Sunday, October 10, 2021

September’s jobs report; August's trade deficit, factory inventories and wholesale sales

Major agency reports released this past week included the the Employment Situation Summary for September from the Bureau of Labor Statistics, the August report on our International Trade from the Commerce Dept, and the Full Report on Manufacturers' Shipments, Inventories and Orders for August, and the August report on Wholesale Trade, Sales and Inventories, both from the Census Bureau...in addition, the Fed released the Consumer Credit Report for August, which indicated that overall consumer credit, a measure of non-real estate debt, grew at a seasonally adjusted $14.4 billion in August, or at a 4.0% annual rate, as non-revolving credit expanded at a 4.1% rate to $3,345.3 billion while revolving credit outstanding grew at a 3.6% rate to $1,001.6 billion...

This week’s major privately issued reports included the ADP Employment Report for September, the September Services Report On Business from the Institute for Supply Management (ISM), who reported their Services PMI rose to 61.9% in September, up from 61.7% in August, indicating a slightly larger majority of service industry purchasing managers reported expansion in various facets of their business in September, and the Mortgage Monitor for August (pdf) from Black Knight Financial Services, who reported that 4.00% of mortgages were delinquent in August, down from the 4.14% that were delinquent in July, and down from the 6.88% delinquency rate of August of 2020, and that 0.27% of mortgages remained in the foreclosure process in August, up from the record low of 0.26% in July, but down from the 0.35% of mortgages that were in foreclosure a year ago...however, with the lifting of the government imposed foreclosure moratorium in July, the Mortgage Monitor also shows that foreclosure starts rose from 4,200 in July to 7,100 in August...

Employers Add 194,000 Jobs in September; Unemployment Rate Fell to 4.8% as Labor Force Participation Rate Declined

The Employment Situation Summary for September showed the smallest increase in payroll jobs so far this year, but that the unemployment rate fell by 0.4% to 4.8%, even as the labor force participation rate fell by 0.1% to to 61.6%….estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 194,000 jobs in September, after the previously estimated payroll job increase for July was revised up from 1,053,000 to 1,091,000 and the payroll jobs increase for August was revised up from 235,000 to 366,000, revisions which mean that the combined number of jobs created over those two months was 169,000 more than was previously reported, and that this report shows 363,000 more jobs than last months...despite the past year's steady job gains, however, seasonally adjusted non-farm payrolls are still 4,970,000 below their pre-pandemic level......the unadjusted data, meanwhile, shows that there were actually 654,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, and that the seasonal adjustment brought the headline jobs number down to a level where that normal September increase was negated...

Seasonally adjusted job increases in September were seen throughout the private goods producing and service sectors, with only jobs in government seeing a net seasonally adjusted employment decrease of 123,000 jobs, as local school systems added 144,200 fewer jobs and state universities adding 16,600 fewer jobs than is normal for September, shortfalls from the norm which are logged as decreases....a similar dynamic played out for employment in private educational services stats; while 248,600 more were working in private education in September than in August, it’s reported as an 18,900 job decrease….meanwhile, jobs in the leisure and hospitality sector accounted for a seasonally adjusted increase of 74,000 jobs in September, with an increase of 43,000 jobs in performing arts and spectator sports, 29,000 jobs in bars and restaurants and 16,900 more employed in amusements, gambling, and recreation....the broad professional and business services category added 60,000 jobs, as 15,100 were hired by architectural and engineering services, 15,200 more were hired by management and technical consulting services, and 8,800 found jobs with computer systems design and related services.....meanwhile, the retail sector saw an increase of 56,100 jobs, with 27,300 finding jobs in clothing stores, 16,100 more in general merchandise stores, and 16,000 more working for building material and garden supply stores....in addition, the transportation and warehousing sector added 47,300 jobs, including 12,500 couriers and messengers and 15,600 working in warehousing and storage facilities...at the same time, there were 32,000 more jobs in the information industry, with 13,700 hired by the motion picture and sound recording industries and 11,000 more in publishing of books, magazines and newspapers...employment in social assistance rose by 29,800, led by the addition of 17,800 jobs with child care services and 10,200 jobs in individual and family services....meanwhile, employment in manufacturing increased by 26,000, with 8,200 of those working in the manufacture of fabricated metal products and 6,300 more in the manufacture of machinery...in addition, construction employment rose by 22,000, with 11,400 of those jobs with nonresidential specialty trade contractors....other September job additions included 17,000 jobs in wholesale trade, 4,000 jobs in resource extraction, and 2,000 jobs in the financial sector, while health care employment fell by 17,500 despite the addition of 28,200 jobs in ambulatory healthcare services, as hospitals lost 8,100 jobs and nursing homes and residential care facilities employed 37,600 fewer than a month earlier...

