Sunday, November 6, 2016

October's jobs; September's income and outlays, trade, construction spending, and factory inventories

in addition to the Employment Situation Summary for October from the Bureau of Labor Statistics, this week also saw the release of four September reports that included metrics which were either estimated or included in last week's advance estimate of 3rd quarter GDP: the September report on Personal Income and Spending from the Bureau of Economic Analysis, the Census report on our International Trade for September, the September report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for September...

the week’s privately issued reports included the ADP Employment Report for October, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 17.90 million annual rate in October, up 1.4% from the 17.65 million annual rate in September, and up 1.5% from the same month a year ago, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the October Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 51.9% in October, up from 51.5% in September, which still suggests a sluggish expansion in manufacturing firms nationally, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 54.8%, from 57.1% in September, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in October...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 161,000 Jobs in October; Employment and Unemployment Both Down

the Employment Situation Summary for October indicated fairly weak job creation, a decent increase in average wages for those who were working, while the unemployment rate, the employment to population ratio and the labor force participation rate all fell by 0.1%…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 161,000 jobs in October, after the previously estimated payroll job increase for September was revised up from 156,000 to 191,000 and the payroll jobs increase for August was revised up from 167,000 to 176,000…that means that this report represents a total of 205,000 more seasonally adjusted payroll jobs than were reported last month, partially ameliorating the weak MoM headline increase...the unadjusted data, however, shows that there were actually 724,000 fewer payroll jobs extent than in September, so the month's job increase was entirely due to a large seasonal adjustment...

seasonally adjusted job increases in October were spread throughout the private service sector and in government, while new jobs in the goods producing industries netted zero, because the 11,000 job increase in construction was completely offset by job losses in manufacturing and resource exploitation...the broad professional and business services sector added 43,000 jobs, with 8,300 more positions in computer systems design and 8,100 more jobs in services to buildings ....the health care sector saw the addition of 30,500 jobs with the addition of 18,500 jobs in ambulatory care services and 12,700 jobs in hospitals....branches of government added 19,000 employees, with 12,000 of those employed by the Feds...another 14,000 jobs were added in the financial sector, with 7,700 of those in insurance and related activities...otherwise, no other sector saw increases larger than 10,000, as even retail sales saw a decrease of 1,000 jobs, with the loss of 15,600 jobs in clothing and accessories stores...

with most of the increases in generally better paying jobs, the establishment survey also showed that average hourly pay for all employees rose by 10 cents an hour to $25.92 an hour in October, after it had increased by a revised 8 cents an hour in September; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.72 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in October, while hours for production and non-supervisory personnel was unchanged at 33.6 hours, after their September average workweek was revised higher by a tenth of an hour...at the same time, the manufacturing workweek increased by 0.1 hour to 40.8 hours, while average factory overtime was unchanged at 3.3 hours...

meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 43,000 to 151,925,000, while the estimated number of those unemployed fell by 152,000 to 7,939,000; and hence the total labor force decreased by a total of 195,000....since the working age population had grown by 230,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 425,000 to 94,609,000, which was enough to reduce the labor force participation rate from 62.9% in September to 62.8% in October...in addition, the drop in number employed combined with the increase in the population was also enough to cut the employment to population ratio, which we could think of as an employment rate, from 59.8% to 59.7%...but at the same time, with the relatively large drop in the number unemployed was also enough to cut the unemployment rate from 5.0% to 4.9%...meanwhile, the number of those who reported they were forced to accept just part time work fell by 5,000, from 5,894,000 in September to 5,889,000 in October, which combined with the lower unemployment rate, cut the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", down to 9.5% of the labor force in October, its lowest level since April 2008....

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..

September Personal Income Rose 0.3%, Personal Spending Rose 0.5%

technically, the Monday release of the September Income and Outlays report was concurrent with the GDP release on the prior Friday, since all the PCE data in the GDP report comes from this report, and like that 3rd quarter GDP report we reviewed last week, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if September's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from August to September....thus, when the opening line of the press release for this report tell us "Personal income increased  $46.7 billion (0.3 percent) in September...", they mean that the annualized figure for all types of personal income in September, $16,089.7 billion, was $46.7 billion, or almost 0.3% greater than the annualized personal income figure for August; the actual increase in personal income in September over August is not given....similarly, disposable personal income, which is income after taxes, also rose by less than 0.3%, from an annual rate of $14,070.2 billion in August to an annual rate of $14,107.2 billion in September...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for September, which were included in the change in real PCE in 3rd quarter GDP, rose at a $61.0 billion annual rate to a level of $12,844.0 billion in consumer spending annually, almost 0.5% higher than in August, which itself was revised from the originally reported annual rate of $12,802.3 billion to $12,783.0 billion...the current dollar increase in September spending included a $28.0 billion annualized increase to an annualized $8,733.5 billion spending for services, an $18.1 billion increase to $1,410.3 billion in annualized spending for durable goods, and a $14.9 billion increase to $2,700.2 billion in annualized spending for non durable goods...total personal outlays for September, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $59.7 billion to $13,309.4 billion, which left personal savings, which is disposable personal income less total outlays, at a $797.8 billion annual rate in September, down from the revised $820.5 billion in annualized personal savings in August...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 5.7%, from 5.8% in August, which itself was originally reported at 5.7%..

