Sunday, March 11, 2018

February’s jobs report; January’s trade deficit, factory inventories, and wholesale sales

in addition to the Employment Situation Summary for February from the Bureau of Labor Statistics, this week's major releases included three reports that will input into 1st quarter GDP: the Commerce Dept report on our International Trade for January, the Full Report on Manufacturers' Shipments, Inventories and Orders for January from the Census Bureau, and the January report on Wholesale Trade, Sales and Inventories, also from the Census Bureau....in addition, the Fed released the Consumer Credit Report for January, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $13.9 billion, or at a 4.2% annual rate, as non-revolving credit expanded at a 5.6% annual rate to $2,825.2 billion and revolving credit outstanding expanded at a 0.8% rate to $1,029.8 billion...

the week’s privately issued reports included the ADP Employment Report for February and the Mortgage Monitor for January (pdf) Black Knight Financial Services….the latter indicated that 4.31% of US mortgages were delinquent in January, down from 4.71% in December but up from 4.25% in January a year ago, and that 0.66% of all mortgages were in the foreclosure process at the end of the month, up from 0.65% of mortgages in December but down from the 0.94% of mortgages that were in foreclosure in January a year ago...in addition, the Institute for Supply Management (ISM) released the February Non-Manufacturing Report On Business, which saw the NMI (non-manufacturing index) slip to 59.5%, down from 59.9% in January, indicating a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business in February...

Employers Add 313,000 Jobs in February, Employment Rate and Labor Force Participation Rate Both Up 0.3%

the Employment Situation Summary for February reported the largest payroll job increase in 19 months and an even larger increase in the employed labor force…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 313,000 jobs in February, after the previously estimated payroll job increase for January was revised up from 200,000 to 239,000 and the payroll jobs increase for December was revised from 160,000 up to 175,000…that means that this report represents a total of 367,000 more seasonally adjusted payroll jobs than were reported last month, more than double the 2017 average increase of 176,000 jobs per month...the unadjusted data shows that there were actually 1,224,000 more payroll jobs extant in February than in January, as large seasonal job increases in sectors such as professional & business services, leisure and hospitality and state and local government were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in February were spread through through both the goods producing and the service sectors, with only the information sector dropping 12,000 jobs on a seasonally adjusted basis, as motion picture and sound recording industries cut 9,700 employees...the construction sector saw a seasonally adjusted increase of 61,000 jobs, with specialty trade contractors adding 37,600 workers, largely because of warmer than normal temperatures through most of the US during the reference week....the retail sector saw a seasonally adjusted gain of 50,300 jobs, with an increase of 17,700 employees in general merchandize stores and another 14,900 in clothing and accessories stores...the broad professional and business services sector added 50,000 jobs, as temporary help services employed 26,500 more than in January...employment in manufacturing rose by 31,000, with the addition of 8,200 jobs by transportation equipment manufacturers...local governments also added 31,000 jobs over the month, with 26,500 of those in education....employment in health care and social assistance rose by 29,100, with the addition of 10,400 jobs in individual and family services and 9,300 in hospitals...financial services added another 28,000 jobs, with 7,600 of those in credit intermediation and related activities and 7,500 more with insurance carriers...meanwhile, employment in other major sectors, including resource extraction, wholesale trade, transportation and warehousing, leisure and hospitality, and the federal government, all saw smaller job gains over the month....

the establishment survey also showed that average hourly pay for all employees rose by 4 cents an hour to $26.75 an hour in February, after it had increased by 7 cents an hour in January, revised from the 9 cent increase reported last month; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents an hour to $22.40 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 February, while hours for production and non-supervisory personnel increased by 0.2 hour to 33.8 hours...in addition, the manufacturing workweek also increased by 0.2 hour to 41.0 hours, while average factory overtime increased by 0.1 hour to 3.6 hours...

meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 785,000 to 155,215,000, while the similarly estimated number of those unemployed rose by 22,000 to 6,706,000; which together meant there was a rounded 806,000 increase in the total labor force...since the working age population had grown by 154,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 653,000 to 95,012,000...with the increase of those in the labor force much greater than the increase in the civilian noninstitutional population, the labor force participation rate rose from 62.7% in January to 63.0% in February....meanwhile, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, by 0.3% to 60.4%...at the same time, the increase in the number unemployed was still enough to keep the unemployment rate unchanged at 4.1%....meanwhile, the number who reported they were involuntarily working part time rose by 171,000 to 5,160,000 in February, which also left the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", unchanged at 8.2% in February....

