Sunday, May 8, 2016

April jobs report, March trade deficit, construction spending, factory inventories, & Mortgage Monitor

as is usual for the week with the first Friday of the month, the Employment Situation Summary for April from the Bureau of Labor Statistics was the most widely watched release this week...but the week also saw the release of three reports for March from the Census Bureau that input into GDP, all of which hint at revisions to 1st quarter results: the Census report on our International Trade for March, the March report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for March...in addition to the jobs report, the BLS also released the revised 1st Quarter Report on Labor Productivity and Costs, which showed nonfarm business sector labor productivity decreased at a 1.0% annual rate during the quarter, as hours worked increased 1.5% and the output of goods and services from those hours increased just 0.4%...with a greater than 1.0% decrease in labor productivity and a 3.0% increase in hourly compensation, unit labor costs thus rose 4.1% in the first quarter of 2016...also on Friday, the Fed released the Consumer Credit Report for March, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $29.67 billion, or at a 10.0% annual rate, as non-revolving credit expanded at a 8.5% rate to $2,640.7 billion and revolving credit outstanding rose at a 14.2% rate to $951.6 billion...the 10.0% seasonally adjusted annual growth rate was the greatest credit expansion rate since November 2001; analysts had expected credit to rise by just $15.8 billion...

privately issued reports this week included the Mortgage Monitor for March (pdf) from Black Knight Financial Services, the report on light vehicle sales for April from Wards Automotive, which estimated that vehicles sold at a 17.23 million annual rate in April, up from the 16.46 million annual pace of March, but at a 0.5% lower daily sales rate than in April of 2015, and both of the widely followed reports from the Institute for Supply Management (ISM): the April Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) decreased from 51.8% in March to 50.8% in April, which still suggests a slight expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 55.7%, up from 54.5% in March, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally... 

Employers add 160,000 Jobs in March; Employment Rate and Participation Rate Both Fall 0.2%

the Employment Situation Summary for April showed the weakest job creation since September and a drop in both the employment rate and the labor force participation rate, while the unemployment rate was unchanged....estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 160,000 jobs in April, after the payroll job increase for February was revised down from 245,000 to 233,000 and the March jobs increase was revised down from 215,000 to 208,000, meaning the combined number of jobs created over those months was 19,000 less than was previously reported…seasonally adjusted job increases in April were almost entirely in the private service sector, as government payrolls shrunk by 11,000 and small gains of 1,000 and 4,000 jobs in construction and manufacturing were offset by a loss of 8,000 jobs in the resource extraction sector...

the broad professional and business services sector, the largest employer overall, saw the addition of 65,000 payroll jobs, as 20,600 jobs were added by management and technical consulting services and 15,500 more were added by employment services...another 44,200 jobs were added in the health care sector, with 22,900 of those working in hospitals and another 19,300 jobs spread through several categories of ambulatory health care services...the leisure and hospitality sector added 22,000 jobs, including 18,200 jobs in bars and restaurants...another 20,000 jobs were added in the financial sector, with 7,900 of those in credit intermediation and related areas....the retail sector was notably a laggard in April, as a net of 3,000 jobs were lost in the sector which had added 47,000 jobs in March...hence, the entirety of the April weakness can be attributed to a dearth of new jobs in retail, something which shouldn't be surprising given the recent weakness in retail sales..

the establishment survey also showed that average hourly pay for all employees rose by 8 cents to $25.53 an hour, after it had increased by a revised 6 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 5 cents to $21.45 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.5 hours, recovering part of the 0.2 hour workweek decline in February, while hours for production and non-supervisory personnel also rose by a tenth of an hour to 33.7 hours...meanwhile, the manufacturing workweek remained unchanged at 40.7 hours, while factory overtime was at 3.3 hours for the fifth month in a row...

