Sunday, May 6, 2018

April’s jobs report; March incomes and outlays, trade deficit, construction spending, and factory inventories

the major economic releases from the past week that we'll review today include the Employment Situation Summary for April from the Bureau of Labor Statistics, and four March reports that include metrics which were either estimated or included in last week's advance estimate of 1st quarter GDP:  the March report on Personal Income and Spending from the Bureau of Economic Analysis, the Commerce Dept report on our international trade in goods and services for March, and the March report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for March, both from the Census Bureau...in addition, this week also saw the release of the last regional Fed manufacturing survey for April: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +21.8 in April, down from a revised +22.8 in March, still suggesting a strong expansion in the energy industry centered Texas economy…

privately issued reports released this week included the ADP Employment Report for April and the light vehicle sales report for April from Wards Automotive, which estimated that vehicles sold at a 17.07 million annual rate in April, down from the 17.40 million annual rate of sales in March, but up from the 16.81 million annual rate in April a year ago...in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the April Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 57.3% in April, down from 59.3% in March, which suggests a more modest expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 56.8% in April from 58.8% in March, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in April...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 164,000 Jobs in April, Unemployment Rate Drops to 3.9% On Labor Force Decline

the Employment Situation Summary for April indicated weak payroll job growth, while the unemployment rate dropped because the labor participation rate fell…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 164,000 jobs in April, after the previously estimated payroll job increase for March was revised up from 103,000 to 135,000, while the payroll jobs increase for February was revised down from 326,000 to 324,000…that means that this report represents a total of 194,000 more seasonally adjusted payroll jobs than were reported last month, about in line with the past year's average of 191,000 jobs per month...the unadjusted data shows that there were actually 998,000 more payroll jobs extant in April than in March, as the usual seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were normalized by the seasonal adjustments…

seasonally adjusted job increases in April were spread through throughout both the goods producing and the private service sectors, with only the wholesale trade sector showing a 9,800 job loss on a seasonally adjusted basis, while governments shed 4,000 employees with the loss of 7,000 at the state level...the broad professional and business services sector added 54,000 jobs, as 8,600 more than normal for this time of year were added in services to buildings.... employment in health care and social assistance rose by 29,300, with the addition of 8,000 jobs in hospitals, while manufacturers added 24,000 jobs, led by an 8,400 job increase in the production of machinery...the leisure and hospitality sector added 18,000 jobs, with the addition of 14,800 more spots than usual in bars and restaurants, while the construction sector added 17,000 jobs above their seasonal norm, with 7,300 of those added by nonresidential specialty trade contractors....meanwhile, the other major sectors, including financial services, information, mining, retail, transportation and warehousing, utilities, and education all also saw small increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 4 cents an hour to $26.84 an hour in April, after it had increased by a revised 6 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 5 cents to $22.51 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in April, while hours for production and non-supervisory personnel rose 0.1 hour to 33.8 hours after falling back 0.1 hour in March...in addition, the manufacturing workweek was up 0.2 hours at 41.1 hours, while average factory overtime increased by 0.1 hours to 3.7 hours...

meanwhile, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed inched up by an estimated 3,000 to 155,181,000, while the similarly estimated number of those who reported being unemployed fell by 239,000 to 6,346,000; which thus meant a net 236,000 decrease in the total labor force...since the working age population had grown by 175,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 410,000 to a record 95,745,000....with the number of those in the labor force decreasing  while the civilian noninstitutional population was increasing, the labor force participation rate fell 0.1% to 62.8%....at the same time, since the number employed was virtually unchanged, the employment to population ratio, which we could think of as an employment rate, fell 0.1% to 60.3%...in addition, the decrease in the number unemployed was also large enough to lower the unemployment rate from 4.1% to 3.9%, the lowest in 18 years....meanwhile, the number who reported they were involuntarily working part time fell by 34,000 to 4,985,000 in April, which was also enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.0% in March to 7.8% in April, the lowest since May 2001....

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.. 