The establishment survey also showed that average hourly pay for all employees rose by 19 cents an hour to $30.85 an hour, after it had increased by a revised 11 cents an hour in August; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 14 cents to $26.15 an hour....employers also reported that the average workweek for all private payroll employees rose by 0.2 hour to 34.8 hours in September, while hours for production and non-supervisory personnel rose by 0.1 hour to 34.2 hours, after their workweek had been unchanged for the 3rd month in a row in August...at the same time, the manufacturing workweek was unchanged at 40.4 hours after falling 0.2 hours in August, while average factory overtime increased by 0.1 hour to 3.3 hours...

Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 526,000 to 153,680,000, while the similarly estimated number of those who would qualify as being unemployed fell by 710,000 to 7,674,000; and hence the civilian labor force decreased by a rounded net of 183,000...since the working age population had grown by 155,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 338,000 to 100,412,000, which combined with the lower labor force, was enough to lower the labor force participation rate from 61.7% to 61.6%...however, the relatively large increase in number employed was still enough to boost the employment to population ratio, which we could think of as an employment rate, as it rose from 58.5% to 58.7%...at the same time, the relatively large drop in the number unemployed was also enough to lower the unemployment rate by 0.4%, from 5.2% to 4.8%, which was the lowest unemployment rate since March 2020....meanwhile, the number of the employed who reported they were forced to accept just part time work fell by 1,000 to 4,468,000 in September, while the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell from 8.8% of the labor force in August to 8.5% in September, now the lowest since February 2020....

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..

Trade Deficit Rose 4.2% to a Record High in August on Higher Imports of Pharmaceuticals and Services

Our trade deficit rose by 4.2% in August as the value of both our exports and our imports increased, but the value of our imports increased by four times as much....the Commerce Dept report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $2.9 billion to a record high of $73.3 billion in August, from a July deficit of $70.3 billion, which was revised from the $70.1 billion deficit for July that had been reported last month...after rounding, the value of our August exports rose by $1.0 billion to $213.7 billion on a $1.1 billion increase to $149.7 billion in our exports of goods, offset by a $0.1 billion decrease to $64.0 billion in our exports of services, while the value of our imports rose by $4.0 billion to $287.0 billion on a $2.7 billion increase to $239.1 billion in our imports of goods and a $1.3 billion increase to $47.9 billion in our imports of services...prices for our exports were on average 0.4% higher in August, which means the relative real change in exports for the month was less than the nominal change by that percentage, while import prices were 0.3% lower, meaning that the relative real change in imports was greater than the nominal dollar value reported here by that percentage...

The increase in our August exports of goods mostly resulted from greater exports of industrial supplies and materials, which were partially offset by lower exports of automotive products, capital goods and farm products....referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $3,535 million to $57,234 million on a $1,645 million increase in our exports of non-monetary gold, a $670 million increase in our exports of natural gas, a $648 million increase in our exports of petroleum products other than fuel oil, a $636 million increase in our exports of crude oil, and a $254 million increase in our exports of other precious metals, and that our exports of consumer goods rose by $295 million to $19,104 million on an $347 million increase in our exports of pharmaceuticals...partially offsetting the increases in those two end use categories, our exports of automotive vehicles, parts, and engines fell by $980 million to $11,201 million on a $544 million decrease in our exports of trucks, buses, and special purpose vehicles and a $297 million decrease in our exports of passenger cars, our exports of capital goods fell by $829 million to $43,868 million on a $690 million decrease of in our exports of civilian aircraft and a $629 million decrease of in our exports industrial machines other than those itemized separately, our exports of foods, feeds and beverages fell by $640 million to $12,170 million on a $616 million decrease in our exports of corn, and our exports of other goods not categorized by end use fell by $207 million to $5,533 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of consumer goods and industrial supplies and materials were responsible for the $2.7 billion increase in our imports of goods, even as our imports of automotive products and "other" goods decreased....our imports of consumer goods rose by $2,979 million to $63,236 million on a $2,238 million increase in our imports of pharmaceuticals, a $625 million increase in our imports of toys, games, and sporting goods, a $428 million increase in our imports of cotton apparel and household goods, a $368 million increase in our imports of apparel and textiles other than those of wool or cotton, and a $332 million increase in our imports of gem diamonds, while our imports of industrial supplies and materials rose by $1,806 million to $57,091 million on a $752 million increase in our imports of organic chemicals, a $450 million increase in our imports of copper, and a $330 million increase in our imports of petroleum products other than fuel oil...partially offsetting the increases in those categories, our imports of automotive vehicles, parts and engines fell by $1,549 million to $28,012 million on a $1260 million decrease in our imports of new & used passenger cars and a $445 million decrease in our imports of trucks, buses, and special purpose vehicles, our imports of capital goods fell by $257 million to $63,095 million on a $835 million decrease in our imports of computers, our imports of foods, feeds, and beverages fell by $239 million to $15,695 million on decreases in our imports of beer and wine, alcoholic beverages other than wine and beer, and food oils and oilseeds, and our imports of other goods not categorized by end use fell by $322 million to $10,145 million....

