Sunday, September 29, 2013

US “wealth” boosted by unfunded pensions; GDP revision shows Q2 PCE deflation; August incomes and spending, and durable goods

in a few days we'll know which of the two upcoming budget crises we'll face; as it seems unlikely that we'll get through the month without either a shutdown of "non-essential" government operations or a debt ceiling crisis which could lead to a US default...the stop-gap spending bill that was passed by the House late last week went to the Senate, where after the necessary procedural moves and a brief filibuster, the language defunding Obamacare was stripped out, and a clean continuing resolution to fund the government till Dec 15 at the same levels as it is currently was passed and sent back to the House, where the Republicans again attached an amendment, this time delaying the start of Obamacare for one year and repealing an associated medical device tax, which Obama has already said he'd veto, making an Oct 1st government shutdown increasing likely...meanwhile, even after loading up a debt ceiling bill with a dozen right wing priorities, including a delay of the health insurance individual mandate, approval of the Keystone XL pipeline, opening the coasts to offshore oil drilling, a Ryanesque fast-track tax reform authority, gutting several provisions of Dodd-Frank, moving funding of the Consumer Financial Protection Bureau to house appropriations, et al, Boehner was still unable to push it past the hard liners in his own this point no one is negotiating, everyone is presenting their demands, so it's hard to see how either the stop-gap pending bill or the debt ceiling gets resolved...

US Household Wealth Boosted by Over $3 Trillion of Unfunded Pensions


while last week we saw that 15% of us remain stuck in poverty and the real median income for working Americans is still below the levels first reached in 1989, this week we discover that U.S. Household Wealth has hit an all time peak of $74.8 trillion...the 2nd Quarter Flow of Funds, Balance Sheets and Integrated Accounts (pdf) from the Fed showed that the difference between US households’ assets and liabilities was at $74.821 trillion at the end of the second quarter, $1.342 trillion, or 1.8% more than the revised $73.479 trillion in household net worth at the end of the first quarter, due in part to an increase of $525 billion in the value of real estate and a $300 billion increase in the value of household owned stocks, bonds and and mutual funds; the Fed doesn't say, but based on the Census count of households, that’s an average of $651,970 per household; everyone with less is below average...household debt was up at an annual rate of 0.2% to $12970.6 billion, as mortgage debt decreased 1.7% to $9345.8 billion and consumer credit rose at an annual rate of 5.6% to $3010.7 non-financial debt in the system increased at a 0.8% rate to a seasonally adjusted $41041.4 billion, as nonfinancial business debt rose at an annual rate of 6.9% to $13103.4 billion, state and local government debt rose at an annual rate of 1.1% to 3006.4 billion, and external federal government debt rose at an annual rate of 2.5% to $11960.9 billion...

normally, this report would not be noteworthy, but this release was the first quarterly flow of funds since the comprehensive benchmark revision to the national products accounts which, as we saw, dramatically altered the reports on GDP, personal income and spending...although we briefly mentioned that using an accrual approach for measuring defined benefit pension plans resulted in upward revisions to personal income, we didn't get into much detail about what that meant...this time, we'll quote:  "the comprehensive revision moves the accounting for defined-benefit (DB) pensions from a cash basis (related to the sponsors’ funding of the plans) to an accrual basis (related to households’ earnings of pension benefits)"...and as it relates to household wealth: "the Financial Accounts of the United States now account for the level and flow of “pension entitlements,” which are the present value of accrued defined-benefit benefits. Where previously only the assets of DB plans were tracked (and treated as an asset of the household sector), now pension entitlements are shown as an asset of the household sector and as a liability of the pension fund sectors", what that means is that our household wealth now includes "pension entitlements", whether they're funded or not; the level of these pension entitlements for the 2nd quarter is now at $18,736.61 billion, up from $18,560.9 billion in the first quarter, which includes now includes an upward revision of $3.6 trillion...our ALFRED graph to the right above shows how this change impacted reported household wealth; blue shows what household wealth was under the old accounting method over the past 15 years, while the red graphs shows what historical household wealth is now reported at, incorporating the change...(note that assets of non-profit organizations serving households has always been lumped in with household wealth) way of example, a year ago we reported that in the flow of funds report showed household net worth was at $62.7 trillion at the end of the second quarter of 2012; in this latest report, table B.100 "Balance Sheet of Households and Nonprofit Organizations" (pdf), household wealth for the second quarter of 2012 is now listed as $67,130.7 billion...

Final 2nd Quarter GDP Revision Unchanged at 2.5% Rate; Deflator for PCE turns Negative

this week also saw the release of the Third Estimate for 2nd quarter GDP from the BEA (Bureau of Economic Analysis) and, unlike many other such revised estimates we've seen, there was little change this time; the headlines read that the economy grew at a seasonally adjusted 2.5 percent annual rate in the spring quarter, unchanged from the previous report, but it was in fact fractionally less, at a 2.48% rate vs the 2.52% growth rate that the 2nd estimate yielded when computed to two decimal places...nominal GDP rose from the $16,535.3 billion seasonally adjusted and annualized figure reported in the first quarter to an annualized $16,661.0 billion with this final revision, which gives us a current dollar annual growth rate of 3.07%, while the 2nd quarter GDP in chained 2009 dollars, on which the 2.48% growth rate and all other percentages in this report are based, rose $95.8 billion to $15,679.7 billion from the 1st quarter's $15,583.9 billion...on a year over year basis, GDP has increased $252.0 billion in chained 2009 dollars, which gives us an anemic 1.63% growth rate for the 12 months ending June...

since this third estimate didn't show much change from the  2nd estimate of 2nd quarter GDP, which we covered quite thoroughly, we'll just briefly highlight what changed in this week's release...personal consumption expenditures at an annual rate of $11,427.1 trillion were up 1.8% from the first quarter and virtually unchanged from the 2nd estimate; they accounted for exactly half of the growth in the second quarter...spending on durable goods was up at a 6.2% rate, a bit more than the 6.1% rate of increase indicated in the last report, while the increase in spending on non-durable goods was 0.2%, less than reported last month at 1.6%, while personal outlays for services increased at a 1.2% annual rate, up from the 1.1% rate of increase reported in the 2nd estimate...spending on durables added .46% to the 2.48% annual rate of increase for the quarter, while spending on non-durables contributed .26% to GDP and spending for services added .53%...

fixed private investment was up at a 6.5% annual rate, somewhat more than the 6.0% rate of increase reported last month; non-residential investment increased at a 4.7% rate, as investment in private structures increased 17.6% from the first quarter, a jump from the 16.1% increase approximated by the 2nd estimate; investment in equipment increased at a 3.3% annual rate, revised from 2.9%, and investment in intellectual property fell 1.5%, a greater contraction than the 0.9% reported by the 2nd reading...meanwhile, investment in residential property was up at a 14.2% annual rate from the first quarter to the second, more than the 12.9% rate of increase estimated at the end of a result of these changes, growth in non-residential structures now contributed .45% to 2nd quarter growth, while residential added .40%, equipment added .18% and intellectual property subtracted .06% from 2nd quarter GDP...

one larger change between the 2nd and 3rd estimate was a downward revision to inventory investment, most of which was a downward revisions to retail trade industries...reported last month as a $85 billion increase in inventories from the 1st quarter to the 2nd, that's now been revised to a $77.2 billion QoQ rate of increase, which is even lower than the 1st estimate, which came in at $78.7 billion...the result was that inventories contributed .41% annualized to 2nd quarter GDP growth, not the .55% approximated last month..