March Personal Income Rose 0.3%, Personal Spending Rose 0.4% , PCE Price Index Little Changed

the release on Monday of this week of the March Income and Outlays report from the Bureau of Economic Analysis was actually concurrent with the release of the advance report on 1st 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 March'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 February to March....thus, when the opening line of the press release for this report tell us "Personal income increased $47.8 billion (0.3 percent) in March...", it means that the annualized figure for all types of personal income in March, $16,888.3 billion, was $47.8 billion, or a bit less than 0.3% greater than the annualized personal income figure for February; the actual increase in personal income in March over February is not given....similarly, disposable personal income, which is income after taxes, also rose by less than 0.3%, from an annual rate of $14,770.1 billion in February to an annual rate of $14,809.9 billion in March...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for March, which were included in the change in real PCE in 1st quarter GDP that we reviewed last week, rose at a $61.7 billion annual rate to a rate of $13,823.9 billion in consumer spending annually, more than a 0.4% increase from February, which itself was revised down from the originally reported annual rate of $13,777.0 billion to $13,762.2 billion...the current dollar increase in March spending included an annualized $57.1 billion increase in spending for services, but just a $4.6 billion increase in annualized spending for goods...total personal outlays for March, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $62.3 billion to $14,349.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $460.6 billion annual rate in March, down from the revised $483.1 billion in annualized personal savings in February...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 3.1%, from 3.3% in February, which itself was originally reported at 3.4%..

while our personal consumption expenditures accounted for 69.4% of our first 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 was 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 114.273 in February to 114.310 in March, giving us a month over month inflation rate of 0.032379%, which the BEA reports as a increase of less than 0.1 percent, or 0.0% in their tables….at the same time, Table 11 gives us a year over year PCE price index increase of 2.0%, and a core price increase, excluding food and energy, of 1.9% for the past year, both close to the Fed's inflation target....applying the March inflation adjustment to the change in March PCE shows that real PCE was up 4.158%, which BEA reports as a 0.4% increase in their press release and in the 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...

March Trade Deficit Drops 15.2% as Imports Fall and Exports Rise

our trade deficit was significantly lower in March, after our February deficit was revised a bit higher....the Commerce Department report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit fell by $8.787 billion to $48.956 billion in March, from a February deficit that was revised from the originally reported $57.59 billion to $57.743 billion...in rounded numbers, the value of our March exports rose by $4.2 billion to $208.5 billion on a $3.7 billion increase to $140.9 billion in our exports of goods and an increase of $0.4 billion to $67.6 billion in our exports of services, while our imports fell $4.6 billion to $257.5 billion on a $3.7 billion decrease to $210.4 billion in our imports of goods and a $0.9 billion decrease to $47.1 billion in our imports of services.....the latter reflected the absence of the one-time $1.0 billion increase in charges for the use of intellectual property for the rights to broadcast the 2018 Winter Olympic Games in February...export prices averaged 0.3% higher in March, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were unchanged, so hence the change in real imports will be roughly equal to the nominal dollar values reported here..

the increase in our March exports of goods came about as a result greater exports of capital goods, foods and feeds, and industrial supplies and materials...referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of capital goods rose by $1,900 million to $47,440 million on a $1,938 million increase in our exports civilian aircraft and a $387 million increase in our exports of engines for civilian aircraft, that our exports of foods, feeds and beverages rose by $1,049 million to $11,825 million on a $517 million increase in our exports of soybeans and a $308 million increase in our exports of corn, and that our exports of industrial supplies and materials rose by $947 million to $44,377 million on a $443 million increase in our exports of crude oil, a $331 million increase in our exports of fuel oil, and a $218 million increase in our exports of other petroleum products...in addition, our exports of consumer goods rose by $146 million to $17,217 million on a $379 million increase in our exports of pharmaceuticals, and our exports of other goods not categorized by end use rose by $531 million to $5,521 million...partially offsetting those increases, our exports of automotive vehicles, parts, and engines fell by $646 million to $14,180 million on $687 million lower exports of 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 all categories of goods other than passenger cars were responsible for the decrease in March imports...our imports of capital goods fell by $1513 million to $56,215 million on a $543 million decrease in our imports of computer accessories, a $548 million decrease in our imports of telecommunications equipment, and a $531 million decrease in our imports of semiconductors...in addition, our imports of consumer goods fell by $928 million to $54,216 million on a $710 million decrease in our imports of toys, games and sporting goods, and a $696 million decrease in our imports of TVs, and our imports of industrial supplies and materials fell by $704 million to $47,330 million, as our imports of crude oil fell by $509 million...meanwhile, our imports of foods, feeds, and beverages fell by $411 million to $12,227 million, and our imports of other goods not categorized by end use fell by $248 million to $7,566 million....partially offsetting those decreases, our imports of automotive vehicles, parts and engines rose by $214 million to $31,301 million on a $531 million increase in our imports of new and used passenger cars...