The Full Release and Tables pdf for this month's report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected countries:

The August figures show surpluses, in billions of dollars, with South and Central America ($5.7), Hong Kong ($2.2), Brazil ($2.1), Singapore ($1.0), and United Kingdom ($0.8). Deficits were recorded, in billions of dollars, with China ($28.1), European Union ($19.3), Mexico ($6.6), Germany ($5.8), Japan ($5.6), Canada ($5.1), Taiwan ($3.6), South Korea ($3.1), Italy ($3.1), India ($3.0), France ($1.4), and Saudi Arabia ($0.6).

  • The deficit with China increased $3.1 billion to $28.1 billion in August. Exports decreased $1.8 billion to $11.2 billion and imports increased $1.3 billion to $39.3 billion.
  • The deficit with Canada increased $1.4 billion to $5.1 billion in August. Exports decreased $1.6 billion to $25.2 billion and imports decreased $0.2 billion to $30.3 billion.
  • The deficit with Mexico decreased $1.9 billion to $6.6 billion in August. Exports increased $0.9 billion to $24.1 billion and imports decreased $1.0 billion to $30.7 billion.

To gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except that the figures are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 145,669.3 million monthly in 2012 dollars, while the similarly inflation adjusted July and August goods export figures were at 145,668 million and 146,324 million respectively, in that same 2012 dollar quantity index representation...computing the annual rate of change between the second and third quarter inflation adjusted averages, we find that the 3rd quarter's real exports of goods are running at a 0.90% annual rate above those of the 2nd quarter, or at a pace that would add about 0.07 percentage points to 3rd quarter GDP if it were continued through September....in a similar manner, we find that our 2nd quarter real imports of goods averaged 247,414 million monthly in chained 2012 dollars, while inflation adjusted July and August imports were at 245,481 million and 248,087 million in 2012 dollars respectively...that would mean that so far in the 3rd quarter, our real imports have fallen at a 1.01% annual rate from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 1.01% rate would conversely add about 0.12 percentage points to 3rd quarter GDP.....hence, if our July and August trade deficit in goods remains at these same levels throughout September, our improving balance of trade in goods over that of the 2nd quarter would add about 0.18 percentage points to the growth of 3rd quarter GDP....

However, you might note that we have not computed the impact of the usually less volatile change in services here, because the BEA does not provide inflation adjusted data on those, and we don't have a straightforward way to adjust the various services for all their price changes, but that our exports in services fell $0.1 billion in August, whereas our imports in services grew $1.3 billion, following an even worse imbalance in July services, which would the suggest a substantial hit to GDP on the services side of the trade ledger...

