Sunday, February 5, 2017

January jobs report; December’s income and outlays, construction spending and factory inventories..

with the first Friday in February, the key economic release this week was the Employment Situation Summary for January from the Bureau of Labor Statistics...in addition, the week also saw the release of three December reports that included metrics which were either estimated or included in last week's advance estimate of 4th quarter GDP: the December report on Personal Income and Spending from the Bureau of Economic Analysis, and the December report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for December, both from the Census Bureau...the week also saw the January Dallas Fed Texas Manufacturing Outlook Survey, which reported their general business activity composite index rose to +22.1 from last month's +15.5, it's highest reading since April 2010, suggesting a return to booming growth in the boom-bust Texas oil patch economy...

the week’s privately issued reports included the ADP Employment Report for January, the light vehicle sales report for January from Wards Automotive, which estimated that vehicles sold at a 17.48 million annual rate in January, down 4.5% from the 18.29 million annual rate in December, but up slightly from the 17.46 million annual rate in January a year ago, and the Case-Shiller Home Price Index for November from S&P Case-Shiller, which reported that home prices nationally during September, October and November averaged 5.6% higher than prices for the same homes that sold during the same 3 month period a year earlier....in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.0% in January, up from 54.5% in September, which suggests a stronger expansion in manufacturing firms nationally, and the January Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) slip to 56.4%, from 56.5% in December, indicating a marginally smaller plurality of service industry purchasing managers reported expansion in various facets of their business in January...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 227,000 Jobs in January, Unemployment Rate Rises to 4.8%

the Employment Situation Summary for January indicated modest job creation over the month, offset by revisions to prior months, while the household survey saw upticks in those unemployed and those who had their hours reduced to part time…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 227,000 jobs in January, after the previously estimated payroll job increase for November was revised down from 204,000 to 164,000, while the payroll jobs increase for December was revised up from 156,000 to 157,000…that means that this report represents a total of 188,000 more seasonally adjusted payroll jobs than were reported last month, a bit better than the 6 month average of 183,000 jobs per month, but below the past year's average of 195,000 jobs per month...the unadjusted data, however, shows that there were actually 2,948,000 fewer payroll jobs extant in January than in December, as the normal post holiday seasonal layoffs in areas such as retail, wholesale, goods transportation, leisure and hospitality were smoothed over by the seasonal adjustments..

as is usual for January, this report included the results of the annual benchmark revision, which revised prior reports and set March 2016 (the benchmark) at 143,673,000 payroll jobs, 60,000 less than previously reported, and which changed job totals for every month in 2016 by statistically insignificant amounts (as shown in Table A of the press release)...as a result, 2016 job growth totaled 2,242,000 payroll jobs, up from the previously published total of 2,157,000, while job growth in earlier years was revised slightly as well...since all the newly revised figures are incorporated into this months report as if previously reported totals had never been reported, that's the way we'll cover it...

seasonally adjusted job increases in January were spread through through both the goods producing and the private service sectors, with only the government sector seeing a loss as great as 10,000 jobs...after the seasonal adjustment which added 592,200 retail jobs, 45,900 adjusted jobs were added in the sector, with 18,300 of those in clothing stores...another 36,000 seasonally adjusted jobs were added in construction, with 11,300 of those working for residential specialty trade contractors...the broad professional and business services sector added 39,000 jobs, as temporary help agencies employed 15,000 more than in December and 12,500 jobs were added in computer systems design....in addition, employment in the finance sector increased by 32,000 jobs in January, with 10,200 more jobs in real estate, 9,000 more with insurance carriers, and 8,900 in credit intermediation... employment in health care and social assistance rose by 32,100, with the addition of 11,100 jobs in individual and family social assistance services...another 25,700 seasonally adjusted jobs were added in accommodation and food services, with the addition of 29,900 jobs in bars and restaurants...other major industries, including resource extraction, manufacturing, wholesale trade, and information all saw job gains of less than 10,000, while the transportation and warehousing sector shed a net of 4,000 employees..