in the advance report on 1st quarter GDP last week, our March trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release...that report estimated that our March goods trade deficit was at $68.037 billion on a Census adjusted basis, on goods exports of $125.5 billion and goods imports of $190.3 billion....at the same time, the February goods trade deficit had remained unrevised from advance figure of $75,875 million…Table 5 from the March trade report revises those figures and indicates that our March goods deficit actually came in at $68,294 million on a Census basis, while the February goods deficit was revised to $75,811 million...those revisions from the previously published data mean that the 1st quarter trade deficit in goods was $0.193 billion more than was included in last week's GDP report, or roughly $0.8 billion more on an annualized basis, which would subtract about 0.02 percentage points from 1st quarter GDP when the 2nd estimate is published at the end of May....

Construction Spending Fell 1.7% in March after Prior Months Were Revised Much Higher

the Census Bureau's report on construction spending for March (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,284.7 billion annually if extrapolated over an entire year, which was 1.7 percent (±0.8%) below the revised annualized February estimate of $1,306.4 billion, but 3.6 percent (±1.3 percent) above the estimated annualized level of construction spending in March of last year...however, the annualized February construction spending estimate was revised 2.6% higher, from $1,273.1 billion to $1,306.4 billion, while the annual rate of construction spending for January was revised 1.7% higher, from $1,272.2 billion to $1,294.0 billion...

details on different subsets of construction spending are provided by the Census release summary:  Spending on private construction was at a seasonally adjusted annual rate of $987.5 billion, 2.1 percent (±0.8 percent) below the revised February estimate of $1,009.1 billion. Residential construction was at a seasonally adjusted annual rate of $536.8 billion in March, 3.5 percent (±1.3 percent) below the revised February estimate of $556.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $450.7 billion in March, 0.4 percent (±0.8 percent)* below the revised February estimate of $452.5 billion.  In March, the estimated seasonally adjusted annual rate of public construction spending was $297.2 billion, nearly the same as (±1.6 percent)* the revised February estimate of $297.3 billion. Educational construction was at a seasonally adjusted annual rate of $73.1 billion, 0.1 percent (±2.5 percent)* below the revised February estimate of $73.2 billion. Highway construction was at a seasonally adjusted annual rate of $91.0 billion, 1.2 percent (±5.4 percent)* above the revised February estimate of $89.9 billion.

with the upward revisions to the prior months, it turns out that construction spending for all three months of the 1st quarter was higher than was reported by the BEA in their advance estimate of GDP last week....as we saw above, annualized construction spending for January was revised $21.8 billion higher, and annualized construction spending for February was revised $33.3 billion higher...in reporting 1st quarter GDP, the BEA's key source data and assumptions (xls) indicated that they had estimated March residential construction (at an annual rate) would be $4.6 billion more than that of the previously reported February figure, that March nonresidential construction would be valued at $456.6 billion, $2.4 billion more than that of the reported February figure, and that March public construction would increase by $1.4 billion from previously reported February levels...totaling those changes, the 1st quarter GDP report showed March construction spending at an annual rate $8.4 billion higher than previously reported February levels...with this report showing March construction spending was down at an $21.7 billion annual rate from February figures that were revised $33.3 billion higher, that means the total annualized construction figure used for March in the GDP report was $3.2 billion too low...averaging the understatements in the annual rates of construction spending for the three months of the 1st quarter, that would mean that this report suggests that construction spending was underestimated by $19.43 billion (at an annual rate) in the 1st quarter GDP report, implying a upward revision to the related GDP components at a rate that would result in an addition of about 0.47 percentage points to first quarter GDP when the 2nd estimate is released at the end of May...