at the same time, results of the April household survey estimated that the seasonally adjusted number of those who were employed fell by 316,000 to 151,004,000; while the estimated number of unemployed also fell by 46,000 to 7,920,000; and thus the labor force decreased by a total of 362,000...since the working age population grew by 201,000 at the same time, that meant the number of employment aged individuals not in the labor force increased by 562,000 to 94,044,000, which was enough to clip the labor force participation rate by 0.2%, as it fell from 63.0% in March to 62.8% in April....with the large drop in the number employed, the employment to population ratio, which we could think of as an employment rate, also fell by 0.2% to 59.7%...meanwhile, with both the number of the employed and the unemployed down by similar proportions, the unemployment rate remained unchanged at 5.0%...at the same time, there was a relatively large 161,000 decrease in the number who reported they were involuntarily working part time, from 6,123,000 in March to 5,962,000 in April, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 9.8%% in March to its post recession low of 9.7% in April...

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports 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 tables 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....

March Trade Deficit Falls 13.8%, Modest Revisions are Little Boost to 1st Quarter GDP

our trade deficit fell by 13.8% in March, as the net value of both our exports and our imports decreased, but our imports decreased by much more....the Census report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit fell by $6.5 billion to $40.4 billion in March from a February deficit which was revised from $47.1 billion to $47.0 billion...the value of our March exports fell by $1.5 billion to $176.6 on a $1.8 billion decrease to $116.8 billion in our exports of goods and a $0.3 billion increase to $59.8 billion in our exports of services, while our imports fell $8.1 billion to $217.1 billion on a $7.9 billion decrease to $175.3 billion in our imports of goods and a $0.2 billion decrease to $41.7 billion in our imports of services...export prices were unchanged on average in March, so real exports were valued at close to the nominal dollar value in national accounts data, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage. ...this report revises the Advance Report on our International Trade in Goods for March, released last week in advance of the GDP report, which estimated a trade in goods deficit of $56.9 billion, in contrast to the $58.5 billion goods deficit reported here...including the $0.1 billion revision to the February deficit, then, this report indicates that our 1st quarter trade deficit was about $0.5 billion less than the trade input data that was included in last week's 1st quarter GDP report, which would suggest an upward revision to GDP of a bit over 0.01 percentage points...

most of the drop in our March exports could be accounted for by lower exports of consumer goods, while an increase in our capital goods exports was more than offset by lower exports of automotive vehicles parts, and engines and industrial supplies and materials....referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $1,579 million to $15,463 million on a $739 million drop in our exports of gem diamonds and a $751 million decrease in our exports of pharmaceutical preparations...our exports of industrial supplies and materials fell by $793 million to $30,540 million on a $485 million drop in our exports of petroleum products other than fuel oil and a $310 million drop in our exports of organic chemicals...in addition, our exports of automotive vehicles, parts, and engines fell by $713 million to $11,946 on a $353 million decrease in our exports of automotive parts other than tires and engines, and our exports of foods, feeds and beverages fell by $363 million to $9,375 million on a $343 million decrease in export of soybeans...meanwhile, our exports of capital goods rose by $1,004 million to $43,534 on a $1,288 million increase in our exports of civilian aircraft, a $395 million increase in our exports of oilfield drilling equipment, and a $363 million increase in our exports of semiconductors, which were partially offset by somewhat lower exports of computer accessories, electrical apparatuses. generators, and telecommunications equipment, and in addition our exports of other goods not categorized by end use rose by $737 million to $5,607 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a drop in our imports of consumer goods accounted more than half of the decrease in our imports, as our imports of consumer goods fell by $5,073 million to $46,396 million on a $1,066 million drop in our imports of toys, games, and sporting goods, a $647 million decrease in our imports of textiles other than wool and cotton, a $570 million decrease in our imports of cotton apparel and household goods, a $577 million decrease in our imports of televisions and video equipment, a $488 million decrease in our imports of furniture and similar household goods, a $470 million decrease in our imports of footwear, and a $353 million decrease in our imports of household appliances, all of which were hardly offset by a $479 million increase in our imports of pharmaceutical preparations...at the same time, our imports of capital goods fell $1,568 million to $47,385 million on a $767 million decrease in our imports of computer accessories and a $337 million decrease in our imports of electrical apparatuses, and our imports of industrial supplies and materials fell by $976 million to $32,585 million on an $248 million decrease in our imports of finished metal shapes and a $221 million decrease in our imports of petroleum products other than fuel oil....in addition, our imports of automotive vehicles, parts and engines fell $742 million to $28,311 million on a $621 million decrease in our imports of automotive parts other than tires and engines, our imports of foods, feeds, and beverages fell by $656 million to $10,549 million on lower imports of most foodstuffs and a $167 million drop in our imports of beer and wine, and our imports of goods not categorized by end use fell by $1172 million to $8,328 million...

