Sunday, December 10, 2017

November’s jobs report; October’s trade deficit, factory inventories and wholesale sales

in addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's releases included three reports that will feed into 4th quarter GDP: the Census report on our International Trade for October, the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, also from the Census Bureau...in addition, the Fed released the Consumer Credit Report for October from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $20.5 billion, or at a 6.5% annual rate, as non-revolving credit expanded at a 5.6% rate to $2,790.7 billion and revolving credit outstanding rose at a 9.9% rate to $1,011.5 billion...

privately issued reports released this week included the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 57.4%, down from 60.1% in October, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in November, and the Mortgage Monitor for October (pdf) Black Knight Financial Services, which indicated that 4.44% of all mortgages were delinquent in October, up from 4.40% in September and up from 4.35% in October of 2016, and that 0.68% of all mortgages were in the foreclosure process, down from from 0.70% in September and down from 0.99% a year ago....mortgage delinquencies continue to be elevated in regions of the country where properties have experienced hurricane damage...

Employers Add 228,000 Jobs, Unemployment Rate and Labor Force Participation Unchanged

the Employment Situation Summary for November reported better than average job creation, while the employment rate fell even as the unemployment rate was unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 228,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 18,000 to 38,000, while the payroll jobs increase for October was revised down from 261,000 to 244,000…that means that this report represents a total of 232,000 more seasonally adjusted payroll jobs than were reported last month, about 50,000 more than the average of the past 12 months...the unadjusted data, meawhile, shows that there were actually 532,000 more payroll jobs extent than in October, 451,600 of which were seasonal jobs added in the retail sector...

seasonally adjusted job increases in November were spread throughout the private goods producing and service sectors and in government, with the 4,000 jobs lost in the information sector the only notable decrease...the largest job increase was seen in the broad professional and business services sector, which added 46,000 jobs, with 18,300 of those working for temporary employment services...the health care and social assistance sector saw the addition of 33,500 jobs, with the addition of 6,800 jobs in doctor's offices and 6,900 jobs in home health care services...another 31,000 jobs were added in manufacturing, with 8,300 of those employed in the manufacture of machinery...in addition, 19,000 jobs were added in construction, with 11,900 of those working for nonresidential specialty trade contractors....then, after the seasonal adjustment, retail sales added 18,700 workers, with 6,800 of those working in general merchandise stores, and another 14,000 were employed in the leisure and hospitality sector, with the addition of 18,900 jobs in bars and restaurants...meanwhile, other sectors including mining, wholesale trade, transportation and warehousing, financial activities, private education and government, all saw smaller job gains over the month..

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.55 an hour in November, after it had decreased by a revised 3 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees also increased by 5 cents to $22.24 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 in November, while weekly hours for production and non-supervisory personnel was unchanged at 33.7 hours...at the same time, the manufacturing workweek was unchanged at 40.9 hours, while average factory overtime was unchanged at 3.5 hours...

meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 57,000 to 153,918,000, while the estimated number of those unemployed and looking for work rose by 90,000 to 6,610,000; and hence the total labor force increased by a rounded total of 148,000....since the working age population had grown by 183,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 35,000 to a record high of 95,420,000, which was still not enough to statistically change the labor force participation rate, which remained at 62.7% in November....meanwhile, the increase in number employed as a percentage of the increase in the population was small enough to lower the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.1%...on the other hand, the increase in the number unemployed was not enough to change the unemployment rate, which remained at 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 48,000, from 4,753,000 in October to 4,801,000 in November, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.9% of the labor force in October to 8.0% in November...

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..