2nd quarter export growth was also a little weaker than the 2nd estimate indicated, as it also trended back to the levels reported in the 1st estimate...real exports of goods and services were reported to have increased at an annualized 8.6% rate in the second estimate, but in this 3rd estimate it's now indicated as growing at a 8.0% rate...the rate of increase in 2nd quarter imports was also written down a bit, from 7.0% in the 2nd estimate to 6.9% in this a result of these changes, the growth in imports, which subtracted 1.10% to the change in 2nd quarter GDP, was greater than the 1.04% contribution to GDP added by exports...

the charge indicated in the contribution from state and local governments to 2nd quarter GDP by the 3rd estimate was also closer to the 1st estimate than the 2nd; instead of decreasing at a 0.5% rate as was reported at the end of August, investment and consumption spending by state and and local governments rose at a 0.4% rate in the 2nd quarter, just a fraction more than the 0.3% increase indicated from that government sector by the advance estimate of 2nd quarter GDP released in July....meanwhile, federal outlays decreased at a 1.6% rate in the 2nd quarter, which was the same decrease in federal spending reported in the second while state and local governments finally made a small .05% contribution to GDP, the decrease in federal outlays took .12% away, leaving government as a drag on the 2nd quarter, much as it has been throughout this recovery…

the zero hedge bar graph above is a visual representation of how each of these major GDP components have impacted the quarterly result since the 2nd quarter of 2011, with the net quarterly change in GDP at an annual rate tracked by a black line; additionally, the pinkish shaded box includes a similar visualization of the differences between the first, second and third estimates for the 2nd quarter…if you click to enlarge it you’ll see that the dark blue in each bar represents the increase in personal consumption expenditures for each quarter,  the red in each bar represents the change in fixed investment for that quarter, while the change in private inventories, the other investment category, is shown in green, with additions to GDP above the red dashed “0.00%” line and subtractions, representing a component that had contracted during the quarter, below it…in addition, the change in exports, which adds GDP when its growing and subtracts when it contracts, is shown in purple, while the opposite is true for a positive change in imports, shown in teal blue; they subtract from GDP when growing while a shrinkage of imports would be an addition to GDP and be shown above the red ‘0’ line…lastly, in orange, the graph shows the change in government consumption and investment, which has subtracted from GDP for every recovery quarter shown except for Q2 & Q3 of 2012…clearly, it’s been consumers in blue and fixed investment in red that have provided most of the growth over the last two years..

in addition to data on GDP and its components, this report included revised estimates of 2nd quarter inflation based on prices changes in national income & product accounts...the GDP deflator, which is used to convert nominal GDP changes into real dollars and hence is the broadest measure of inflation, increased at an annual rate of just 0.6% in the 2nd quarter; meanwhile, the deflator for personal consumption expenditures, which the Fed has targeted at 2.5%, has now actually fallen at a annual rate of 0.1% in the 2nd quarter, rather than unchanged as previously reported (it might be more appropriate to call it a PCE inflator)...the deflator for goods indicated 3.3% goods deflation at an annual rate in the 2nd quarter, and hence raised their value by that much in the GDP computation, while the deflator for services indicated an annual inflation rate of 1.6% for services, and hence lowered their contribution to GDP by that percentage..

3rd Quarter Real PCE to Date Suggests Weak Contribution to GDP

the key monthly release of the past week was also from the BEA, on Personal Income and Outlays for August;  which gives us the first look at personal consumption expenditures for the month, which as we've seen has been the critical component of GDP during the recovery; it also includes data on personal income and disposable income after taxes, total personal savings and the national savings rate, as well as the price index for PCE, which the inflation gauge the Fed targets...a footnote tells us that the income data in this report reflects revisions from January to March due to the inclusion of the recently available first-quarter wage and salary data from the BLS...

overall, this month's report shows an improvement from recent months, although it's a source of some confused misreporting in the press...the BEA opens by telling us seasonally adjusted personal income for August increased by $57.2 billion, or 0.4 percent over July's level; however, what their news release fails to mention is that the $57.2 billion is an annualized figure, which means that August’s personal income gains, if extrapolated over an entire year, would increase annual personal income from $14,131.0 billion to $14,188.2 a similar manner, annualized disposable personal income (DPI), or income after taxes, increased by $56.2 billion to $12,522.8 billion, which was a 0.5% increase over July's DPI, making August income increases the largest since February...and unlike last month, when incomes from wages and salaries reported fell at a $15.3 billion rate, income from private wages and salaries increased at a $28.5 billion rate in August...even wages and salaries from government jobs increased at a $2.0 billion rate in August, in contrast to a decrease of $7.6 billion in July, despite being reduced by $7.3 billion in August and $7.7 billion in July due to sequester related proprietors incomes also rose by $5.0 billion in August, compared with an increase of $2.3 billion in July, and farm owners incomes we up at a $7.9 billion addition, personal rental income increased $7.6 billion in August, while personal income from receipts on assets (interest and dividend income) decreased $4.5 billion, in contrast to an increase at a $13.6 billion rate in July...although rental income and dividends account for less than 10% of all income, they have accounted for 25% of the increase in all earnings over the last 4 years...

personal consumption expenditures (PCE) increased 0.3% in August and were up at an annual rate of $34.5 billion to an annualized $11,528.8 billion; of that, spending for durable goods increased at a $6.7 billion rate to $1,274.4 billion, and spending on non-durables was down by $0.5 billion to an annualized $2,635.1 billion, while spending for services was up at a $28.3 billion rate to $7,619.3 personal outlays during August, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $38.4 billion to $11,942.2 billion, which left personal savings, which is disposable personal income less total outlays, at $580.7 billion for the month, which was the largest monthly savings this year... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was at 4.6% in August, up from 4.5% in July and the highest savings rate since May..