March Factory Shipments Up 0.4%, Inventories up 0.1%

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

  • New orders for manufactured goods in March, up seven of the last eight months, increased $7.8 billion or 1.6 percent to $507.7 billion, the U.S. Census Bureau reported today. This followed a 1.6 percent February increase. Shipments, up fifteen of the last sixteen months, increased $2.1 billion or 0.4 percent to $502.8 billion. This followed a 0.2 percent February increase. Unfilled orders, up six of the last seven months, increased $9.2 billion or 0.8 percent to $1,153.8 billion. This followed a 0.3 percent February increase. The unfilled orders-to-shipments ratio was 6.52, up from 6.51 in February. Inventories, up sixteen of the last seventeen months, increased $1.7 billion or 0.3 percent to $677.3 billion. This followed a 0.4 percent February increase. The inventories-to-shipments ratio was 1.35, unchanged from February.
  • New orders for manufactured durable goods in March, up four of the last five months, increased $6.5 billion or 2.6 percent to $255.2 billion, unchanged from the previously published increase. This followed a 3.6 percent February increase. Transportation equipment, also up four of the last five months, led the increase, $6.4 billion or 7.6 percent to $91.4 billion. New orders for manufactured nondurable goods increased $1.2 billion or 0.5 percent to $252.4 billion. 
  • Shipments of manufactured durable goods in March, up ten of the last eleven months, increased $0.9 billion or 0.4 percent to $250.4 billion, up from the previously published 0.3 percent increase. This followed a 0.8 percent February increase. Transportation equipment, up four of the last five months, drove the increase, $1.5 billion or 1.8 percent to $83.5 billion. Shipments of manufactured nondurable goods, up nine of the last ten months, increased $1.2 billion or 0.5 percent to $252.4 billion. This followed a 0.3 percent February decrease. Petroleum and coal products, up eight of the last nine months, led the increase, $0.8 billion or 1.5 percent to $51.7 billion.
  • Unfilled orders for manufactured durable goods in March, up six of the last seven months, increased $9.2 billion or 0.8 percent to $1,153.8 billion, unchanged from the previously published increase. This followed a 0.3 percent February increase. Transportation equipment, up three of the last four months, led the increase, $7.9 billion or 1.0 percent to $782.8 billion.
  • Inventories of manufactured durable goods in March, up twenty of the last twenty-one months, increased $0.5 billion or 0.1 percent to $411.5 billion, unchanged from the previously published increase. This followed a 0.5 percent February increase. Machinery, up four of the last five months, led the increase, $0.4 billion or 0.5 percent to $71.0 billion. Inventories of manufactured nondurable goods, up ten consecutive months, increased $1.2 billion or 0.5 percent to $265.8 billion. This followed a 0.2 percent February increase. Petroleum and coal products, up nine consecutive months, led the increase, $0.8 billion or 1.9 percent to $43.7 billion. By stage of fabrication, March materials and supplies increased 0.5 percent in durable goods and increased 0.2 percent nondurable goods. Work in process decreased 0.4 percent in durable goods and increased 2.0 percent in nondurable goods. Finished goods increased 0.4 percent in durable goods and were virtually unchanged in nondurable goods.

the BEA's key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $0.6 billion in March, while this report indicates total non-durable goods inventories increased by $1.2 billion, so that would indicate that they underestimated the 1st quarter GDP inventory component by about $2.4 billion on an annualized basis, which would seem to imply that 1st quarter GDP would have to be revised upwards by 0.06 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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