Sunday, February 4, 2018

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

as is usual with the first Friday of the month, 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 last Fed manufacturing survey for the month; the January Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +33.4, from last month's +29.7, it's highest reading in 12 years, suggesting they're now into a period of 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 17.07 million annual rate in January, down 3.9% from the 17.76 million annual rate in December, and down 2.3% from the 17.48 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 6.4% higher than prices for the same homes that sold during the same 3 month period a year earlier....in addition, the week also saw the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) slipped to 59.1% in January, down from 59.3% in December, which still suggests an ongoing expansion in manufacturing firms nationally...

Employers Add 200,000 Jobs in January, Unemployment Rate Unchanged at 4.1%

the Employment Situation Summary for January indicated modest job creation over the month, slightly offset by revisions to prior months, while the household survey saw most of its metrics unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 200,000 jobs in January, after the previously estimated payroll job increase for November was revised down from 252,000 to 216,000, while the payroll jobs increase for December was revised up from 148,000 to 160,000…that means that this report represents a total of 176,000 more seasonally adjusted payroll jobs than the report of a month ago, exactly in line with the past year's average of 176,000 jobs per month...the unadjusted data, however, shows that there were actually 3,085,000 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 averaged out 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 2017 (the benchmark) at  145,969,000 payroll jobs, 146,000 more jobs than was previously reported, and which thereby changed job totals for every month in 2017 by totals of similar magnitude (as shown in Table A of the press release)...as a result of this revision, 2017 job growth totaled 2,173,000 payroll jobs, up from the previously published total of 2,055,000, while job growth in earlier years was revised slightly as well...since all the newly revised figures are now 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 and government, with only the utility sector seeing a job loss of 1,400 jobs...after the seasonal adjustments, 36,000 jobs were added in construction, with 26,300 of those working for specialty trade contracts, split between both nonresidential and residential specialty trade contractors...another 35,000 seasonally adjusted jobs were added in accommodation and food services, with the addition of 31,100 jobs in bars and restaurants...employment in health care and social assistance rose by 25,800, with the addition of 12,700 jobs in hospitals...the broad professional and business services sector added 23,000 jobs, despite the loss of 10,100 in accounting and bookkeeping services, as many other business services subsectors saw modest job gains...in addition, the retail sector saw a seasonally adjusted gain of 15,400 jobs, after the actual 574,400 post holiday layoffs were adjusted for the normal level of January layoffs...meanwhile, other major sectors, including resource extraction, wholesale trade, transportation and warehousing, information, financial activities, and government all saw more modest job gains during the month...

the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.74 an hour in January, after it had increased by a revised 11 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees increased by 3 cents to $22.34 an hour...employers also reported that the average workweek for all private payroll employees decreased by 0.2 hour to 34.3 hours in January, while hours for production and non-supervisory personnel was down by 0.1 hour at 33.6 hours...at the same time, the manufacturing workweek decreased by 0.2 hour to 40.6 hours, while average factory overtime was unchanged at 3.5 hours...

meanwhile, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 409,000 to 154,430,000, while the estimated number of those unemployed rose by 108,000 to 6,684,000; which led to a 518,000 increase in the total labor force...however, those numbers were skewed as the benchmark revision to the civilian noninstitutional population showed that December's population had been understated by 488,000, which meant that the population dependent metrics all had to be adjusted for that revision....with a January population increase of 183,000 on top of that, that meant the number of employment aged individuals who were not in the labor force increased to a record 95,665,000, the labor force participation rate remained unchanged at 62.7%, and the employment to population ratio, which we could think of as an employment rate, also remained unchanged 60.1% in January.....at the same time, the increase in the number unemployed was not large enough to increase the unemployment rate, as it remained at 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 74,000, from 4,915,000 in December to 4,989,000 in January, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.1% of the labor force in December to 8.2% in January...