the price index for personal consumption expenditures, based on 2009 = 100, was at 107.423 in August, nominally a 0.1% increase from July's 107.276 reading; the core PCE price index, which removes food and energy, was at 106.131, up 0.2% for the month...the year over year change in the headline PCE price index works out to an increase of 1.15%, and the year over year Core PCE price index, which the Fed has targeted at 2.50%, is at 1.23%, 0.1%  higher than last month's 1.13% year over year a result, real disposable personal income, which is DPI adjusted for PCE inflation, increased 0.3% in August, after being up 0.2% in July...real PCE, which is personal consumption expenditures adjusted for inflation using the PCE price index, increased 0.2% or $17.5 billion annualized in August, after being up 0.1% or $7.2 billion in July...thus for the 3rd quarter to date, real PCE has increased at a $24.7 billion rate, or at a 1.4% annual rate, which indicates a weak contribution to 3rd quarter GDP...our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the scale in chained 2009 dollars for both on the left; also shown in green is the monthly personal savings rate over the same period, with the scale as a percentage of DPI on the right….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI below is not adjusted for increases in the population…on a per capita basis, real DPI is up just 18.3% over the span of this graph…and we already know the lion’s share of that has gone to the rentier class…

FRED Graph

August Orders for Durable Goods Confirms July Contraction

the August Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders (pdf) from the Census Bureau also may give us some insight into the direction of the 3rd quarter GDP, as its data inputs into equipment investment, consumer durable goods spending, government and military spending, inventories and exports...while most reported that new orders were up slightly in August, as they rose 0.1%, few made note of the fact that July durable goods orders, which we previously reported showed a widespread contraction while shrinking 7.3% in July, were revised down to an even greater 8.1% decrease...while that does not bode well for the future, new orders are notoriously noisy, so we'll also look at shipments and inventories with an eye to their impact on the current quarter...

seasonally adjusted new orders for manufactured durable goods increased $0.3 billion in August to $224.9 billion, which as we've already mentioned was a 0.1% increase from July's depressed level; that means that August orders were still 8.0% below the new orders rate of $244.4 billion that we saw in June…there was a 0.7% increase to $67,909 million in new orders for transportation equipment, led by a 2.4% jump in new orders for vehicles and parts, however, that came on the heals of a 21.9% decrease in orders for transportation goods, as June transport orders came in at $86, orders less transports, a popular metric which strips out volatile aircraft orders, were down 0.1% in August after a revised 0.5% decrease in orders for defense aircraft, another volatile category, were down 11.8% after being down 3.1% in July; however they just account for $4,479 million on the books, less than 2% of the total...but there's not much volatile about new orders for computers and electronic equipment, which were down 3.4% in August after being down 2.4% in July; their new orders have now shrunk to $20,775 million from $22,069 million in June...but it's new orders for capital goods where the real weakness lies, down another 0.8% after being down 18.1% in July, which means new orders for capital goods at $84,285 million are now running nearly 19% below the June level of $103,795 million...even stripping out defense capital goods and aircraft, orders for so called core capital goods were at $68,379 in August, 1.9% below the June core capital goods orders of $69,695...were it not for new orders for new cars, new orders for durable goods would be a real train wreck...

our FRED bar graph below shows the month to month change of several of these durable goods categories, beginning in January of each month, the red bar indicates the percentage change in overall new orders for durable goods for that month; next in each month, the blue bar indicates the percentage change for all orders for durable goods except aircraft and defense; followed by a bar in green which shows the change in new orders ex-defense; while in orange, we have a special consumer durables category, new orders for consumer durables ex transportation; finally, in violet, we have the change in new orders for all non-defense capital goods including aircraft, which is a fair proxy for what would be included in the equipment investment category of GDP...on that graph, the August / September 2012 change shows what should have happened if the change was just from abnormally volatile orders; after a downturn comes a rebound.. But after the downturn in July this year, new orders in August didn't do squat...

FRED Graph

as bad as new orders were, it's the value of shipments of durable goods over July, August and September that will more closely impact third quarter GDP than new orders, which in many cases have lead times in months...overall, August seasonally adjusted shipments of manufactured durable goods increased $2.1 billion to $231.466 billion, which is a 0.9% increase over total July shipments of $229.353 billion, which was down 0.1% from June's level of $229,600...shipments of transportation equipment, up 1.5% in August to $69,738 million, led the increase, with shipments of motor vehicles up 1.9% driving that increase, as shipments of non-defense aircraft fell 5.1%...shipments of machinery were up 0.4% to $33,705 million after falling 1.5% in July, and shipments of computers and electronic equipment rose 1.3% in August to $27,576 million after a 1.1% contraction in July...overall shipments of capital goods also partially rebounded from a 1.9% pullback in July, as they rose 1.3% in August to $83,941 million; of that, shipments of non-defense capital goods rose 0.4% to $73,808 million after falling 1.4% in July...

seasonally adjusted inventories of durable goods were up 0.1% in August to a new record high of $379,084 million, which in turn followed the 0.3% increase in July...inventories of transportation equipment, up 0.3% and valued at $117,280 million, again led the increase, as transportation equipment inventories were also up 0.6% in July; inventories of motor vehicles increased 0.7% and inventories of non-defense aircraft were up 1.3%, while military aircraft and parts inventories fell 3.6%....excluding transportation inventories, all other inventories were virtually unchanged, as they fell by less than 0.1%...inventories of computers and electronic equipment were down 0.6% to $46,374 million, although inventories of communication gear rose 1.3%...inventories of electrical equipment, appliances, and components rose 0.5% after being up 0.2% in July, and overall capital goods inventories increased 0.1% as well, to $194,624 million, after increasing 0.3% in July...our FRED graph below shows the ratio of durable goods inventories to shipments in blue with the scale on the left, and the ratio of inventories to unfilled durable goods orders in red with the scale on the left…concerns that there has been an excessive build of inventories appear unfounded, at least for durable goods…

FRED Graph

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Sunday, September 22, 2013

Census report on 2012 Income, Poverty and Health Insurance; August reports on industrial production and consumer prices

we should at least note that the US fiscal year ends in 8 days, on September 30, and as of today there hasn't been any serious movement in Congress to pass a budget to fund the government past October addition, sometime after mid-October, the Treasury is expected to run out of accounting tricks it has been using to make its mandated payments and be stopped from further spending by the artificial constraint of the legislated debt what was largely a theatrical move, the republican majority in the House did vote on Friday to continue funding government operations at last years level's, including the sequestered cuts, until December 15, but to also defund Obamacare, which is supposed to go into operation on October 1st, in the process...the thinking had been that the GOP would avoid an October 1st government shutdown and use the leverage of the debt ceiling to extract demands out of the president and the Senate, but it is now looking more likely that a shutdown may occur on Tuesday, October 1st and probably last the rest of that week...even Bill McBride at Calculated Risk, who is the last one to be alarmist, has warned of the possibility that the employment report for September, due Oct 4th, may not be released on that manner, a shutdown would be an inconvenience, but would not have the serious economic impact that the specter of a government default associated with a debt ceiling impasse could precipitate...