March Construction Spending Reported up 0.3%, Was Actually Down in 23 Basis Point Hit to GDP

the March report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending for the month would work out to $1,137.5 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.0%)* above the revised annualized estimate of $1,133.6 billion in construction spending in February and 8.0 percent (±1.6%) above the estimated annualized level of construction spending of March last year...before we go any further, we should note that there was widespread media misreporting of the revisions included this report; for example, Bloomberg's Econoday said "February is now revised sharply higher; Reuters called it "an upwardly revised 1.0 percent jump in February", and the NY Times reported that the "February increase represented an upward revision by the government from its initial estimate that spending had fallen 0.5 percent"...they are are all wrong...February construction spending was originally reported at $1,144.0 billion annually, and it has now been revised down to $1,133.6 billion annually, and hence spending in March was below what was originally reported for February...what happened was there was a large downward revision to January spending, from the revised $1,150.1 billion figure reported last month to $1,122.0 billion with this report; hence the downwardly revised February spending was up from from January, even though it was lower than originally reported...reporters apparently took the change in the month over month percentage change to mean there was an upward change in spending... 

even worse than that, the NY Times quoted someone at Barclays in reporting "Barclays thinks the government will revise up its estimate of the economy's growth last quarter to a 0.7 percent annual rate, from its initial 0.5 percent estimate"...as noted, we have a $28.1 billion downward revision to January spending, a $10.4 billion downward revision to February spending, and March construction spending that was almost certainly lower in most sectors than was estimated by the BEA, who in their technical notes for 1st quarter GDP, noted they assumed an increase in nonresidential construction, and an increase in residential construction...not even considering whatever the downward revision to assumed March spending might be (GDP investment categories include more than is included in this report) the $38.5 billion downward revisions to January and February alone would subtract more than 0.23 percentage points from GDP, just the opposite of what Barclays is alleged to have forecast....

for March construction, then, private construction spending came in at a seasonally adjusted annual rate of $842.3 billion, 1.1 percent (±0.8%) above the revised February estimate of $832.8 billion, which was originally reported at $846.2 billion...that included residential spending at annual rate of $435.5 billion in March, 0.9 percent (±1.3%) 1.6 percent (±1.3%) above the downwardly revised February estimate of $428.8 billion, while private non-residential construction spending rose 0.7 percent (±0.8%)* to $406.8 billion from the revised February level, which was revised up...at the same time, public construction spending was estimated to be at an annual rate of  $295.2 billion, 1.9 percent (±2.0%) below the revised February estimate, with spending for public power down 14.1% and spending for sewage and waste disposal down 4.2% to an annual rate of $24,745 million....