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..   

January Trade Deficit Rises 5.0% on Higher Imports of Oil, Lower Exports of Aircraft

our trade deficit rose by 5.0% January, as both the value of our exports and our imports decreased, but the decrease in our imports was comparatively minuscule....the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $2.7 billion to $56.6 billion in January, the highest in more than 9 years, from a December deficit which was revised from $53.1 billion to $53.9 billion.....the value of our January exports fell by $2.7 billion to $200.9 billion on a $3.0 billion decrease to $134.2 billion in our exports of goods and an increase of $0.3 billion to $66.7 billion in our exports of services, while our imports fell by less than $0.1 billion to $257.5 billion on a $0.2 billion decrease to $210.7 billion in our imports of goods and a $0.2 billion increase to $46.8 billion in our imports of services...export prices averaged 0.8% higher in January, so the real drop in exports was greater than the nominal change by that percentage, while import prices were 1.0% higher, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage.....

the decrease in our January exports of goods was mostly a result of big drops in our exports of capital goods and industrial supplies, which were partially offset by a increase in our exports of consumer goods...referencing the Full Release and Tables for January (pdf), in Exhibit 7 we find that our exports of capital goods fell by $2,554 million to $44,887 million on a $1,818 million decrease in our exports of civilian aircraft, a $505 million decrease in our exports of industrial machines other than those itemized separately, and a $203 million decrease in our exports of industrial engines, and that our exports of industrial supplies and materials fell by $1326 million to $41,495 million led by a $471 million decrease in our exports of fuel oil and a $216 million decrease in our exports of crude oil....in addition, our exports of foods, feeds and beverages fell by $77 million to $10,737 million and our exports of other goods not categorized by end use fell by $1,014 million to $4,740 million...partially offsetting those decreases, our exports of consumer goods increased by $1,171 million to $17,909 million on a $481 million increase in our exports of art, antiques and other collectibles, a $425 million increase in our exports of pharmaceuticals, and a $324 million increase in our exports of jewelry...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that higher imports of crude oil were more than offset by lower imports of capital goods and consumer goods...our imports of capital goods fell by $1,333 million to $55,930 million on a $1,818 million decrease in our imports of civilian aircraft, a $462 million decrease in our imports of semiconductors and a $250 million decrease in our imports of industrial machines other than those itemized separately, and our imports of consumer goods fell by $879 million to $54,601 million on a $1,198 million decrease in our imports of cellphones...in addition,  our imports of foods, feeds, and beverages fell by $16 million to $11,871 million, our imports of automotive vehicles, parts and engines fell by $6 million to $30,913 million as a $273 million increase in our imports of vehicle parts and accessories was offset by lower imports of passenger cars, engines and tires, and our imports of other goods not categorized by end use fell by $59 million to $8,343 million...offsetting those decreases, our imports of industrial supplies and materials rose by $1952 million to $47,275 million as the value of our imports of crude oil rose by $2,184 million...

to gauge the impact of January trade on 1st 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 that’s 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 figure that 4th quarter real exports of goods averaged 128,106 million monthly in chained 2009 dollars, while inflation adjusted January goods exports were at 126,904 million in that same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that January's real exports of goods are running at a 3.7% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.28 percentage points from 1st quarter GDP growth if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 194,913.3 million monthly in chained 2009 dollars, while inflation adjusted goods imports in January were at 196,628 million...that would indicate that so far in the 1st quarter, we have seen our real imports increase at a 3.566% annual rate from those of the 4th 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 3.6% rate would subtract 0.41 percentage points from 1st quarter GDP....hence, if the January trade deficit is maintained at the same level throughout the 1st quarter, our deteriorating balance of trade in goods would subtract about 0.68 percentage points from the growth of our 1st quarter GDP....note that we have not computed the impact of the 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 the details on their price changes... 