census income and poverty table 5 this past week saw the release of an annual demographic report on Income, Poverty and Health Insurance Coverage in the United States in 2012 from the Census Bureau; which showed that neither median household incomes nor the percentage of American in poverty budged from the levels they were at a year earlier, while the percentage of people without health insurance decreased...based on data collected in February, March, and April, the Census found that the national median household income in 2012 was $51,017, which was not statistically different than the revised 2011 median income of $51,100, which was originally reported as $50,054, down 1.5% from 2010's median of $50,831...the 2012 median was 8.3% less than the inflation adjusted median income of prerecession year of 2007 and 9.0% less in real dollars than the real median household income high water mark of $56,080 in fact, real median household incomes in 2012 were still 1.3% below the 1989 real household median of $51,681...understand that this median income data includes households of any number of number of employed persons living under one roof; census breaks this household category down into family and non-family households; the real median incomes for family households was at $64,053, while nonfamily households had a median household income of $30,88...our 2012 Gini-coefficient, a measure of income inequality, was at .477 in 2012, statistically unchanged from 2011; this put us on a par with the inequality of Ecuador and China, and more unequal than Iran, Nigeria, and Uganda...the historical data for household real median incomes since 1967 are included in the table along the side of this text, and a chart showing the trajectory of this median income data is included below...both the table and the chart are from the 57 page pdf webinar supplement to the 88 page pdf report, so you can gather that we're just scratching the surface here...

census income and poverty graphs 3

 Census found that 46.5 million Americans were living at or below the poverty line in 2012, which was 15.0% of the estimated population at the time of the survey; this marks the 3rd consecutive year and only the 6th time in the history of this series that the US poverty rate has been at 15% or above, as you can see on the adjacent table. or on the chart below...9.5 million families were in poverty in 2012 and the poverty rate for families was at 11.8%, essentially unchanged from 2011...the poverty rate for married couples was at 6.3%, while 16.4% of families headed by a male householder and 30.9% of families headed by a female were living in poverty...9.1% of those over 65 were considered in poverty, while the poverty rate for adults between 18 and 64 was 13.7%...however, 16.1 million children under the age of 18 were living in poverty, which translates to 21.8% of all children in this country in families below the threshold...the poverty threshold varies by family size and composition; in 2012, the weighted average poverty threshold for a family of four in 2012 was $23,492, while the poverty threshold for an elderly couple was an income of $13,878; poverty thresholds for other family combinations are in Appendix B on page 51 of the pdf report, and levels for previous years can be viewed here  some government transfers,.such as social security. are included within that threshold; others, such as food stamps, are not...without social security, the poverty rate among the elderly would have been more than 44%

census income and poverty graphs 2

this report also found that 263.2 million Americans were covered by health insurance in 2012, up from the 260.2 million who were covered in 2011; this leaves 48.0 million people without coverage in 2012, statistically unchanged within the accuracy range of this survey from the 48.6 million uncovered in 2011...the percentage of us without health insurance coverage declined to 15.4%  from 15.7% in 2011; the percentage of youngsters under the age of 18 who were not covered declined from 9.4%, or 7.0 million in 2011 to 8.9%, or 6.6 million in 2012, while the percentage of those in other age brackets was statistically unchanged...54.9% were covered by employment-based health insurance, at 170,877,000 statistically unchanged from the 170,102,000 covered by employers in 2011...another 50,903,000 were covered by Medicaid, which was also statistically unchanged from the year earlier Medicaid coverage...those covered by Medicare, however, increased to 48,884,000 in 2012 from 46,922,000 in 2011..


the key economic release of this past week was from the Fed on August Industrial Production and Capacity Utilization, which showed that industrial production rose a seasonally adjusted 0.4% in August, the largest monthly increase since February...the seasonally adjusted industrial composite index, which is benchmarked at 2007 equal to 100, is now at 99.4, up from 99.0 in July, up from 98.1 at year end and 2.7% higher than last August....manufacturing, which accounts for over three-fourths of the composite, was up 0.7% in August after being down 0.4% in July; the manufacturing index rose to 96.0 in August from 95.3 in July, and is now up 2.6% year over year, although July's' index was at the same level as December's....mining, which includes gas and oil drilling and accounts for 14.62% of industrial production, increased 0.3% in August after a 2.4% jump in July; the mining index at 121.1 is now 7.5% higher than its reading of a year earlier...meanwhile, utility output fell more than a percent for the 5th straight month, down 1.5% in August after falling 1.3% in July and 2.0% in June..the utility index is now at 95.6, 3.9% below a year ago, which you may recall saw record summer heat...our FRED graph below shows shows the production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100….we can see the industrial production index has closely tracked manufacturing as it has recovered slowly, while the mining index continues to hit new highs as domestic oil & gas operations expand…

FRED Graph

in the breakdown of industrial production by market group, August saw seasonally adjusted production of consumer goods increase by 0.3% to an index level at 94.1 after a 0.5% decrease in March...changing production of consumer durables accounted for most of the swing, rising 2.5% in August after falling 2.2% in July...a swing in production of automotive products in turn accounted for most of the change in production of consumer durables, as August saw automotive products production rise 4.4% after it fell 4.2% In July, although the index for appliances, furniture, and carpeting also increased 2.0% in August after a 0.1% increase in July...meanwhile, the production of consumer non-durables, which has not seen an increase since March and which accounts for 21.33% of industrial production, fell 0.3% in August; production of food and tobacco increased 0.6% while production of clothing increased 1.3%, but those were offset by a 1.0% decrease in output of chemical products, a 0.2% decrease in production of paper products, and a 1.5% decrease in output of consumer energy products...meanwhile, production of business equipment was up 0.9% in August, after a 0.9% decrease in July, as production of transportation equipment increased 3.6%, reversing its July 3.2% slide...production of defense and space equipment was also up 1.0, after slipping 0.1% in July...the output of construction supplies rose 0.3% in August, after rising 0.5% in July and 0.7% in June; the index for construction supplies is now at 81.8, 5.3% higher than a year ago...production of business supplies, however, was unchanged in August after being down 1.0% in Jule and 0.1% in June; that index is at 90.3, down from 90.4 in 2012...production of materials, which accounts for 46.54% of industrial production, increased 0.4% in August and was 3.4% above the year-earlier level...production of durable inputs rose 1.0% in August as the production of consumer parts rebounded 2.5% and the output of equipment parts rose 1.7%...output of non-durable materials rose 0.7% as production of textiles was up 0.7%, paper production saw a 1.0% increase and chemicals output rose 0.6%...meanwhile, the output of energy materials decreased 0.3% in August, although the index for energy materials remains 4.4% above the year earlier reading at 115.6...

