Sunday, April 4, 2021

March employment report; February’s construction spending

Major monthly reports released over the past week included the Employment Situation Summary for March from the Bureau of Labor Statistics and the February report on Construction Spending from the Census Bureau...this week also saw the last of the regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +28.9 from last month's +17.2, indicating that a substantial majority of Texas businesses reported an increase in activity during the month...

Privately issued reports released this week included the ADP Employment Report for March and the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 17.75 annual rate in March, up from the snowstorm suppressed 15.67 annual sales rate in February, and up from the pandemic lockdown suppressed 11.37 million annual sales rate reported a year earlier...the week also had the release of the Case-Shiller Home Price Index for January from S&P Case-Shiller, which reported that home prices during November, December and January averaged 11.2% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier....in addition, this week also saw the widely followed March Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that the manufacturing PMI (Purchasing Managers Index) rose to 64.7% in March, up from 60.8% in February, which suggests a widespread expansion among manufacturing firms nationally...

Employers Add 916,000 Jobs in March, Unemployment Rate Falls 0.2% to 6.0%

The Employment Situation Summary for March reported a much larger than expected payroll job increase, while the employment rate rose 0.2% and the unemployment rate fell 0.2%…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 916,000 jobs in March, after the previously estimated payroll job increase for January was revised up by 67,000, from 166,000 to 233,000, and the payroll jobs increase for February was revised up by 89,000, from 379,000 to 468,000…so including those revisions, this report thus represents a total of 1,072,000 more seasonally adjusted payroll jobs than were reported last month...nonetheless, seasonally adjusted non-farm payrolls are still 8,403,000 below the record 152,523,000 jobs reported for February a year ago, before the pandemic related layoffs kicked in...the unadjusted data shows that there were actually 1,323,000 more payroll jobs extant in March than in February, as the usual seasonal job increases in sectors such as construction, administrative and waste services, and in leisure and hospitality were washed out by the seasonal adjustments…

Seasonally adjusted job increases in March were spread through both the goods producing and the service sectors and government, with no major sector showing a statistically significant job loss...even after a 156,000 job downward seasonally adjustment, employment in the leisure and hospitality sector increased by 280,000 jobs, including the addition of 175,800 more jobs in bars and restaurants, 41,200 more jobs in amusements, gambling, and recreation, and 40,000 more jobs in accommodation...similarly, even after a 101,000 job downward seasonally adjustment, employment in construction increased by 110,000 jobs, including 38,200 jobs with nonresidential specialty trade contractors and 27,300 more in heavy and civil engineering construction...with several school districts resuming in-person classes, employment in local education increased by 76,000 jobs; at the same time, state government education payrolls increased by 49,600, and private educational services added 64,400 more....the broad professional and business services sector added 66,000 jobs, with an increase of 12,800 jobs with employment services and 10,000 jobs servicing to buildings and dwellings...employment in manufacturing rose by 53,000, led by the addition of 13,700 jobs in the manufacture of fabricated metal products and 7,400 more in the manufacture of miscellaneous nondurable goods...there were also 47,500 jobs added in transportation and warehousing, including 16,700 couriers and messengers and 12,800 jobs in transit and ground passenger transportation...another 42,000 jobs were added in a catch-all 'other services' category, including 18,600 jobs in personal and laundry services and 18,300 in repair and maintenance  ....employment in health care and social assistance rose by 36,400, with the addition of 20,100 jobs in individual and family services and 4,200 jobs in home health care services…wholesale trade employment increased by 23,700, led by the addition of 14,300 jobs in the trade of durable goods....in addition, seasonally adjusted retail jobs increased by 22,500, with 16,300 of those in clothing and clothing accessories stores and 13,000 more with motor vehicle and parts dealers, which were partially offset by a loss of 9,100 jobs in building material and garden supply stores...the resource extraction sector added 20,000 jobs, 19,300 of which were in support activities for mining...there were also 16,000 more jobs in the financial sector, due to the addition of 11,200 jobs with insurance carriers and related activities and 10,000 more in real estate, as credit intermediation and related activities shed 6,600 employees....meanwhile employment in other major sectors, including the information sector and utilities, saw employment change by less than 2,000 over the month....

The establishment survey also showed that average hourly pay for all employees fell by 4 cents an hour to $29.96 an hour in March, after it had increased by a revised 4 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 2 cents to $25.21 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.3 hour to 34.9 hours in March, after a 0.4 hour decrease in February, while hours for production and non-supervisory personnel rose by 0.3 hour to 34.3 hours, also reflecting a rebound from February...in addition, the manufacturing workweek rose by 0.2 hour to 40.5 hours, while average factory overtime increased by 0.1 hours to 3.3 hours...

Meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 609,000 to 150,848,000, while the similarly estimated number of those counted as unemployed fell by 262,000 to 9,710,000; which together meant there was a 347,000 increase in the total labor force...since the working age population had grown by 85,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 263,000 to 100,445,000...meanwhile, the increase of those in the labor force was large enough, when compared to the civilian noninstitutional population, to increase the labor force participation rate from 61.4% in February to 61.5% in March......at the same time, the increase in number employed as a percentage of the increase in the population was enough to raise the employment to population ratio, which we could think of as an employment rate, by 0.2%, from 57.6% in February to 57.8% in March...likewise, the decrease in the number unemployed was enough to lower the unemployment rate by 0.2%, from 6.2% in February to 6.0% in March....meanwhile, the number who reported they were involuntarily working part time fell by 262,000 to 5,826,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 11.1% in February to 10.7% in March, the lowest since March of last year..

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.. 

Construction Spending Fell 0.8% in February after January & December Figures Were Revised Higher

The Census Bureau's report on February construction spending (pdf) reported that "Construction spending during February 2021 was estimated at a seasonally adjusted annual rate of $1,516.9 billion, 0.8 percent (±0.7 percent) below the revised January estimate of $1,529.0 billion. The February figure is 5.3 percent (±1.0 percent) above the February 2020 estimate of $1,441.1 billion. During the first two months of this year, construction spending amounted to $213.2 billion, 4.9 percent (±1.0 percent) above the $203.2 billion for the same period in 2020. "...the January annualized spending estimate was revised 0.5% higher, from the $1,521.5 billion reported a month ago to $1,529.0 billion, while December's construction spending was revised from $1,496.5 billion to $1,510.4 billion annually, which together meant that the January construction spending increase was revised from +1.7% to +1.2%...the $13.9 billion upward revision to December’s annualized spending would mean we’ll see a upward revision of about 12 basis points to 4th quarter GDP when the annual revisions are released later this summer...

A further breakdown of the different subsets of construction spending are provided by a Census summary, which precedes the detailed spreadsheets:below:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,165.7 billion, 0.5 percent (±0.7 percent)* below the revised January estimate of $1,171.6 billion. Residential construction was at a seasonally adjusted annual rate of $717.9 billion in February, 0.2 percent (±1.3 percent)* below the revised January estimate of $719.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $447.8 billion in February, 1.0 percent (±0.7 percent) below the revised January estimate of $452.3 billion.
  • Public Construction: In February, the estimated seasonally adjusted annual rate of public construction spending was $351.2 billion, 1.7 percent (±1.2 percent) below the revised January estimate of $357.4 billion. Educational construction was at a seasonally adjusted annual rate of $86.9 billion, 3.2 percent (±1.3 percent) below the revised January estimate of $89.8 billion. Highway construction was at a seasonally adjusted annual rate of $102.3 billion, 0.6 percent (±3.1 percent)* below the revised January estimate of $103.0 billion.

As you can tell from that summary, construction spending data would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of February’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price to determine the actual change in construction put in place...there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust the figures for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate...

That price index showed that aggregate construction costs were up 0.3% in February, after they had increased by 0.2% in January, and had been up by 0.1% in both December and in November...on that basis, we can estimate that February construction costs were about 0.5% more than those of December, roughly 0.6% more than those of November, and roughly 0.7% more than those of October, and of course 0.3% more than those of January...we then use those relative price change percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,510,387 in December, $1,479,555 in November, and $1,458,989 in October, while annualized construction spending was at $1,516,927 in February and $1,528,954 in January....thus to compare January's nominal construction spending of $1,384,486 and February's figure of $1,366,697 to inflation adjusted figures of the fourth quarter, our formula becomes: ((1,516,927 + 1,528,954 * 1.003) / 2 ) / (( 1,510,387 * 1.005 + 1,479,555 * 1.006 + 1,458,989 * 1.007)/ 3) = 1.022372, which tells us that real construction spending over January and February was up by 2.237% from that of the 4th quarter period, or up at a 9.25% annual rate...then, to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and that of January's & February's adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add about 0.88 percentage points to 1st quarter GDP, an estimate which assumes there would be little change in real construction in March over the January & February average...

 

(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 of which are picked from the aforementioned GGO posts, contact me…)  

No comments:

Post a Comment