Sunday, March 6, 2022

February’s jobs report; January’s construction spending & factory inventories

This week's major releases included the Employment Situation Summary for February and two reports that will provide source data for 1st quarter GDP: the January report on Construction Spending, and the Full Report on Manufacturers' Shipments, Inventories and Orders for January, both from the Census Bureau....in addition, the week also saw the last of regional Fed manufacturing surveys for February: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +14.0 from last month's +2.0, suggesting a return to a modest expansion of the Texas area economy…

The week’s privately issued reports included the ADP Employment Report for February and the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 14.07 annual rate in February, down 6.4% from the revised 15.04 million annual rate in January, and down 10.2% from the 15.67 million annual sales rate in February a year ago...in addition, this week saw both of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 58.6% in February, up from 57.6% in January, which suggests a bit broader based growth among manufacturing firms nationally, while the February 2022 Services Report On Business reported their Services Index fell to 56.5%, down from 59.9% in January, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in February...

Employers Add 678,000 Jobs in February, Unemployment Rate Falls to 3.8%

The Employment Situation Summary for February reported an unexpectedly large payroll job increase, that the employment rate rose 0.2%, and that the unemployment rate fell 0.2%…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 678,000 jobs in February, after the previously estimated payroll job increase for January was revised up by 14,000 from 467,000 to 481,000, while the payroll jobs increase for December was revised up by 78,000, from a increase of 510,000 jobs to an increase of 588,000 jobs…hence, those revisions mean that this report represents a total of 770,000 more seasonally adjusted payroll jobs than the report of a month ago....however, February's non-farm payrolls were still 2,105,000 jobs below the 152,523,000 seasonally adjusted jobs that are now indicated for February 2020, the month before before the pandemic hit employment....the unadjusted data shows that there were actually 1,457,000 more payroll jobs extant in February than in January, as typical seasonal job increases in sectors such as professional & business services, leisure and hospitality and public and private education were leveled off by the seasonal adjustments…

Seasonally adjusted job increases in February were spread through the private goods producing and service sectors and in government, as no major sector saw a decrease in employment....despite a significant downward seasonal adjustment, the largest job increase in February was the addition of 151,000 jobs in the leisure and hospitality sector, which included 123,700 new jobs in bars and restaurants, 27,500 jobs in accommodation, and 21,900 more jobs in amusements, gambling, and recreation....the broad professional and business services sector added 95,000 jobs, with 35,500 of those working for temporary help services, 9,500 employed by management and technical consulting services, and 12,200 more employed in management of companies and enterprises... meanwhile, health care employment increased by 63,500 jobs in February, with the addition of 19,700 jobs with home health care services and 15,100 jobs in doctor's offices...despite the generally colder February weather, seasonally adjusted construction jobs increased by 60,000, including 24,300 with residential specialty trade contractors and 19,900 with nonresidential specialty trade contractors….employment in the transportation and warehousing sector increased by 47,200, with 9,400 of those working as couriers and messengers and 10,700 working in warehousing and storage, while retail trade employment increased by 36,900, as building material and garden supply stores added 12,100 more workers to their payrolls in February, while department stores added 8,900 employees...employment in manufacturing rose by 36,000 despite the loss of 18,000 jobs in the manufacture of motor vehicles and parts, as 10,500 jobs were added in the manufacture of fabricated metal products, 8,300 jobs were added in the manufacture of machinery, and 7,200 jobs were added in food manufacturing....employment in financial activities increased by 35,000, including 15,800 jobs in real estate and 6,300 in insurance...in addition, the social assistance sector saw a 30,700 job increase in February, with 20,200 of those working with individual and family services, while government sector employment increased by 24,000 with the addition of 14,800 jobs in local school districts, and employment in "other services" was up by 25,000 with 9,500 more employed in repair and maintenance, and 8,000 in personal and laundry services....meanwhile, employment in other major sectors, including wholesale trade, resource extraction, information, utilities, and private educational services sector all saw smaller jobs gains in January…

The establishment survey also showed that average hourly pay for all employees rose by a penny an hour to $31.58 an hour in February, after it had increased by a downwardly revised 19 cents an hour in January; at the same time, the average hourly earnings of production and non-supervisory employees increased by 8 cents an hour to $26.94 an hour...employers also reported that the average workweek for all private payroll employees increased by one-tenth of an hour to 34.7 hours in February, while hours for production and non-supervisory personnel increased by 0.1 hour to 34.1 hours...in addition, the manufacturing workweek increased by 0.4 hour to 40.7 hours, while average factory overtime was up 0.2 hour to 3.6 hours...

Meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 548,000 to 157,722,000, while the similarly estimated number of those unemployed fell by 243,000 to 6,270,000; which together meant there was a rounded 304,000 increase in the total labor force...since the working age population had grown by 122,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 183,000 to 99,333,000...with the increase of those in the labor force modest compared to the civilian noninstitutional population, the labor force participation rate rose by 0.1% to 62.3%....meanwhile, the increase in number employed as a percentage of the increase in the population was large enough to raise the employment to population ratio, which we could think of as an employment rate, from 59.7% in January to 59.9% in February ...at the same time, the decrease in the number unemployed was large enough reduce the unemployment rate from 4.0% in January to 3.8% in February....on the other hand, the number who reported they were involuntarily working part time rose by 418,000 to 4,135,000 in February, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.1% in January to 7.2% in February, the first increase in that rate since April 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 alongside the press release to access the data while avoiding the need to scroll up and down the page..

Construction Spending Up 1.3% on Higher Costs in January after December and November Spending Was Revised Higher

The Census Bureau's report on January construction spending (pdf) estimated that January's seasonally adjusted construction spending would work out to $1,677.2 billion annually if extrapolated over an entire year, which was 1.3 percent (±0.8 percent) above the revised annualized estimate of $1,655.8 billion for construction spending in December, and 8.2 percent (±1.2 percent) above the estimated annualized level of construction spending of January last year...the December spending estimate was revised from the $1,639.9 billion figure published a month ago to $1,655.8 billion, while November's annualized construction spending was revised from $1,636.5 billion to $1,643,024 billion...since those figures are already annualized, the combined upward revisions of $22.4 billion to November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore raise the quarter's annualized construction spending by almost $7.5 billion, and would thus imply an upward revision of about 0.15 percentage points to fourth quarter GDP when the third estimate is released at the end of March, assuming there are no major changes to or imbalances in the previously applied inflation adjustments...

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes their detailed spreadsheets:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,326.5 billion, 1.5 percent (±0.5 percent) above the revised December estimate of $1,307.1 billion. Residential construction was at a seasonally adjusted annual rate of $829.4 billion in January, 1.3 percent (±1.3 percent)* above the revised December estimate of $819.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $497.2 billion in January, 1.8 percent (±0.5 percent) above the revised December estimate of $488.2 billion.
  • Public Construction: In January, the estimated seasonally adjusted annual rate of public construction spending was $350.7 billion, 0.6 percent (±1.5 percent)* above the revised December estimate of $348.7 billion. Educational construction was at a seasonally adjusted annual rate of $80.9 billion, virtually unchanged from (±1.8 percent)* the revised December estimate of $81.0 billion. Highway construction was at a seasonally adjusted annual rate of $105.3 billion, 0.1 percent (±4.1 percent)* below the revised December estimate of $105.5 billion.

As you can tell from that summary, construction spending 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 January’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...moreover, there are multiple price 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 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 index showed that aggregate construction costs were up 3.9% in January, after they had risen by 0.3% in December and by 0.4% in November...

On that basis, we can thus estimate that January construction costs were roughly 4.2% more than those of November, and about 4.6% more than October, and of course, 3.9% more than December...we’ll then use those percent increases to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, which is arithmetically the same as deflating January construction spending, for purposes of comparison.…this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,655,847 in December, $1,643,024 in November, and $1,626,413 in October....thus to compare January's annualized construction spending of $1,677,246 million to 'inflation adjusted' figures of the fourth quarter, our calculation is: (1,677,246 / ((( 1,655,847 * 1.039) + (1,643,024 * 1.042) + (1,626,413 *1.046)) / 3) = 0.980142, hence indicating that adjusted for inflation, construction spending in January was down 1.99% vis a vis that of the 4th quarter, or down at a 7.71% annual rate...then, to figure the potential effect of that estimated change on GDP, we take the difference between the 4th quarter inflation adjusted average and January's inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is falling at a rate that would subtract about 0.67 percentage points from 1st quarter GDP, if in the unlikely event that there is no further change in real construction over the next two months..