capacity utilization for total industry, which is the percentage of our plant and equipment that was in use during the month, rose 0.2% from 77.6% in July to to 77.8% in August, up from an operating rate of 77.2% in August of last year...the operation rate for manufacturing was at 76.1%, up from 75.7% in July, as capacity utilization for durables manufacturing rose from 75.5% to 76.2% and utilization for non-durables manufacturing rose from 77.3% to 77.4%...meanwhile, the operating rate for mining, which includes oil & gas rigs, slipped from 90.1 in July to 90.0% in August, and utilities operated at 74.7% of capacity in August, down from 74.8% in July and 75.8% a year earlier...over the year between August of 2012 and August of 2013, manufactures added 1.5% to their capacity, utilities expanded their plant base by 1.1%, and mining saw capacity growth of 4.2%...the FRED graph above shows the track of capacity utilization for total industry since 2007 in pink; note that it’s a percentage, rather than an index number like the other metrics tracked on the same graph

this week also saw the release of the Consumer Price Index for All Urban Consumers (CPI-U) for August from the BLS, which showed that except for rent and medical care, prices either fell or showed subdued increases when compared to a month earlier…the seasonally adjusted weighted average of August prices was 0.1% above the index for consumer prices in July, while the unadjusted CPI, which is based on prices between 1982 and 1984 being equal to 100, rose .12% from 233.596 in July to 233.877 in August, and was 1.51 % higher than the 230.379 reading of a year ago …the Core CPI, which strips out price changes in foodstuffs and energy, also rose a seasonally adjusted 0.1%, and was at a level 1.8% higher than a year earlier...the unadjusted Core index rose 0.2%, from 233.792 in July to 234.258 in August...

  the seasonally adjusted food index rose 0.1% in August, while the unadjusted food index barely budged, rising from 237.001 in July 237.406 in away from home rose 0.2% and was 3.0% higher than a year earlier while food at home rose at a seasonally adjusted 0.1% and was 1.0% higher than last August...prices for the cereal and baked good group were 0.3% higher than July and 1.3% higher than a year ago as bread rose 1.1% over the month and was 2.8% higher than last year while breakfast cereal fell 0.9 in August leaving average breakfast cereal prices 0.4% below last August….the meat, poultry, fish and eggs index was up 0.6% in August and 2.2% over a year, with bacon up 2.4% in August and 8.2% since last August; chicken parts also saw a 2.6% price jump in August, while frozen seafood fell 3.6%...dairy products rose 0.4% for the month as cheese prices rose 1.1% and fresh whole milk prices fell 0.3%; over the preceding year, milk rose 1.8% while the dairy index just rose addition, fruits and vegetables increased by 1.2% in August and 3.6% over the past year as potatoes were up 3.0% for the month and 11.9% in a year while oranges, which were up 6.5% over the year, fell 2.5% in August...meanwhile, the prices for beverages fell 0.1% in August and 1.0% for the preceding year as the price of roast coffee was off 2.1% for the month and 7.6% year over year...but it was the large "other foods" category, which was down 1.0%, that brought the food index down, as sugars and sweets fell 1.1% for the month, frozen foods were 1.4% cheaper, and snack prices dropped 1.6% below the July average...

the seasonally adjusted energy price index declined 0.3% in August, while the unadjusted energy index fell 0.54%, from 251.370 in July to 250.011 in August...while fuel oil rose 1.5% for the month and gasoline fell just 0.1%, the overall index was dragged down by a 0.7% decrease in the energy services index, driven by a 2.3% decrease in piped natural gas prices and a 0.1% decrease in the cost of an August 2012 to August 2013 comparison, gasoline prices were 2.4% lower, fuel oil prices were unchanged, while electricity prices rose 2.8% and natural gas utility prices saw a 4.8% price increase...

the cost of shelter, the largest component of the CPI at 31.638% of the total index, was up 0.2% in August and 2.4% year over year….the rent of one's primary residence was rose 0.4% for the month, home owner's equivalent rent was up 0.2%, while prices for lodging away from home fell 0.8%...medical care costs, up 0.6% for the month, were the other major driver of the rise in the August CPI; prices for medical care commodities rose 0.4% as prices for prescriptions, which had been slightly down this year, rose 0.8%, while medical care services rose 0.7% for the month as both inpatient and outpatient hospital services rose contrast, the transportation index fell 0.2%, as prices for used cars fell 0.1% and prices for new cars were unchanged while the transportation services index fell 0.5% as air fares fell 2.0% and car insurance fell 0.1%....the education and communication index was also down 0.1% for the month, although year over year prices were 1.6% higher; tuition and fees were said to be down 0.2% in August, while telephones services were down 0.1% while postage and delivery fees were up 0.3%...meanwhile, the recreation index was unchanged, as prices of recreation commodities fell 0.3% on  0.9% decrease in TV prices and 1.0% lower prices for sports vehicles including bikes while recreation services price were up 0.2% as club dues and gym fees rose 0.4% and admissions to sports events rose 1.1%...finally, the clothing index, which accounts for just 3.462% of the CPI, was up 0.1% in August, as men's apparel was down 0.5%. women's apparel was up 1.0%, and footwear prices were unchanged…

our first FRED graph below shows the track of these major aggregate price indexes going back to 1997, when two of these composite indexes were reset; the rest represent recent price indexes based on prices from 1982 to 1084 = 100... the price index for food and beverages, which is 15.1% of the CPI, is shown in blue while the composite price index for housing, which includes rent or equivalent, maintenance, and utilities and accounts for 41.1% of the CPI, is in red...meanwhile, the apparel index in violet, has actually been falling since the 1990s until just recently...the rising orange line is the medical care composite index, which accounts for 7.144% of the CPI; it’s now at 426.866, an increase of more than fourfold from the index years; next, in light green, we have the volatile transportation index, which at 17.194% of the CPI reflects the gyrating cost of gasoline and fuel related costs of transportation services, moderated by the slow steady rise in the cost of vehicles; lastly, we have our two indexes benchmarked to 1997 prices equal to 100: education and communication price changes are shown in dark green and account for 6.695% of the aggregate CPI, while the recreation index, at 5.936% of the CPI, is shown in bright blue…

FRED Graph

next, we have a FRED bar graph below which maintains the same color coding as the above and shows the monthly percentage changes in each of those major CPI components over the past year, with increases in prices above the “0” line and price decreases below it…clearly, prices changes in food in blue and housing, which is mostly rent, have been modest month to month, while the clothing index in violet does exhibit some unexpected volatility…but it’s also obvious that the only index which continually shows monthly changes greater than 1 percent is transportation, again reflecting the volatile prices changes in the cost of fuel..

FRED Graph

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Monday, September 16, 2013




Is there a media blackout on the fracking flood disaster in Colorado?  Hat Tip Bluedaze

We need the national news stations to go cover the environmental disaster that’s happening in Colorado right now.