January Factory Shipments and Inventories Both 0.3% Higher

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for January, which precedes the detailed spreadsheet and which includes revisions to the January advance durable goods report we covered last week, is quite complete, so we'll just quote directly from that here:

  • New orders for manufactured goods in January, down following five consecutive monthly increases, decreased $6.9 billion or 1.4 percent to $491.7 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent December increase. Shipments, up thirteen of the last fourteen months, increased $2.8 billion or 0.6 percent to $498.8 billion. This followed a 0.7 percent December increase. Unfilled orders, down following four consecutive monthly increases, decreased $2.9 billion or 0.3 percent to $1,141.2 billion. This followed a 0.6 percent December increase. The unfilled orders-to-shipments ratio was 6.54, down from 6.58 in December. Inventories, up fourteen of the last fifteen months, increased $2.1 billion or 0.3 percent to $672.4 billion. This followed a 0.7 percent December increase. The inventories-to-shipments ratio was 1.35, unchanged from December.
  • New orders for manufactured durable goods in January, down following two consecutive monthly increases, decreased $9.0 billion or 3.6 percent to $240.0 billion, up from the previously published 3.7 percent decrease. This followed a 2.7 percent December increase. Transportation equipment, also down following two consecutive monthly increases, led the decrease, $8.6 billion or 10.0 percent to $77.9 billion. New orders for manufactured nondurable goods increased $2.1 billion or 0.8 percent to $251.7 billion.
  • Shipments of manufactured durable goods in January, up eight of the last nine months, increased $0.7 billion or 0.3 percent to $247.1 billion, up from the previously published 0.2 percent increase. This followed a 0.5 percent December increase. Transportation equipment, up two of the last three months, led the increase, $0.6 billion or 0.7 percent to $81.5 billion. Shipments of manufactured nondurable goods, up nine of the last ten months, increased $2.1 billion or 0.8 percent to $251.7 billion. This followed a 0.9 percent December increase. Petroleum and coal products, up seven consecutive months, led the increase, $1.8 billion or 3.5 percent to $52.5 billion.
  • Unfilled orders for manufactured durable goods in January, down following four consecutive monthly increases, decreased $2.9 billion or 0.3 percent to $1,141.2 billion, unchanged from the previously published decrease. This followed a 0.6 percent December increase. Transportation equipment, down three of the last four months, drove the decrease, $3.6 billion or 0.5 percent to $771.9 billion. 
  • Inventories of manufactured durable goods in January, up eighteen of the last nineteen months, increased $1.3 billion or 0.3 percent to $408.8 billion, unchanged from the previously published increase. This followed a 0.5 percent December increase. Transportation equipment, up two consecutive months, led the increase, $0.7 billion or 0.6 percent to $131.9 billion. Inventories of manufactured nondurable goods, up eight consecutive months, increased $0.7 billion or 0.3 percent to $263.6 billion. This followed a 0.9 percent December increase. Petroleum and coal products, up seven consecutive months, drove the increase, $0.7 billion or 1.7 percent to $42.4 billion..

to gauge the effect of January factory inventories on 1st 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 $232,905 million; the value of work in process inventories was up 0.4% at $211,337 million, and materials and supplies inventories were valued 0.2% higher at $228,192 million...the producer price index for January indicated that prices for finished goods increased 0.7%, that prices for intermediate processed goods were also 0.7% higher, and that prices for unprocessed goods were on average 0.9% higher....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were 0.4% smaller, that real inventories of intermediate processed goods were 0.3% smaller, and that real raw material inventory inventories were 0.5% smaller…since real factory inventories in the 4th quarter were a bit larger, any real inventory decreases in the 1st quarter will subtract from growth of 1st quarter GDP...

January Wholesale Sales Down 1.1%, Wholesale Inventories Up 0.8% 

the January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $492.6 billion, down 1.1 percent (+/-0.7%) from the revised December level, but 6.7 percent (±1.2 percent) higher than wholesale sales of January 2017... the December preliminary estimate of wholesale sales was revised down from $500.2 billion to $498.15 billion, which meant December's sales were 0.9% above the November level, rather than 1.2% as was reported last month... January wholesale sales of durable goods fell 1.4% from December but were up 6.6% percent (+/-1.8%) from a year earlier, while wholesale sales of nondurable goods were down 0.8 percent from December but were up were 6.7 percent (+/-1.6%) from last January...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 sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $619.05 billion at month end, an increase of 0.8 percent (+/-0.4%) from the revised December level and 4.8 percent (±0.7) percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $612.1 billion to $613.9 billion, now up 0.7% from November...inventories of durable goods were valued 0.2 percent higher than December and were valued 5.1 percent higher than January a year earlier, while the value of wholesale inventories of nondurable goods was up 1.1 percent (+/-0.2%) from December and was 4.4 percent higher than last January...with the January producer price index for finished goods up by 0.7%, and producer prices for intermediate goods also up by 0.7%, it appears that the nominal 0.8% increase in wholesale inventories is mostly price related, and hence these additions to January inventories will most likely have a negligible impact on 1st quarter GDP growth...  

 

(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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