while our personal consumption expenditures accounted for 68.8% of our second quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100....from Table 9 in the pdf for this report, we find that that index rose from 110.898 in August to 111.135 in September, giving us a month over month inflation rate of 0.2137%, which BEA reports as an increase of +0.2%; at the same time, Table 11 gives us a year over year PCE price index increase of 1.2%, and a core price increase, excluding food and energy, of 1.7% for the year, both still below the Fed's inflation target...applying the September inflation adjustment to the change in September PCE shows that real PCE was up 0.263%, which BEA reports as a 0.3% increase in their tables...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2009 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

September Trade Deficit Down 9.9% on Aircraft and Services Trade Reversals

our trade deficit fell by 9.9% in September as the value of our exports increased and the value of our imports decreased....the Census report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit fell by more than $4.0 billion (rounded) to $36.4 billion in September from a revised August deficit of $40.5 billion...the value of our September exports rose by $1.0 billion to $189.2 billion on a $0.6 billion increase to $126.1 billion in our exports of goods and a $0.4 billion increase to $63.1 billion in our exports of services, while our imports fell $3.0 billion to $225.6 billion on a $2.0 billion decrease to $183.7 billion in our imports of goods while our imports of services fell $1.0 billion to $42.0 billion...export prices were on average 0.3% higher in September, so the relative real increase in September exports would be lower than the nominal amount by that percentage, while import prices were 0.1% higher, meaning real imports were smaller than the nominal dollar values reported here by that fractional percentage....

the increase in our September exports of goods resulted from higher exports of capital goods and of consumer goods, which was partially offset by lower exports of foods, feeds and beverages...referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of capital goods rose by $1576 million to $43,684 million on a $1444 million increase in our exports of civilian aircraft, and that our exports of consumer goods rose by $738 million to $16,824 million on a $1,042 million increase in our exports of artwork and antique, which was partially offset by a $328 million decrease in our exports of pharmaceuticals...in addition, our exports of industrial supplies and materials rose by $497 million to $34,765 million on a $254 million increase in our exports of nonmonetary gold, and our exports of other goods not categorized by end use rose by $102 million to $5,090 million...offsetting the increases in those export categories, our exports of foods, feeds and beverages fell by $1732 million to $12,644 million on a $2,015 million decrease in our exports soybeans, and our exports of automotive vehicles, parts, and engines fell by $458 million to $12,452 million on a $517 million decrease in our exports of new and used passenger cars...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of capital goods and consumer goods were responsible for the $2.0 billion decrease in our goods imports, even as our imports of passenger cars increased....our imports of capital goods fell by $1,690 million to $48,475 million on a $531 million decrease in our imports of civilian aircraft, a $317 million decrease in our imports of computer accessories, and a $229 million decrease in our imports of telecommunications equipment...at the same time, our imports of consumer goods fell by $837 million to $47,199 million on a $652 million decrease in our imports of pharmaceuticals, a $261 million decrease in our imports of cellphones, and a $260 million decrease in our imports of apparel and fabric household goods, other than those made of wool or cotton...in addition, our imports of industrial supplies and materials fell by $39 million to $38,007 million, even as our imports of organic chemicals rose by $618 million, on a $309 million decrease in our imports of fuel oil and smaller decreases in many other line items, and our imports of other goods not categorized by end use fell by $373 million to $7,580 million...partially offsetting those decreases, our imports of automotive vehicles, parts and engines rose by $1182 million to $29,823 million on a $1,059 million increase in our imports of of new and used passenger cars, and our imports of foods, feeds, and beverages rose by $4 million to $10,915 million as small increases in several food items were offset by decreases in imports of meat products, fish and shellfish..