This picture taken by a resident is from yesterday, 9/14/13

flood in Weld County yesterday Sept 13

From an email.
I see you’ve noticed the underwater wells in Weld County, Colorado. Amazing; we’ve emailed the Denver TV stations, other media, and state and local politicians. We’ve sent pictures that our members have taken. It’s like the media and politicians have been TOLD not to say anything about it. There has been no mention of the gas wells on the Denver newscasts either last night or this evening although all stations have had extensive and extended flood coverage. You can see underwater wells in the background of some of the newscast videos, and yet the reporters say absolutely nothing.
Here’s a picture one of our members took yesterday in Weld County, Colorado. We’ve got tons more on our website. Check it out. The tanks are tipping and, in some cases, have fallen over. They have to be leaking toxins into the flood waters. There have to be hundreds if not thousands of underwater well pads in Weld County as a result of the flooding.
Please publicize this in Texas since our media people and politicians have gone silent!
East Boulder County United
Lafayette, Colorado

 Post from yesterday shows leaking tank floating down the river.


UPDATE: The locals are very busy right now taking calls from the media. So far no calls from the local media though. Last I heard it is continuing to rain.
They reported to EPA emergency under report number 1060249.
UPDATE: You can see more photos HERE. Another tank overturned and a fracking chemical warehouse that was flooded. I did not take the photos.
UPDATE: From the Daily Camera:
Regulators say they agree these well sites could pose a contamination risk, and they will get out to assess the damage as soon as it’s feasible.
Lafayette-based anti-fracking activist Cliff Willmeng said he spent two days “zig-zagging” across Weld and Boulder counties documenting flooded drilling sites, mostly along the drainageway of the St. Vrain River. He observed “hundreds” of wells that were inundated. He also saw many condensate tanks that hold waste material from fracking at odd angles or even overturned.
“It’s clear that the density of the oil and gas activity there did not respect where the water would go,” Willmeng said. “What we immediately need to know is what is leaking and we need a full detailed report of what that is. This is washing across agricultural land and into the waterways. Now we have to discuss what type of exposure the human population is going to have to suffer through.”
A spokesman for the Colorado Oil and Gas Conservation Commission said the agency is aware of the potential for contamination from flooded drilling sites, but there simply is no way to get to those sites while flooding is ongoing and while resources are concentrated on saving lives.
Apparently all sides agree that there is a contamination risk. So I hope the industry apologists will, at least, stop using my bandwidth trying to convince us otherwise.

Colorado Flooding: Deaths, Dramatic Rescues, Fracking & Broken Oil Pipeline - by Diane Sweet, Occupy America, September 16, 2013
Boulder County activists are concerned -- and rightly so -- with flooded oil and gas wells in northeast Boulder County, and southwest Weld County in Colorado.

Residents in Colorado no doubt barely had a chance to catch their breath between the extreme drought conditions, and the torrential rains that led to devastating flash-flooding in many areas.

Further complicating evacuations and rescue efforts, as well as eventual recovery work; An uncooperative Mother Nature, broken oil and gas industry pipeline, wells, fracking and operating oil and gas facilities.

The Denver Post reported on Saturday:
"Oil drums, tanks and other industrial debris mixed into the swollen river flowing northeast. County officials did not give locations of where the pipeline broke and where other pipelines were compromised.
While the water levels in the South Platte appear to be receding slightly, bridges over the South Platte have been closed as water overflowed the bridges at least as far east as Morgan County.
Oil and gas industry crews have been monitoring wells drilled into the flood plain east of Greeley in Weld County.
One pipeline has broken and is leaking, Weld County Emergency Manager Roy Rudisill. Other industry pipelines are sagging as saturated sediment erodes around the expanding river.
Industry crews "are shutting in the lines, shutting in the wells," Rudisill said.
In a statement, Gary Wockner, of Clean Water Action, said "Fracking and operating oil and gas facilities in floodplains is extremely risky. Flood waters can topple facilities and spread oil, gas, and cancer-causing fracking chemicals across vast landscapes making contamination and clean-up efforts exponentially worse and more complicated."
Indeed, why is there such a heavy presence of the fracking, oil and gas industries in a floodplain? It's as if there was no forethought at all to the potential complications of flash-flooding.
This is footage of the flooding that occurred in Longmont, CO, and was recorded the morning of the 13th around 9am. During the aerial surveillance it's noted that a sewage treatment plant is completely flooded in the town.

An estimated 1,254 people are still unaccounted for in Colorado’s devastating floods, with at least four more inches of rain in the already-soaked Boulder expected Sunday. Five deaths have been blamed on the flooding, with a sixth person presumed dead. Among the dead were a man and woman, both 19, who were swept away while leaving their car. In fact, a helicopter surveillance mission carrying Gov. John Hickenslooper and others was forced to divert twice to rescue people waving below for help. The damage of the floods is expected to cost an estimated $150 million in Boulder alone. Meanwhile, New Mexico was also hit by heavy rains, with at least one death blamed on flash floods. Officials estimate that 1,500 homes have been destroyed and about 17,500 damaged so far.

Associated Press video: Fifth-graders air-lifted from Colorado flood zone.

More than 85 fifth-graders from Louisville, Colorado were flown to safety by the 4th Aviation Division Saturday. They had been trapped by rising flood waters plaguing the state.

They were attending an outdoor education program at the Cal-Wood Education Center in Jamestown when the town was cut off by floodwaters. To help keep nervous families informed, the center’s Facebook page posted regular updates on how the children were doing.

Denver’s Channel 7, the ABC News affiliate, posted a video on YouTube with interviews of people rescued in Lyons on Friday by the National Guard.

Unable to keep up with the traffic to their news site, the Estes Park News Inc. used its Facebook page to keep residents informed with updates and images and videos sent in by residents, including this YouTube video.
In Jamestown, residents watched as "one by one, houses cracking off and going into the creek," said Colleen Williams, chief EMS officer with the Jamestown Fire Department. "But everyone was accounted for — that was the best thing."

"There were almost 300 of them until Friday, when military helicopters evacuated all but about 20 from this mountain town northwest of Boulder. Jamestown lost one person, 72-year-old Joey Howlett, a beloved town fixture who was crushed inside his house by a mudslide Thursday morning."

With floodwaters, mud and debris filling Boulder County sewer pipelines, citizens began reporting water or sewage backing up into homes. In those cases, people are being asked to evacuate because it's a health issue.

You can see more photos HERE
. Another tank overturned and a fracking chemical warehouse that was flooded.

Search for open shelters throughout Colorado through text messaging. Text SHELTER and a Zip Code to 43362. (Example SHELTER 80025)

President Obama Declares Disaster for Colorado
The FEMA toll-free number 800-621-3362, will operate from 7am-10pm MT, 7 days a week until further notice to assist residents.
Individuals in Boulder County can apply for FEMA assistance at or call 800-621-3362.

Much more emergency information available here.

And if you're searching for someone in Colorado, try SafeandWell from the Red Cross.