the establishment survey also showed that average hourly pay for all employees rose by 3 cents an hour to $26.00 an hour in January, after it had increased by a revised 6 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.84 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in January, while hours for production and non-supervisory personnel was unchanged at 33.6 hours for the sixth consecutive month...at the same time, the manufacturing workweek increased by 0.1 hour to 40.8 hours, while average factory overtime was down a tenth of an hour at 3.2 hours...

meanwhile, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 30,000 to 152,081,000, while the estimated number of those unemployed rose by 106,000 to 7,635,000; which led to a 176,000 increase in the total labor force...however, the benchmark revision to the civilian noninstitutional population showed that December's population had been overstated by 660,000, which meant that population dependent metrics had to be adjusted for that revision....that meant the number of employment aged individuals who were not in the labor force was reduced to 94,366,000, the labor force participation rate increased up to 62.9%, and the employment to population ratio, which we could think of as an employment rate, rose to 59.9% in January.....at the same time, the increase in the number unemployed was large enough to increase the unemployment rate from 4.7% to 4.8%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 242,000, from 5,598,000 in December to 5,840,000 in January, which was enough to raise the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons" by 0.2%, up to 9.4%of the labor force in January, from 9.2% in December ....

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..  

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

the Monday release of the December Income and Outlays report from the Bureau of Economic Analysis was actually concurrent with the release of the advance report 4th quarter GDP on the prior Friday, and much of the data in this report has already been included in that report...and like that report, 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 December'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 November to December....thus, when the opening line of the press release for this report tell us "Personal income increased $50.2 billion (0.3 percent) in December...", they mean that the annualized figure for all types of personal income in December, $16,290.2 billion, was $50.2 billion, or a bit more than 0.3% greater than the annualized personal income figure for November; the actual increase in personal income in December over November is not given....similarly, disposable personal income, which is income after taxes, also rose by a bit more than 0.3%, from an annual rate of $14,237.5 billion in November to an annual rate of $14,281.2 billion in December...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for December, which were included in the change in real PCE in 4th quarter GDP that we reviewed last week, rose at a $63.5 billion annual rate to a level of $13,032.1 billion in consumer spending annually, almost 0.5% higher than in November, which itself was slightly revised from the originally reported annual rate of $12,970.4 billion to $12,969.0 billion...the current dollar increase in December spending included a $37.8 billion annualized increase to an annualized $8,832.1 billion spending for services, an $19.7 billion increase to $1,450.4 billion in annualized spending for durable goods, and a $5.7 billion increase to $2,749.6 billion in annualized spending for non durable goods...total personal outlays for December, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $66.4 billion to $13,512.7 billion, which left personal savings, which is disposable personal income less total outlays, at a $768.4 billion annual rate in December, down from the revised $791.2 billion in annualized personal savings in November...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 5.4%, from 5.6% in November, which itself was originally reported at 5.5%..

while our personal consumption expenditures accounted for 68.8% of our fourth 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 also 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 111.475 in November to 111.651 in December, giving us a month over month inflation rate of 0.1579%, which the 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 1.6%, 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 December inflation adjustment to the change in December PCE shows that real PCE was up 0.328%, 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...

Construction Spending Fell 0.2% in December after Prior Months Were Revised Higher

the Census Bureau's report on construction spending for December (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,181.5 billion annually if extrapolated over an entire year, which was 0.2 percent (±1.0%)* below the revised annualized November estimate of $1,184.4 billion, but 4.2 percent (±1.3%)* above the estimated annualized level of construction spending in December of last year...the annualized November construction spending estimate was revised 0.2% higher, from $1,182.1 billion to $1,184.4 billion, while the annual rate of construction spending for October was revised 0.6% higher, from $1,166.5 billion to $1,173.75 billion...for all of 2016, construction spending totaled $1,162.4 billion, 4.5 percent (±1.0%) above the $1,112.4 billion spent in 2015.

