 in June from 46.2 in May, but still the 4th month in contraction out of the last five..

Employers add 223,000 Jobs in May While Labor Force Participation Rate Falls to 38 Year Low

the Employment Situation Summary for June again showed weaker net job creation than we saw last year, with two prior months revised lower; in addition, the unemployment rate fell because the labor force participation rate crashed to a 38 year low...the establishment survey data indicated that employers added a seasonally adjusted 223,000 jobs, while job additions for May were revised from 280,000 to 254,000 and the payroll increase in April was revised from 221,000 to 187,000.....job gains were concentrated in the service sector, led by 41,100 in health care services, 33,600 in administrative and waste services, and 32,900 in retail, while the goods producing sectors of manufacturing, construction, and resource exploitation together netted only 1,000 additional jobs...the average workweek was unchanged at 34.5 hours and the average hourly earnings for all employees was also unchanged at $24.95...

the June household survey indicated that the seasonally adjusted count of the employed fell by 56,000 to 148,739,000, and the number of unemployed fell by 375,000 to 8,299,000, and as a result of this 432,000 decrease in the number counted in the labor force, the unemployment rate fell from 5.5% to 5.3%...combining the labor force dropouts with a 208,000 increase in the civilian population meant that the count of those not in the labor force rose 640,000 to a record 93,626,000, and the labor force participation rate crashed from 62.9% to 62.6%, the lowest since 1977, a time when women were not yet a major factor in the work force..and even with the drop in the number employed, the number who willingly took only part time work rose by 519,000 to 20,480,000 and these voluntary part time employees now represent 13.8% of all employed workers..

the BLS employment situation press release itself is very readable, so you can get more details from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page....thus, when you encounter a line such as "The number of long-term unemployed (those jobless for 27 weeks or more) declined by 381,000 to 2.1 million in June". (See table A-12.) you can quickly open Table A-12.to get the details on what the change really was....

April and May Construction on Track to Add 1.24 Percentage Points to 2nd Quarter GDP

in the report on May construction spending (pdf), the Census Bureau estimated that our seasonally adjusted construction spending would work out to $1,035.8 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.5%)* above the revised estimate of a $1,027.0 billion annual rate in April, 8.2 percent (±2.0%) above the estimated adjusted and annualized level of construction spending of May last year, and the highest since October 2008...the April construction spending estimate was revised from $967.9 billion annually to $1,027.0 billion, the March estimate was revised from $984.0 billion to $1,006.35 billion annually, and the February estimate was revised up to $993.465 billion, which together imply a large enough revision to first quarter GDP to turn the quarter positive when the annual revisions are released July 30th....private construction spending was at a seasonally adjusted annual rate of $752.4 billion in May, 0.9 percent (±0.8%) above the revised April estimate, with residential spending rising to a seasonally adjusted annual rate of $359.5 billion in May, 0.3 percent (±1.3%)* above the revised April estimate of $358.5 billion, while private non-residential construction spending rose 1.5 percent (±0.8%) to $392.8 billion...meanwhile, public construction spending was estimated at a rate of $283.4 billion annually, 0.7 percent (±2.5%)* above the revised April estimated rate of $281.5 billion, with highway and street spending up 2.1% (±6.9%)* while construction spending for public safety was off 7.6% for the month and down 12.9% since last year...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...to see how this report of two month's spending might impact 2nd quarter GDP, we must adjust those varied categories of spending for inflation to give us the quantity of construction in real terms....the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, such as the Turner Construction building-cost indices for several types of buildings and the Engineering News Record construction cost index for utilities construction, while they use the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction for residential investment...the later indicates that prices for residential construction fell by 0.1% in April and rose by 0.1% in May, but more appropriately for our purposes, their average is down by 0.8% from the first quarter average; for the other types of construction, we'll simplify and just use the producer price index for final demand for construction, which showed 0.1% increases in both April and May, as well as in each of the preceding months, giving us a quarter over quarter increase of 0.3%...note that because the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling not captured by this report, our estimate is limited to the data included in this report...

using the revised monthly annualized construction spending data for January, February and March from Table 1 of this report, we find that 1st quarter private residential construction spending was at a seasonally adjusted annual rate of $359,009 million, and that comparable inflation adjusted value of April and May residential spending adjusted for inflation would be at a $387,700 million rate, which would mean that real residential construction rose at a 36.0% annual rate so far in this quarter, vis a vis the 1st quarter...for private non-residential construction, we find that 1st quarter non-residential construction was at a $363,230 million annual rate, while April and May non-residential spending adjusted for 0.1% monthly inflation would give us a rate of $388,821 in chained first quarter dollars, an increase in real non-residential construction at a 31.3% annual rate...lastly, using just the monthly data in this report, we find that public construction averaged at a $274,383 million annual rate over the 1st quarter, while public construction for April and May adjusted for inflation works out to a $282,431 million annual rate...hence, real government investment spending for construction was up at a 12.3% annual rate in April and May over the first quarter...finally, for the rate of construction growth we have for these two months, we find that real residential construction would add 0.42 percentage points to 2nd quarter GDP growth, real private non-residential would add .63 percentage points to 2nd quarter growth, and real public construction would add .19 percentage points to 2nd quarter GDP in the various government investment components...

May Factory Orders Fall 1.0%; Factory Shipments Down 0.1%; Factory Inventories Flat

the Census Bureau also released the Full Report on Manufacturers’ Shipments, Inventories, & Orders for May (note, pdf shows February; Census has been notified; see Excel link), which showed new orders for manufactured goods fell by $4.5 billion or 1.0 percent to $470.5 billion, after falling a revised 0.7% in April, as new orders for durable goods fell 2.2% on a 35.3% decrease in orders for commercial aircraft while new orders for non-durables rose 0.2%...this report also showed factory shipments fell by $0.3 billion or 0.1 percent to $482.1 billion, after they were virtually unchanged in April, and that May factory inventories rose by increased $0.1 billion to $649.7 billion, which was statistically unchanged from April, when inventories rose 0.2% over March...in addition, Census showed that unfilled factory orders decreased by $6.4 billion or 0.5 percent to $1,194.6 billion, following a 0.2% April decrease, the 5th decrease out of the last 6 months...remember, though, that this release reports the current value of shipments, inventories and orders and does not adjust for price, and since it includes output of refineries and food producers, is necessarily lower for those commodity producers because of the drop in price of their products..

April Case-Shiller Shows National Home Prices up 4.2% Since Last Year

lastly, the Case-Shiller house price indexes for April were released Tuesday and indicated a 4.6% year over year increase in prices on repeat home sales in the original ten cities covered, a 4.9% annual increase in the 20 city Composite, and a 4.2% increase in home prices nationally since the April report of last year....they also report a 'monthly' increase of 1.0% in the ten city index and a 1.1% increase in the 20 city index and in home prices nationally from the index readings of the March report; but since the month over month figures for this report are comparing prices of houses sold in February, March, and April to those sold in January, February and March, the change in the month over month indexes is in effect equal to 1/3rd the difference between April prices and January prices, logically a seasonal increase at this time of year...the full pdf of the release is here and it includes full unadjusted and adjusted tables for all 20 cities and the 3 indexes, as well as graphs and commentary....for coverage of this Case-Shiller report on the web, Bill McBride has two posts, which include several graphs: Case-Shiller: National House Price Index increased 4.2% year-over-year in April, followed by his analysis in Real Prices and Price-to-Rent Ratio in April, while Robert Oak has several excellent graphs in his thorough post titled Case-Shiller Index Shows Home Prices Continue to Rise….


(the above is the synopsis that accompanied my regular 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 receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)

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