Sunday, September 15, 2013

August retail sales eclipsed by July revisions; July’s consumer credit; July job openings and job turnover

the most widely watched economic release of this past week was the Advance Report on Retail Sales for August (pdf) from the Census bureau, which estimated that retail sales grew at a 0.2% seasonally adjusted rate in August, much slower than the expected 0.5% increase over July's sales...but the real surprise was again in the revisions, which showed that for the 2nd consecutive month, the upward revision to the previously reported monthly sales gain alone was actually greater than the entire sales gain for the reporting month....

let's look at that revision phenomena first; retail and food services sales for July were originally reported at a seasonally adjusted of $424,481 million, up just $832 million from June sales; that has now been revised to show sales of $425 657, a $1.815 billion or 0.42% increase over June sales, which are now shown to be at $423,842 million; hence, this "August" report in effect added $983 million to July's sales...meanwhile, August sales as estimated at $426,563 were up $901 million from July's $425,657 what looks like a weak report actually shows more than twice as great a sales gain as the headline indicates due to the revisions, which is virtually the same thing that happened last month...

again, since the revision of the July report actually accounted for more of the increase in August retail sales over what was last reported than the August change, we'll again take a brief look at some of the major changes in July that resulted in that swing...seasonally adjusted sales at motor vehicle & parts dealers, which account for nearly 20% of aggregate retail sales, were originally reported down 1.0% in July, from $81,584 million in June to $80,799; the revision cut that automotive sales decline in half, from $81,476 million in June to $81,071 million in July...sales at building material & garden supply stores, originally reported down 0.4%, were actually up 1.8% in July, and non-store (online)  sales, who had their July sales reported nearly flat at 0.1% last month, are now seen to have increased sales 1.3% for the month...meanwhile, sales at groceries, which had been reported up 0.8%, were revised down to show just a 0.1% monthly sales gain in July, and general merchandise stores, which had shown a 0.4% increase in July sales, now appear to have only seem a 0.2% uptick...these July results, in addition to the other revisions, can be seen in the right side columns of the table portion excerpted from this month’s report below, marked as “July preliminary”; recall that for Census reports, the 1st estimate is indicated as an “advance estimate”, while the 2nd estimate is the “preliminary” (p) report, while the 3rd estimate is referred to as the “revised” estimate….if anyone wants more details on this revision, the July preliminary data below can compared to our screenshot of the Advance July report from a month ago, or the entire post on that report, wherein we discussed similar revisions to June data in more detail...

August 13 retail screenshot (2)

the widely watched August advance report, extrapolated from a small sampling of approximately 4,900 firms, will be similarly revised when more complete data is available next month; Census reports that seasonally adjusted aggregate retail sales were at $426.6 billion In August, which was an increase of 0.2 percent (±0.5%)* from the revised July total...the asterisk tells us that the Census Bureau does not have sufficient statistical evidence to determine whether sales rose or not in August, and that ±0.5% means with the data they have at hand, there's a 90% probability that the monthly change in August sales was between a decrease of 0.3% and an increase of 0.7%...unadjusted sales in August have reportedly risen 3.2%, from $429,115 million to $442,847 million, on sales numbers extrapolated from the sampling, as a broad spectrum of retail sectors see a seasonal increase in sales in August...

retail sales volume August 2013

the seasonally adjusted data shows that without a big jump in car sales, August retail sales would have appeared even weaker...seasonally adjusted sales at motor vehicle and parts dealers rose 0.9%, from a upwardly revised $85,922 million in July to $88,762 million in August; the adjusted retail sales increase without those car sales was just $201 million, from July's $344,586 million to $344,787 million, or less than 0.1%...several major retail sectors saw their normal August sales decline: adjusted sales at building material and garden supply stores were off 0.9%, from $26,481 million in July to  $26,234 million in August; sales at clothing and accessory stores were down 0.8%, from $21,159 million to $20,980 million, sales at stores specializing in sporting goods, books or music saw sales decline 0.5%, from $7,535 million to $7,499 million, and sales at general merchandisers were off 0.2%, from $54,879 million in July to $54,747 million in August...offsetting those sales declines, seasonally adjusted sales at furniture stores rose 0.9% to $8,535 million in August, sales at electronics and appliance stores rose 0.8% to $8,503 million, sales at health and personal care stores, most of which are conventional drugs stores, rose 0.6% to $23,917 million, and sales by non-store (online & mail order) retailers increased 0.5% to $37,915 million in August from $37,727 million in July; in addition, seasonally adjusted sales at bars and restaurants were up 0.3%, from $45,720 million in July to $45,976 million in August, and sales at gas stations were statistically unchanged, falling from $45,639 to $45,625 million in August...the adjacent bar graph, from Robert Oak at the Economic Populist, shows the dollar volume sales for each of these retail sales groups and the relative size of each; also note that the seasonally adjusted changes in August sales compared to those in July and vis-a-vis a year ago for each of the major retail groups covered in this report can be seen in the left side columns of the table above under the "August 2013 Advance" header...

another release of this past week should reveal part of the story as to why retail sales ex-autos have weakened over these recent months...the Fed's G19 Release on Consumer Credit for July, a report which we've tended to watch for ballooning amounts of student debt, showed that credit-card use fell for the 2nd consecutive month in July, and combined with the revised June reduction, amounted to the largest two month drop in outstanding revolving debt since January 2011...since we've already seen earlier that disposable personal income is sill nearly 3.0% below the levels of December and that the personal savings rate has been at the lowest levels since 2008 all year, the only way personal expenditures can possibly continue to trend higher is for consumers to borrow...this report indicates that's what's propelling car sales, but not other retail...

FRED Graph

in credit expansion that was generally 20% below forecasts, the Fed report indicated that aggregate consumer credit increased by $10.4 billion in July, or at a 4.4% seasonally adjusted annual rate...revolving credit, which is mostly credit cards, fell $1.8 billion, or at a 2.6% annual rate, while non-revolving credit, which includes longer term borrowing for tuition and items such as cars and yachts but not real estate, rose by $12.3 billion, a 7.4% rate of increase...this follows a June report that showed revolving credit increased at a 9.5% rate while revolving credit fell at 5.2% rate...our adjacent FRED graph shows, for each month since January 2011, the seasonally adjusted annualized change in revolving credit in red, the annualized change in non-revolving credit in green, and the aggregate monthly change in credit outstanding in blue; with monthly increases above the line and decreases below it; it's fairly obvious from that the contraction of credit card debt in red seen over the past two months has been unusually severe, and has pulled down the aggregate totals... 

unlike the previous occasions when we've highlighted this release, a large increase in student debt was not a factor in July's increase in non-revolving credit...unadjusted borrowing from the Federal government rose only $2.5 billion in July, from $569.4 billion in June, to $571.9 billion in July, as you can see in our bastardized table excerpt from the second table in the Fed report which we've included below...with much of the new borrowing originating at depository institutions, where non-revolving consumer credit outstanding rose $5.3 billion to 561.5 billion, finance companies, where non-revolving credit outstanding rose $1.2 billion to $608.2 billion, and credit unions, where long term loans rose $2.6 billion to $214.1 billion, most reports indicated that it was a jump in auto loans that propelled the increase in non-revolving credit, which has certainly been borne out by the retail sales reports...what hasn't been getting much media attention, however, is that a significant portion of that increase in auto loans has been going to subprime borrowers..