in last week's advance report on 3rd quarter GDP, our September trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released last week, just before the GDP release...that report estimated that our September goods trade deficit was at $56,083 million on a Census basis, down from the $59,149 million goods deficit in August, on goods exports of $125,647 million and goods imports of $181,730 million...this report revises that and shows that our actual goods trade deficit in September was $57,519 billion on a balance of payments basis, and $56,540 billion on a Census basis, on Census adjusted goods imports of $183,650 billion and Census adjusted goods exports of $125,459 billion...in addition, the August trade deficit was revised  bit lower to $59,015 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was roughly $0.3 billion more than was included in last week's GDP report, or roughly $1.3 billion on an annualized basis, which would subtract about 0.03 percentage points from 3rd quarter GDP ...however, the unusual change in September trade was the $1.4 billion reduction in our trade deficit in services, which resulted from a $0.4 billion increase in our travel exports and a $1.2 billion decrease in our charges for the use of intellectual property, as September's trade was without the August charge for broadcast rights for the 2016 Summer Olympic Games...in the Technical Note for 3rd Quarter GDP, the BEA says they don't yet have September services trade data, but they don't indicate how they estimated it...the GDP report itself shows our annualized exports of services rose $3.6 billion, while our annualized imports of services rose $10.1 billion...if the September improvement in our services trade was not included in that, it could add as much as 0.13 percentage points to 3rd quarter GDP...

Construction Spending Fell 0.4% in September after Prior Months Were Revised Higher

the Census Bureau's report on construction spending for September (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,150.0 billion annually if extrapolated over an entire year, which was 0.4 percent (±1.3%)* below the revised annualized August estimate of $1,140.9 billion and also 0.2 percent (±1.8%)* below the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised 1.1% higher, from $1,142.2 billion to $1,154.4 billion, while the annual rate of construction spending for July was revised 0.9% higher, from $1,150.6 billion to $1,160.4 billion...

private construction spending was at a seasonally adjusted annual rate of $879.7 billion in September, 0.2 percent (±1.0%)* below the revised August estimate of $881.6 billion, with residential spending of 453.7 billion in September, 0.5 percent (±1.3%)* higher than the upwardly revised annual rate of $451.3 billion in August, while private non-residential construction spending fell 1.0 percent (±1.0%) to $426.0 billion from the revised August level, which included a 2.4% decrease in spending for construction of commercial buildings....at the same time, public construction spending was estimated to be at an annual rate of $270.3 billion, 0.9 percent (±2.5%) below the revised August estimate of $272.8 billion, with public spending for education down 1.1 percent (±4.1%)* to an annual rate of $66.6 billion...

construction spending for all three months of the 3rd quarter was higher than was reported by the BEA in the advance report for 2nd quarter GDP....as we saw above, annualized construction spending for July was revised $9.8 billion higher, and annualized construction spending for August was revised $12.2 billion higher...in reporting 2nd quarter GDP, the BEA's technical note (pdf) indicated that they had estimated September residential construction would be $2.4 billion less than that of the previously reported August figure, with single family construction valued at $233.7 billion and multifamily valued at $61.5 billion, and that September nonresidential construction would be $423.3 billion, $0.9 billion greater than that of the reported August figure...with this report, September residential construction spending was actually up $2.4 billion, with new single family construction at $236,556 million and new multifamily construction at $62,079 million, and while September nonresidential construction spending was down $4.3 billion, at $426.0 billion it was actually $2.7 billion more than the BEA had estimated.…that means that all told, the BEA underestimated annualized September construction spending by $5.1 billion...hence, the annualized figure for 3rd quarter construction spending would thus be $9.03 billion more than the figure used by the BEA when computing 2nd quarter GDP, which would mean that this report implies a .22 percentage point increase to 3rd quarter GDP...

Factory Shipments Up 0.8% in September, Factory Inventories Nearly Unchanged

the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $1.4 billion or 0.3 percent to $455.5 billion, following an increase of 0.4% in August, which was revised from the 0.2% increase reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week...this report showed that new orders for manufactured durable goods fell by $0.7 billion or 0.3 percent to $226.8 billion in September, revised from last week's published 0.1% decrease to $227.3 billion....

this report also indicated that the seasonally adjusted value of September factory shipments rose for the sixth time in 7 months, increasing by $3.9 billion or 0.8 percent to $463.0 billion, following a 0.2% increase in August...shipments of durable goods were up by $1.8 billion or 0.8 percent to $234.3 billion, virtually unrevised from what was published last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $2.1 billion, or 0.9%, to $228.7 billion, as a $1.4 billion, 4.6% increase in the value of shipments from petroleum refineries accounted for two-thirds of the increase...

meanwhile, the aggregate value of September factory inventories fell for the first time in three months, decreasing by $0.2 billion to $621.4 billion, which would be considered statistically unchanged....September inventories of durable goods increased in value by $0.3 billion or 0.1 percent to $383.8 billion, essentially unrevised from what was reported in the advance report....the value of non-durable goods' inventories decreased by $0.5 billion or 0.2% to $237.6 billion, following a increase of 0.1% in August...the BEA's technical note for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would decrease by $3.9 billion, so that would indicate a that they underestimated the 3rd quarter GDP inventory component by about $3.4 billion, which would imply that 3rd quarter GDP will have to be adjusted upwards by another 0.09 percentage points to account for what this report shows..


(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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