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 0.4%, Personal Spending Rose 0.4%

the December Income and Outlays report, released on Monday by the Bureau of Economic Analysis, was actually concurrent with the release of the advance report 4th quarter GDP on the prior Friday, and hence the data in this report has already been included in that report....and like that report, which we reported on 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 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 $58.7 billion (0.4 percent) in December...", they mean that the annualized figure for all types of personal income in December, $16,686.7 billion, was $58.7 billion, or less than 0.4% 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, rose by more than 0.3%, from an annual rate of $14,541.0 billion in November to an annual rate of $14,589.0 billion in December...the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in December, the largest contributors to the $57.8 billion annual rate of increase in personal income were a $38.6 billion increase in wages and salaries and a $17.3 billion increase in dividend and interest income…

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 $54.2 billion annual rate to a level of $13,717.2 billion in consumer spending annually, 0.4% higher than in November, which itself was revised from the originally reported annual rate of $13,635.8 billion to $13,663.0 billion...the current dollar increase in December spending included a $50.1 billion annualized increase to an annualized $9,286.7 billion spending for services, a $10.5 billion increase to $1,531.9 billion in annualized spending for durable goods, and a $6.3 billion decrease to $2,898.5 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 $14,160.0 billion, which left personal savings, which is disposable personal income less total outlays, at a $351.6 billion annual rate in December, down from the revised $365.1 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 a twelve year low of 2.4%, from 2.5% in November, which itself was originally reported at 2.9%..

while our personal consumption expenditures accounted for 69.6% 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 113.515 in November to 113.640 in December, giving us a month over month inflation rate of 0.1101%, which the BEA reports as an increase of +0.1%….at the same time, Table 11 gives us a year over year PCE price index increase of 1.7%, and a core price increase, excluding food and energy, of 1.5% 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 0.286%, 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 Rose 0.7% in December after Prior Months Were Revised Lower

the Census Bureau's report on construction spending for December (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,253.3 billion annually if extrapolated over an entire year, which was 0.7 percent (±1.0 percent)* above the revised November estimate of $1,245.1 billion annually, and 2.6 percent (±1.3 percent) above the estimated annualized level of construction spending in December of last year...the annualized November construction spending estimate was revised 0.9% lower, from $1,257.0 billion to $1,245.1 billion, while the annual rate of construction spending for October was revised 0.8% lower, from $1,247.1 billion to $1,237.65 billion...for all of 2017, construction spending totaled $1,230.6 billion, 3.8 percent (±1.0 percent) above the $1,185.7 billion spent in 2016...

the Census release gives us further details on changes in construction by category: Spending on private construction was at a seasonally adjusted annual rate of $963.2 billion, 0.8 percent (±1.2 percent)* above the revised November estimate of $955.9 billion. Residential construction was at a seasonally adjusted annual rate of $526.1 billion in December, 0.5 percent (±1.3 percent)* above the revised November estimate of $523.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $437.1 billion in December, 1.1 percent (±1.2 percent)* above the revised November estimate of $432.1 billion. The value of private construction in 2017 was $950.7 billion, 5.8 percent (±1.0 percent) above the $898.7 billion spent in 2016. Residential construction in 2017 was $515.9 billion, 10.6 percent (±2.1 percent) above the 2016 figure of $466.6 billion and nonresidential construction was $434.8 billion, 0.6 percent (±1.0 percent)* above the $432.1 billion in 2016.

with the downward revisions to the prior months, construction spending for all three months of the 4th quarter was lower than was reported by the BEA in their advance estimate of 4th quarter GDP last week....as we saw above, annualized construction spending for October was revised $9.45 billion lower, and annualized construction spending for November was revised $11.9 billion lower...the BEA's key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated an annualized $3.6 billion or 1.1% increase in residential construction from previously reported November levels, an annualized $1.9 billion or 0.4% decrease in nonresidential construction from previously reported November levels, and a $0.9 billion or 0.3% decrease in public construction from previously reported November levels...totaling those changes, the BEA reported construction spending $0.8 higher than previously reported November levels in the 4th quarter GDP report...with this report showing December construction spending was up at an $8.2 billion annual rate from November figures that were revised $11.9 billion lower, that means the annualized construction figure used for December in the GDP report was $4.5 billion too high...averaging the overstatements in the annual rates for the three months of the 4th quarter, that would mean that this report suggests that construction spending was overestimated by $8.6 billion (at an annual rate) in the 4th quarter GDP report, implying a downward revision to GDP components at a rate that would mean a subtraction of about 0.21 percentage points from 4th quarter GDP when the 2nd estimate is released at the end of February...