January Factory Shipments Rose 1.2%, Factory Inventories were 0.7% Higher

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by a rounded $7.6 billion or 1.4 percent to $544.2 billion in January, following an increase of 0.7% to $536.7 billion in December, which was revised from a decrease of $2.4 billion or 0.4 percent to $530.7 billion that was reported for December a month ago....however, since the 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 useful for their revised updates to the January advance report on durable goods, which was released last week....on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in January, up twenty of the last twenty-one months, increased $7.6 billion or 1.4 percent to $544.2 billion, the U.S. Census Bureau reported today. This followed a 0.7 percent December increase. Shipments, also up twenty of the last twenty-one months, increased $6.2 billion or 1.2 percent to $536.9 billion. This followed a 0.7 percent December increase. Unfilled orders, up twelve consecutive months, increased $11.7 billion or 0.9 percent to $1,283.5 billion. This followed a 0.8 percent December increase. The unfilled orders-to-shipments ratio was 6.74, down from 6.80 in December. Inventories, up nineteen of the last twenty months, increased $5.6 billion or 0.7 percent to $779.6 billion. This followed a 0.4 percent December increase. The inventories-to-shipments ratio was 1.45, down from 1.46 in December.
  • New orders for manufactured durable goods in January, up eight of the last nine months, increased $4.3 billion or 1.6 percent to $277.6 billion, unchanged from the previously published increase. This followed a 1.2 percent December increase. Transportation equipment, up three consecutive months, led the increase, $2.9 billion or 3.4 percent to $87.7 billion. New orders for manufactured nondurable goods increased $3.3 billion or 1.2 percent to $266.7 billion.
  • Shipments of manufactured durable goods in January, up eight of the last nine months, increased $2.9 billion or 1.1 percent to $270.3 billion, down from the previously published 1.2 percent increase. This followed a 1.3 percent December increase. Machinery, up ten of the last eleven months, led the increase, $1.0 billion or 2.7 percent to $38.9 billion. Shipments of manufactured nondurable goods, up twenty of the last twenty-one months, increased $3.3 billion or 1.2 percent to $266.7 billion. This followed a 0.1 percent December increase. Petroleum and coal products, up eight of the last nine months, led the increase, $1.6 billion or 2.8 percent to $58.6 billion.
  • Unfilled orders for manufactured durable goods in January, up twelve consecutive months, increased $11.7 billion or 0.9 percent to $1,283.5 billion, unchanged from the previously published increase. This followed a 0.8 percent December increase. Transportation equipment, up eleven of the last twelve months, led the increase, $9.6 billion or 1.1 percent to $848.8 billion.
  • Inventories of manufactured durable goods in January, up twelve consecutive months, increased $2.1 billion or 0.4 percent to $476.3 billion, unchanged from the previously published increase. This followed a 0.8 percent December increase. Machinery, up fifteen consecutive months, led the increase, $0.8 billion or 1.0 percent to $79.5 billion. Inventories of manufactured nondurable goods, up fifteen of the last sixteen months, increased $3.5 billion or 1.2 percent to $303.3 billion. This followed a 0.2 percent December decrease. Petroleum and coal products, up eight of the last nine months, led the increase, $2.7 billion or 6.3 percent to $46.2 billion. By stage of fabrication, January materials and supplies increased 0.1 percent in durable goods and 0.8 percent in nondurable goods. Work in process was virtually unchanged in durable goods and increased 2.0 percent in nondurable goods. Finished goods increased 1.4 percent in durable goods and 1.1 percent in nondurable goods.

To gauge the effect of January's nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 1.3% to $274,971 million; the value of work in process inventories was up 0.5% at $224,174 million, while materials and supplies inventories were valued 0.4% higher at $280,475 million...meanwhile, the producer price index for January indicated that prices for finished goods increased 1.3%, that prices for intermediate processed goods were 1.7% higher, but that prices for unprocessed goods were on average 2.0% lower....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were virtually unchanged from December's, that real inventories of intermediate processed goods were about 1.2% smaller, but that real raw material inventory inventories were around 2.4% greater…since there was a modest decrease in real factory inventories in the 4th quarter, the small January increase in real factory inventories apparently indicated by this report will reverse that, and add the January increase to that reversal in boosting 1st quarter GDP...0

 

 

(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