October Trade Deficit Up 8.6%, Revisions to 3rd Quarter Trade are a Big Hit to GDP

our trade deficit rose by 8.6% in October as the value of our exports slipped a bit while the value of our imports increased....the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $3.8 billion to $48.7 billion in October from a revised September deficit of $44.9 billion...the value of our October exports fell by less than $0.1 billion to $195.9 billion on a $0.3 billion decrease to $130.3 billion in our exports of goods and a $0.3 billion increase to $65.6 billion in our exports of services, while our imports rose $3.8 billion to $244.6 billion on a $3.5 billion increase to $199.4 billion in our imports of goods and a $0.3 billion increase to $45.2 billion in our imports of services...export prices were on average unchanged in October, so the relative real decrease in October exports is close to the nominal decrease, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage...

major changes in October's exports of goods included:

  • Foods, feeds, and beverages exports decreased $1.3 billion as soybean exports decreased $1.4 billion.
  • Capital goods exports decreased $1.2 billion as civilian aircraft exports decreased $1.1 billion.
  • Industrial supplies and materials increased $2.6 billion on increased exports of fuel oil, crude oil, natual gas liquids and other petroleum products.

major changes in October's imports of goods included:

  • Industrial supplies and materials imports increased $1.8 billion on a $1.5 billion increase in crude oil imports
  • Consumer goods imports increased by $0.8 billion led by a $0.3 billion increase in imports of cell phones
  • Imports of other goods not categorized by end use increased by $1.1 billion.

further details from the press release indicate that  "October figures show surpluses, in billions of dollars, with South and Central America ($3.9), Hong Kong ($2.3), Brazil ($1.1), Singapore ($0.7), Saudi Arabia ($0.3), and United Kingdom ($0.2).  Deficits were recorded, in billions of dollars, with China ($31.9), European Union ($12.0), Mexico ($6.0), Japan ($5.9), Germany ($5.3), Italy ($2.7), South Korea ($2.7), India ($2.1), Canada ($1.9), OPEC ($1.6), France ($1.6), and Taiwan ($1.6).

note that with this release, data for exports and imports of goods and services going back to April have been revised, which means previously published GDP figures for the 2nd and 3rd quarter will also have to be revised...while the new 2nd quarter trade data for 2017 will not be incorporated into GDP figures until the annual revision to GDP is undertaken with the 2nd quarter 2018 release at the end of July 2018, revisions to 3rd quarter trade will be included with the 3rd estimate of 3rd quarter GDP, which will be released later this month...the revisions are rather significant, especially to services; for instance, September exports of services were revised down $0.9 billion, while September imports of services revised up $0.6 billion; as result, the September trade deficit was at $44.9 billion, revised from the $43.5 billion reported last month...in like manner, the August trade deficit was revised higher, from the revised deficit of $42.8 billion reported last month to $44.3 billion, and the July trade deficit was revised from the $43.6 billion reported last month to $45.2 billion...hence, the total $4.5 billion upward revision in the trade deficit for the 3rd quarter months would work out to a decrease to third quarter GDP at a rate in excess of $18 billion annually...that means that revisions to trade included with this release will have the effect of subtracting 0.40 percentage points or more from previously published 3rd quarter GDP figures...

to gauge the impact of October trade on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here....from that table, we can estimate that revised 3rd quarter real exports of goods averaged 125,674.3 million monthly in chained 2009 dollars, while inflation adjusted October exports were at 125,658 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that October's real exports of goods are running at a 0.05% annual rate below those of the 3rd quarter, a change that would not have a statistically significant impact on 4th quarter GDP even if continued through November and December....at the same time,  however, we find that our 3rd quarter real imports of goods averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October goods imports were at 190,978 million...that would indicate that so far in the 4th quarter, we have seen our real imports of goods increase at annual rate of 7.16% over those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 7.16% rate would subtract about 0.88 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.88 percentage points from the growth of 4th quarter GDP....note that we have not estimated the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes...  

October Factory Shipments Up 0.4%, Inventories 0.2% Higher

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October, which includes revisions to the November 22nd advance durable goods report, is quite complete, so we'll just quote directly from it here:

  • New orders for manufactured goods in October, down following two consecutive monthly increases, decreased $0.3 billion or 0.1 percent to $479.6 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent September increase. Shipments, up ten of the last eleven months, increased $2.7 billion or 0.6 percent to $484.2 billion. This followed a 1.1 percent September increase. Unfilled orders, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion. This followed a 0.3 percent September increase. The unfilled orders-to-shipments ratio was 6.68, unchanged from September. Inventories, up eleven of the last twelve months, increased $1.2 billion or 0.2 percent to $661.6 billion. This followed a 0.6 percent September increase. The inventories-to-shipments ratio was 1.37, unchanged from September.
  • New orders for manufactured durable goods in October, down following two consecutive monthly increases, decreased $1.9 billion or 0.8 percent to $237.4 billion, up from the previously published 1.2 percent decrease. This followed a 2.4 percent September increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $3.4 billion or 4.2 percent to $77.4 billion. New orders for manufactured nondurable goods increased $1.6 billion or 0.7 percent to $242.2 billion.
  • Shipments of manufactured durable goods in October, up five of the last six months, increased $1.1 billion or 0.4 percent to $242.0 billion, up from the previously published 0.1 percent increase. This followed a 1.2 percent September increase. Primary metals, up three of the last four months, led the increase, $0.3 billion or 1.6 percent to $19.9 billion. Shipments of manufactured nondurable goods, up six of the last seven months, increased $1.6 billion or 0.7 percent to $242.2 billion. This followed a 1.0 percent September increase. Petroleum and coal products, up four consecutive months, led the increase, $1.2 billion or 2.6 percent to $46.2 billion.
  • Unfilled orders for manufactured durable goods in October, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion, unchanged from the previously published decrease. This followed a 0.3 percent September increase. Transportation equipment, also down three of the last four months, drove the decrease, $1.8 billion or 0.2 percent to $770.0 billion.
  • Inventories of manufactured durable goods in October, up fifteen of the last sixteen months, increased $0.6 billion or 0.2 percent to $404.2 billion, up from the previously published 0.1 percent increase. This followed a 0.6 percent September increase. Primary metals, also up fifteen of the last sixteen months, led the increase, $0.3 billion or 0.8 percent to $34.0 billion. Inventories of manufactured nondurable goods, up five consecutive months, increased $0.5 billion or 0.2 percent to $257.3 billion. This followed a 0.7 percent September increase. Chemical products, up three of the last four months, drove the increase, $0.9 billion or 1.0 percent to $84.1 billion. By stage of fabrication, October materials and supplies decreased 0.4 percent in durable goods and decreased 0.3 percent in nondurable goods. Work in process increased 1.0 percent in durable goods and decreased 0.3 percent in nondurable goods. Finished goods decreased 0.4 percent in durable goods and increased 0.9 percent in nondurable goods.

to gauge the effect of October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 0.3% to $229,026 million; the value of work in process inventories was up 0.6% at $206,903 million, and materials and supplies inventories were valued 0.4% lower at $225,639 million...the producer price index for October indicated that prices for finished goods increased 0.3%, prices for intermediate processed goods were 1.0% higher, and that prices for unprocessed goods were on average unchanged....assuming similar valuations for like inventories, that would suggest that October's real finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and that real raw material inventory inventories were 0.4% smaller…since real factory inventories in the 3rd quarter were somewhat higher, any real inventory decreases in the 4th quarter will subtract from growth of 4th quarter GDP...

October Wholesale Sales Up 0.7%, Wholesale Inventories Down 0.5%

the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$484.6 billion, up 0.7 percent (±0.5 percent) from the revised September level and were up 8.4 percent (±0.9 percent) from the October 2016 level. The August 2017 to September 2017 percent change was revised from the preliminary estimate of up 1.3 percent (±0.4 percent) to up 1.4 percent (±0.4 percent)" ...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold...

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted "$605.3 billion at the end of October, down 0.5 percent (±0.4 percent) from the revised September level. Total inventories were up 3.9 percent (±0.5 percent) from the revised October 2016 level. The September 2017 to October 2017 percent change was revised from the advance estimate of down 0.4 percent (±0.4 percent)* to down 0.5 percent (±0.4 percent)."

like factory inventories, to estimate the effect of October wholesale inventories on 4th quarter GDP we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for October indicated that prices for finished goods increased 0.3%; thus the 0.5% decline in the nominal value of wholesale inventories suggest that the lion's share of real wholesale inventories were down on the order of 0.8% in October...since real wholesale inventories in the 3rd quarter were higher each month, such a real wholesale inventory decrease in the 4th quarter would necessarily subtract substantially from growth of 4th quarter GDP...

 

(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…)   

No comments:

Post a Comment