private construction spending was at a seasonally adjusted annual rate of $897.0 billion in December, 0.2 percent (±0.8%)* above the revised November estimate of $894.8 billion, with residential construction spending at an annual rate of $466.9 billion in December, 0.5 percent (±1.3%)* higher than the upwardly revised annual rate of $464.8 billion in November, while private non-residential construction spending at an annual rate of $430.1 billion was statistically unchanged (±0.8%)* from the revised November estimate of $430.1 billion, as construction of manufacturing facilities fell 3.5% to an annual rate of $68.1 billion ....at the same time, public construction spending was estimated to be at an annual rate of $284.5 billion, 1.7 percent (±1.8%)* below the revised November estimate of $289.6 billion, with public spending for education down 2.2 percent (±2.3%)* to an annual rate of $70.1 billion, and highway spending down 0.6% (±4.1%)* to an annual rate of $94.3 billion...

with the upward revisions, construction spending for all three months of the 4th quarter was higher than was reported by the BEA in their advance estimate last week....as we saw above, annualized construction spending for October was revised $7.25 billion higher, and annualized construction spending for November was revised $2.3 billion higher...in reporting 4th quarter GDP, the BEA's technical note (pdf) indicated that they had estimated December residential construction would be $2.2 billion more than that of the previously reported November figure, with single family construction valued at $249.4 billion and multifamily valued at $62.3 billion, and that December nonresidential construction would be $428.0 billion, $1.9 billion less than that of the reported November figure...with this report, December residential construction spending at a $466,938 million rate was up by $2.154 billion from the revised November figure, with new single family construction valued at $250,359 million annually and new multifamily construction at $63,725 million, while December nonresidential construction spending was at $430,053 billion, statistically unchanged from the revised November figure...hence, annualized total construction spending in December was roughly $4.5 billion more than the figures used by the BEA to compute 4th quarter GDP...therefore, the annualized figure for 4th quarter construction spending would have thus averaged $4.67 billion more than the figure used by the BEA when computing 4th quarter GDP, which would mean that this report implies a .12 percentage point upward revision to 4th quarter GDP...

Factory Shipments Up 1.3%, Inventories Up 0.1%

the Full Report on Manufacturers' Shipments, Inventories, & Orders for December (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $6.1 billion or 1.3 percent to $464.9 billion, the fifth increase in six months, following an decrease of 2.3% in November, which was revised from the 2.4% decrease 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 December advance report on durable goods we reported on a week ago...this report showed that new orders for manufactured durable goods fell by $1.1 billion or 0.5 percent to $227.1 billion in December, revised from the previously published 0.4% decrease to $227.0 billion, after durable goods orders for prior months were revised higher....

this report also indicated that the seasonally adjusted value of December factory shipments rose for the ninth time in ten months, increasing by $10.4 billion or 2.2 percent to $475.8 billion, following a 0.3% increase in November,  which revised from the previously published $0.3 billion, 0.1% decrease...shipments of durable goods were up by $3.3 billion or 1.4 percent to $238.1 billion, essentially unrevised from the increase that was published last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods were up by $7.2 billion, or 3.1%, to $237.8 billion, after November shipments were revised 0.4% higher, as a $5.4 billion, 14.0% increase in the value of shipments of petroleum and coal accounted for the increase...

meanwhile, the aggregate value of December factory inventories rose for the fifth time in six months, increasing by $0.6 billion or 0.1 percent to $625.6 billion, after a November increase of 0.5%...December inventories of durable goods decreased in value by $0.3 billion or 0.1 percent to $383.9 billion, revised down from last week's published "virtually unchanged increase”, following a revised 0.2% increase in November durable inventories.....the value of non-durable goods' inventories rose by $0.9 billion or 0.4 percent to $241.7 billion, following a revised 1.1% increase in November non-durable inventories...however, the BEA's technical note for 4th quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase at a seasonally adjusted annual rate of $16.9 billion, so that would indicate that they overestimated the 4th quarter GDP inventory component by about $6.1 billion annualized, which would imply that 4th quarter GDP will have to be adjusted downwards by 0.15 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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