Factory Shipments Up 0.5%, Inventories Up 0.5%

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for December, which precedes the detailed spreadsheet, is quite complete, so we'll just quote directly from it here, starting with the summary paragraph: 

  • New orders for manufactured goods in December, up six of the last seven months, increased $8.5 billion or 1.7 percent to $498.2 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent November increase. Shipments, up twelve of the last thirteen months, increased $2.9 billion or 0.6 percent to $495.4 billion. This followed a 1.4 percent November increase. Unfilled orders, up four consecutive months, increased $7.1 billion or 0.6 percent to $1,144.4 billion. This followed a 0.1 percent November increase. The unfilled orders-to-shipments ratio was 6.59, up from 6.58 in November. Inventories, up thirteen of the last fourteen months, increased $3.3 billion or 0.5 percent to $669.2 billion. This followed a 0.5 percent November increase. The inventories-to-shipments ratio was 1.35, unchanged from November.
  • New orders for manufactured durable goods in December, up four of the last five months, increased $6.8 billion or 2.8 percent to $249.3 billion, down from the previously published 2.9 percent increase. This followed a 1.7 percent November increase. Transportation equipment, also up four of the last five months, led the increase, $5.7 billion or 7.1 percent to $86.9 billion. New orders for manufactured nondurable goods increased $1.7 billion or 0.7 percent to $248.9 billion. 
  • Shipments of manufactured durable goods in December, up seven of the last eight months, increased $1.2 billion or 0.5 percent to $246.5 billion, down from the previously published 0.6 percent increase. This followed a 1.3 percent November increase. Primary metals, up five of the last six months, led the increase, $0.5 billion or 2.5 percent to $20.7 billion. Shipments of manufactured nondurable goods, up eight of the last nine months, increased $1.7 billion or 0.7 percent to $248.9 billion. This followed a 1.6 percent November increase. Petroleum and coal products, up six consecutive months, led the increase, $0.7 billion or 1.4 percent to $50.2 billion. 
  • Unfilled orders for manufactured durable goods in December, up four consecutive months, increased $7.1 billion or 0.6 percent to $1,144.4 billion, unchanged from the previously published increase. This followed a 0.1 percent November increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $6.0 billion or 0.8 percent to $775.9 billion. 
  • Inventories of manufactured durable goods in December, up seventeen of the last eighteen months, increased $1.4 billion or 0.3 percent to $406.8 billion, unchanged from the previously published increase. This followed a 0.3 percent November increase. Machinery, up ten of the last eleven months, led the increase, $0.4 billion or 0.5 percent to $70.4 billion. Inventories of manufactured nondurable goods, up seven consecutive months, increased $1.9 billion or 0.7 percent to $262.4 billion. This followed a 0.9 percent November increase. Petroleum and coal products, up six consecutive months, led the increase, $0.9 billion or 2.1 percent to $41.4 billion. By stage of fabrication, December materials and supplies decreased 0.1 percent in durable goods and were virtually unchanged in nondurable goods. Work in process increased 0.4 percent in durable goods and increased 2.1 percent in nondurable goods. Finished goods increased 0.8 percent in durable goods and increased 0.7 percent in nondurable goods.

the BEA's key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $3.0 billion, so the $1.9 billion increase would indicate a that they overestimated the 3rd quarter GDP inventory component by about $1.1 billion, which would imply that 4th quarter GDP would have to be adjusted downwards by around 0.03 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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