Factory Shipments Up 0.5% in March, Factory Inventories Up 0.2%, First Increases Since June 2015

the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $5.0 billion or 1.1 percent to $458.4 billion in March, following an drop of 1.9% in February, revised from the 1.7% decrease reported last month, and a decrease of 2.9% in December, which was unrevised....however, as we learned 6 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report"; instead, they use shipments data as a proxy for non-durable orders, which means that both the "new orders" and "unfilled orders" sections of this report really only useful as a revised update to the advance report on durable goods we reported on last week...this showed that new orders for manufactured durable goods increased $1.7 billion or 0.8 percent to $230.6 billion, virtually unchanged from what was reported then...

this report also indicated that the seasonally adjusted value of March factory shipments rose for the first time in 9 months, increasing by $2.2 billion or 0.5 percent to $464.7 billion, following a 0.8 percent decrease in February, which had previously been reported as an 0.7% decrease...shipments of durable goods were down $1.1 billion or 0.5 percent to $236.9 billion, virtually unchanged from what was reported last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $3.3 billion, or 1.5%, to $227.8 billion, propelled by an 8.8% increase in the value of shipments from refineries, although shipments of most other durable goods categories increased as well.....without the increase in the value of refinery shipments, the value of shipments of other non-durable goods were still up by nearly $0.7 billion, or by nearly 0.4% ..

meanwhile, the aggregate value of March factory inventories rose by $1.1 billion or 0.2 percent to $635.1 billion, also their first increase in 9 months, following a February decrease of 0.5% that was reported as a 0.4% decrease last month....inventories of durable goods increased $0.1 billion to $394.2, or virtually unchanged from what was reported was reported last week, following a 0.3% decrease in February, which had been revised from the 0.1% reported last month in the advance report.....the value of non-durable goods' inventories rose $0.96 billion or 0.4 percent to $240.83 billion, following a decrease of 0.7% in January...the value of inventories at petroleum refineries accounted for more than half of the increase in non-durable inventories, as they rose by $0.61 billion or 2.6% percent to $24.06 billion...producer prices for finished goods were unchanged in March, with producer prices for energy goods up 1.8%, so after non-durable factory inventories are adjusted for inflation, non-durable inventories still show a real increase on the order of 0.4% for the month... since the BEA assumed a decrease in nondurable manufacturing inventories for March when computing 1st quarter GDP, this unexpected inventory increase will likely add at least 0.03 percentage points to 1st quarter GDP when revised figures are published at the end of this month...

Mortgage Delinquencies Drop by 8.37% in March, Mean Time in Foreclosure Rises to Record 1071 Days

the Mortgage Monitor for March (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 630,766 home mortgages, or 1.25% of all mortgages outstanding, remaining in the foreclosure process at the end of March, which was down from 655,311, or 1.30% of all active loans, that were in foreclosure at the end of February, and down from 1.68% of all mortgages that were in foreclosure in March of last year.....these are homeowners who at least had a foreclosure notice served but whose homes had not yet been seized, and the March "foreclosure inventory" remains at the lowest percentage of homes that were in the foreclosure process since the fall of 2007... new foreclosure starts, which have been volatile from month to month, fell to 72,762 in March from 84,305 in February and from 94,138 in March a year ago...over the past year, the average of new foreclosure starts monthly has continued at a level almost 50% higher than the average number of new foreclosures we saw monthly in the precrisis year of 2005...

in addition to homes in foreclosure, BKFS data also showed that  2,062,299 mortgages, or 4.08% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure at the end of March, down from the 4.45% of homeowners with a mortgage who were more than 30 days behind in February, and down from the mortgage delinquency rate of 4.66% in March a year earlier...of those who were delinquent in March, 732,765 home owners, or 1.45% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was also down from 772,441 such "seriously delinquent" mortgages in February...combining the total delinquent mortgages with those in foreclosure, we find that a total of 2,693,065 mortgage loans, or 5.33% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of March, and that 1,363,531, or 2.70% of all homeowners were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

for the details of the history of both those metrics, we're including below that part of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 17 of the pdf....the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past  and for each January shown going back to January 2005…in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure is still down from the April 2015 record of 536 days but has now climbed back up to 514 days, while the average time for those who’ve been in foreclosure without a resolution has increased again and at 1071 days has now topped the record high last set in February…that means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year's new foreclosure starts were all less than 90 days old, suggests that many foreclosures started early in the crisis are still not yet completed…

March 2016 LPS loan counts and days delinquent table


(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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