Factory Shipments Rose 0.1% in August, Factory Inventories Rose 0.6%

The August Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $6.2 billion or 1.2 percent to $515.7 billion in August, following an increase of 0.7% to $509.5 billion in July, which was revised from the 0.4% increase to $508.1 billion in new orders reported last month....however, sincethe Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only accurate as revised updates to the August advance report on durable goods that we reported on last week...on those revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in August, up fifteen of the last sixteen months, increased $6.2 billion or 1.2 percent to $515.7 billion, the U.S. Census Bureau reported today. This followed a 0.7 percent July increase. Shipments, also up fifteen of the last sixteen months, increased $0.3 billion or 0.1 percent to $508.3 billion. This followed a 1.5 percent July increase. Unfilled orders, up seven consecutive months, increased $11.9 billion or 1.0 percent to $1,239.4 billion. This followed a 0.5 percent July increase. The unfilled orders-to-shipments ratio was 6.86, up from 6.81 in July. Inventories, up fourteen of the last fifteen months, increased $4.1 billion or 0.6 percent to $749.3 billion. This followed a 0.6 percent July increase. The inventories-to-shipments ratio was 1.47, unchanged from July.
  • New orders for manufactured durable goods in August, up fifteen of the last sixteen months, increased $4.7 billion or 1.8 percent to $263.6 billion, unchanged from the previously published increase. This followed a 0.5 percent July increase. Transportation equipment, up three of the last four months, led the increase, $4.1 billion or 5.4 percent to $80.7 billion. New orders for manufactured nondurable goods increased $1.5 billion or 0.6 percent to $252.1 billion.
  • Shipments of manufactured durable goods in August, down following three consecutive monthly increases, decreased $1.2 billion or 0.5 percent to $256.1 billion, unchanged from the previously published decrease. This followed a 2.0 percent July increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease, $2.1 billion or 2.8 percent to $73.4 billion. Shipments of manufactured nondurable goods, up fifteen of the last sixteen months, increased $1.5 billion or 0.6 percent to $252.1 billion. This followed a 0.9 percent July increase. Petroleum and coal products, up fourteen of the last fifteen months, led the increase, $0.5 billion or 1.1 percent to $51.0 billion.
  • Unfilled orders for manufactured durable goods in August, up seven consecutive months, increased $11.9 billion or 1.0 percent to $1,239.4 billion, unchanged from the previously published increase. This followed a 0.5 percent July increase. Transportation equipment, up six of the last seven months, led the increase, $7.3 billion or 0.9 percent to $820.9 billion.
  • Inventories of manufactured durable goods in August, up seven consecutive months, increased $3.5 billion or 0.8 percent to $457.9 billion, unchanged from the previously published increase. This followed a 0.8 percent July increase. Transportation equipment, also up seven consecutive months, led the increase, $1.3 billion or 0.8 percent to $153.5 billion. Inventories of manufactured nondurable goods, up twelve of the last thirteen months, increased $0.7 billion or 0.2 percent to $291.4 billion. This followed a 0.4 percent July increase. Plastics and rubber products, up eleven of the last twelve months, led the increase, $0.4 billion or 1.3 percent to $28.9 billion. By stage of fabrication, August materials and supplies increased 1.3 percent in durable goods and 0.7 percent in nondurable goods. Work in process increased 0.2 percent in durable goods and decreased 1.1 percent in nondurable goods. Finished goods increased 0.7 percent in durable goods and 0.4 percent in nondurable goods.

To gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was 0.5% higher at $264,441 million; the value of work in process inventories was 0.1% lower at $219,102 million, and the value of materials and supplies inventories was 1.1% higher at $265,756 million...the producer price index for August indicated that prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.0% higher, while prices for unprocessed goods were also 1.0% higher....assuming average valuations will be similar for like inventories, we could thus estimate that August's real finished goods inventories decreased by 0.5%, that real inventories of intermediate processed goods were 1.1% lower, and that real raw material inventory inventories were about 0.1% greater...August's real inventory decreases follow July’s factory inventory change, when real inventories averaged about 0.6% lower…however, since real NIPA factory inventories were substantially lower in the 2nd quarter, accounting for more that 90% of the quarter's big inventory drop, the fact that this report appears to indicate just a modest real decrease in 3rd quarter factory inventories, they should therefore have a modest positive impact on the growth rate of 3rd quarter GDP, by an amount equal to the difference between the 2nd and 3rd quarter's real inventory decreases....

August Wholesale Sales Down 1.1%, Wholesale Inventories Up 1.2%

The August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $595.5 billion, down 1.1 percent (±0.5 percent) from the July’s revised sales, but up 20.6 percent (±1.8 percent) from the wholesale sales of August 2020... the July preliminary estimate was revised up to $602.2 billion from the $601.3 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of a 2.0 percent (±0.4 percent) increase to one of +2.1 percent (±0.4 percent).....as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $731.1 billion at month end, up 1.2 percent (+/-0.2%) from the revised July level, and 12.3 percent (±1.2 percent) higher than in August a year ago...July's inventory value was revised from the $722.4 billion reported a month ago to $722.6 billion, which left the July inventory increase unchanged at up 0.6 percent (+/-0.2%)..

August wholesale inventories would be adjusted for inflation with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.0% higher, and prices for unprocessed goods were also 1.0% higher....those producer price changes suggest that the increase in August inventories was mostly price related, and that real wholesale inventories were only up around 0.2%....however, since the key source data and assumptions (xls) for the third estimate of 2nd quarter GDP indicates a real increase of just $0.4 billion in wholesale inventories on an inflation adjusted NIPA basis, even that small of an increase in 3rd quarter real inventories could result in a small boost to 3rd quarter GDP...

 

 

(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…)  

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