July 2013 consumer credit

another report we want to take a look at this week is the July Job Openings and Labor Turnover Survey, even though the data is a month older than the August Employment report we covered last week...mirroring establishment survey, this report, commonly known as JOLTS, breaks down that net job creation figure we see monthly to include estimates of the number and rate of hires, those fired, laid-off, or otherwise separated, and the number of workers who quit their jobs by industry and by geographic region; in addition to the total number of job openings reported to the BLS in conjunction with this survey...

  according to the BLS, a seasonally adjusted 3.689,000 jobs remained unfilled on the last business day of July, which they call "little changed" from the 3,869,000 job openings available at the end of June..although that may look like 180,000 thousand less job openings in July, the use of the phrase "little changed" is BLS code speak for a change that falls within their statistical margin of error; on an unadjusted basis, job openings actually rose by 58,000; nonetheless, this was the lowest seasonally adjusted number of job openings since February...the largest seasonally adjusted reduction in July job openings occurred in professional and business services, where the number of openings dropped.116,000, from 685,000 in June to 569,000 in July..while job openings in most industries and government declined, openings in manufacturing and accommodation and food services rose slightly...the job openings rate, or the number of job openings as a percent of total employment, fell from 2.8% in June to 2.6% in July...the largest decline in job openings was in the South, where the job openings rate fell from 3.0% to 2.8%...job openings rose from 789,000 in June to 821,000 in the West in July, where the job openings rate rose from 2.6% to 2.7%...based on the corresponding household survey, the ratio of officially unemployed to jobs was 3.1 to 1; if one includes those working part time who want full time work, there were 6.0 unemployed for every job opening...the graph below, from a BLS pdf supplement to this report, shows the relationship between job openings in blue, with the scale shown on the left, and employment in green (scale right) since January 2003...the number of job openings hit a series high at 4.7 million openings at the peak in March 2007, and fell to a series low at 2.3 million in July of 2009; meanwhile, employment continued to decline to hit a low in February 2010, even as job openings were rising...


the number of those hired in July, which includes those rehired or called back after a layoff, rose 101,000 to a seasonally adjusted 4,419,000, from 4,318,000 in June, an increase the BLS calls "essential unchanged", again indicative of a wide 90% confidence range on this report, which is obtained from a stratified random sample of 16,400 businesses and government agencies; the unadjusted data shows that hiring actually fell 235,000 to 5,087,000 in July, so obviously there's a rather large seasonal adjustment in play between June and in health care and social assistance saw the greatest hiring increase, rising 43,000 from 403,000 seasonally adjusted hires in June to 446,000 hires in July, on a year over year basis, finance and insurance saw the greatest percentage increase in hiring, rising from 119,000 to 158,000 on the other side of the spectrum, there were 33,000 fewer hires in leisure and hospitality, as the total number hired in July slipped to 760,000...hiring rose in every region of the country except the West, where it was seen to fall by 15,000...the seasonally adjusted hiring rate, or those hired in July as a percentage of total employment, was unchanged at 3.2%...

jobs separations are loosely divided into 3 categories; those who were fired or laid off, those who quit, and those separated for other reasons, such as retirement, death or seasonally adjusted job separations fell 119,000 in July, from 4,228,000 in June to 4,109,000 in July; while unadjusted separations rose 41,000 to 4,511,000...the manufacturing, retail trade, and health care sectors all saw small seasonally adjusted increases, while job separations in other industries declined...the separations rates, or the percentage of those who quit or otherwise lost their job in July as a percentage of those employed, fell to 3.0% in July from 3.1% in June...separations decreased on a seasonally adjusted basis in every region of the country except the Northeast, where they rose from 679,000 to 700,000 in July; however, the separations rate in the Northeast, rising from 2.6% to 2.7%, remained the lowest separations rate nationally...

among separations, the number of workers who quit their job in July rose by 63,000, from a seasonally adjusted 2,205,000 quits in June to 2,268,000 who quit in July...the unadjusted data shows an even larger increase in those who quit, jumping 191,000 in July to 2,608,000...the national quit rate, or those who quit as a percentage of those employed, rose from 1.6% in June to 1.7% in July; an improving quit rate is seen as a sign of worker confidence and hence an improving job market....quit rates are widely varied throughout different industries and areas of employment, ranging from a low of 0.6% for those working in government to as high as 3.3% for those working in accommodation and food services...there are also considerable regional differences; only 1.2% of workers in the Northeast quit their jobs in July, while the South saw a 1.9% quit rate...quitting rose in finance and insurance, professional and business services, and health care and social assistance in July, but fell in wholesale trade and resource extraction industries...

a seasonally adjusted 1,513,000 workers were either laid off or fired in July, down 89,000 from the 1,602,000 similarly terminated in June; the unadjusted data shows 47,000 less layoffs and discharges than June at 1,520,000 in July...seasonally adjusted estimates of layoffs and discharges were not available for individual industries, but raw data showed the largest percentage jumps in firings and layoffs in construction, where layoffs and firings rose from 150,000 in June to 180,000 in July, in education services, where such terminations rose from 57,000 in June to 68,000 in July, and in wholesale trade, where 52,000 were either laid off or fired in July, up from 33,000 in June...on the other hand, layoffs and discharges among information workers fell to 21,000 in July from June's level of 35,000...the national layoffs and discharges rate was  unchanged in July at 1.1%; the percentage of the workforce fired or laid off fell from 1.2% to 1.0% in the West, while it was lowest in the Midwest at 0.9% and highest in the South at 1.3%..meanwhile, other workplace separations, ie, retirements, deaths, etc, fell by a seasonally adjusted 92,000 in July to 328,000; unadjusted data for this category similarly fell by 103,000 to 383,000 in July; the seasonally adjusted rate for these other separations fell from 0.3% in June to 0.2% in July...

the graph below, again from the BLS supplement, shows the track of the number of hires monthly since January 2003 in blue, with the scale on left, and similarly, the number of separations monthly over than span indicated by a dashed red line; in addition, the monthly level of employment is on the right scale and indicated by a green dashed line…obviously, when the blue hires line is above the red separations line, employment is rising, and when separations rose above hiring, generally throughout 2008 and 2009, total employment fell…the number of hires less the total number of separations in any given month from this JOLTS survey should be equal to the increase in non-farm payrolls shown in the establishment survey of the same month…that was generally true over most of the preceding decade; however, in the first half of this year this JOLTS survey has shown an average of 60,000 less net jobs per month than the establishment survey from the monthly jobs report…in July, however, the total hires (4,419,000) exceeded separations (4,109,000) by 310,000, obviously quite a divergence from the 104,000 revised increase in non-farm payrolls as reported for July last week…so one or both of these surveys is off by quite a bit over this year, and we can expect major revisions at the beginning of next year…


(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)