There were two major employment reports released this past week: Employment Situation Summary for May andthe Job Openings and Labor Turnover Survey (JOLTS) for April, both from the Bureau of Labor Statistics; other major monthly government agency issued reports released during the week included the April report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for April, both from the Census Bureau...in addition, this week also saw the last regional Fed manufacturing survey for May; the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas, western Louisiana and eastern New Mexico, reported their general business activity composite index fell to -7.3 in May from +1.1 in April and from +8.7 in March, indicating that a modest plurality of Texas businesses reported a slowdown during the month..
Privately issued reports released this week included the ADP Employment Report for May and the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 12.68 million annual rate in May, down from the 14.29 million annual rate of sales in April, and down from the 16.99 million annual sales rate of May a year ago, and the March Case-Shiller Home Price Index from S&P Case-Shiller, an index which represents the relative average of January, February & March home sales prices compared to home sales prices of previous 3 month periods; the Case Shiller index indicated that home prices nationally for those 3 months averaged a record 20.6% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the revised 20.0% year over year increase now indicated for the February index.....
In addition, this week saw the release of both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.1% in May, up from 55.4% in April, which suggests a modest expansion among manufacturing activity nationally, and the May Services Report On Business; which saw the ISM Services index fall to 55.9%, down from 57.1% percent in April, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in May...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally.
Employers Add 390,000 Jobs in May; Unemployment Rate Remains at 3.6%
The Employment Situation Summary for May indicated an increase in payroll jobs that was a bit above expectations, but in line with that of recent months, and that the labor force participation rate increased while the unemployment rate remained unchanged…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 390,000 jobs in May, after the previously estimated payroll job increase for March was revised down from 428,000 to 398,000, while the payroll jobs increase for April was revised up from 428,000 to 436,000 jobs…with those revisions, that means that this report indicates an increase of 368,000 more jobs than were reported last month, but also means that seasonally adjusted non-farm payrolls are still 822,000 below the record 152,504,000 jobs reported for February of 2020, before the first pandemic related layoffs kicked in...the unadjusted data shows that there were actually 809,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were reduced to what is considered a normal level by the seasonal adjustment algorithm…
Seasonally adjusted job increases in May were spread through the private goods and services sectors and government, with the notable exception of retail trade, which lost 60,700 on a seasonally adjusted basis, led by a loss of 32,700 jobs in general merchandise stores and 8,800 jobs in clothing stores....since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we'll just quote from that summary here:
- Employment in leisure and hospitality increased by 84,000 in May, as job growth continued in food services and drinking places (+46,000) and accommodation (+21,000). Employment in leisure and hospitality is down by 1.3 million, or 7.9 percent, compared with February 2020.
- Employment in professional and business services rose by 75,000 in May. Within the industry, job gains occurred in accounting and bookkeeping services (+16,000), computer systems design and related services (+13,000), and scientific research and development services (+6,000). Employment in professional and business services is 821,000 higher than in February 2020.
- In May, transportation and warehousing added 47,000 jobs. Employment rose in warehousing and storage (+18,000), truck transportation (+13,000), and air transportation (+6,000). Employment in transportation and warehousing is 709,000 above its February 2020 level.
- Employment in construction increased by 36,000 in May, following no change in April. In May, job gains occurred in specialty trade contractors (+17,000) and heavy and civil engineering construction (+11,000). Construction employment is 40,000 higher than in February 2020.
- In May, employment increased by 36,000 in state government education and by 33,000 in private education. Employment changed little in local government education (+14,000). Compared with February 2020, employment in state government education is up by 27,000, while employment in private education has essentially recovered. Employment in local government education is down by 308,000, or 3.8 percent, compared with February 2020.
- Employment in health care rose by 28,000 in May, including a gain in hospitals (+16,000). Employment in health care overall is 223,000, or 1.3 percent, lower than in February 2020.
- Manufacturing employment continued to trend up in May (+18,000). Job gains occurred in fabricated metal products (+7,000), wood products (+4,000), and electronic instruments (+3,000). Employment in manufacturing overall is slightly below (-17,000 or -0.1 percent) its February 2020 level.
- Wholesale trade added 14,000 jobs in May, including gains in durable goods (+10,000) and electronic markets and agents and brokers (+6,000). Employment in wholesale trade is down by 41,000, or 0.7 percent, compared with February 2020. Mining employment increased by 6,000 in May and is 80,000 higher than a recent low in February 2021.
- Employment in retail trade declined by 61,000 in May but is 159,000 above its February 2020 level. Over the month, job losses occurred in general merchandise stores (-33,000), clothing and clothing accessories stores (-9,000), food and beverage stores (-8,000), building material and garden supply stores (-7,000), and health and personal care stores (-5,000).
- In May, employment showed little change in other major industries, including information, financial activities, and other services.
The establishment survey also showed that average hourly pay for all employees rose by 10 cents an hour to $31.95 an hour in May, after it had increased by 10 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 15 cents to $27.33 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.6 hours in May, while hours for production and non-supervisory personnel remained at 34.1 hours...however, the manufacturing workweek fell by 0.1 hour to 40.4 hours, and average factory overtime fell by 0.1 hour to 3.2 hours...
Meanwhile, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose by an estimated 321,000 to 158,426,000, while the similarly estimated number of those who were unemployed rose by 9,000 to 5,950,000; which thus meant there was an increase of 330,000 in the total labor force...since the working age population had grown by 120,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 221,000 to 99,302,000....meanwhile, the increase of those in the labor force as a percentage of the increasing working age population was enough to raise the labor force participation rate from 62.2% to 62.3%...likewise, increase in number employed vis a vis the increasing population was enough to raise the employment to population ratio, which we could think of as an employment rate, from 60.0% to 60.1%...however, the small increase in those counted as unemployed vis a vis the total labor force wasn't enough to budge the unemployment rate, which remained at 3.6%...on the other hand, the number who reported they were involuntarily working part time jumped by 295,000 to 4,328,000 in May, which meant the the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", rose by 0.1%, from 7.0% in April to 7.1% in May...
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 avoid the need to scroll up and down the page..
Job Openings and Hiring Lower in April, Record Low Layoff Rate; Job Quitting Little Changed
The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 455,000, from 11,855,000 in March to 11,400,000 job openings in April, after March's record job openings were revised 306,000 higher, from the originally reported 11,549,000 to a record 11,855,000...April’s jobs openings were still up by 23.0% from the 9,265,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed fell from 7.3% in March to 7.0% in April, while it was up from 6.0% a year ago...the greatest percentage decrease in April job openings was in the retail trade sector, where openings fell by 162,000 to 1,101,000, while job openings in manufacturing rose by 119,000 to 996,000... (details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release...
The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in April, seasonally adjusted new hires totaled 6,586,000, down by 69,000 from the revised 6,645,000 who were hired or rehired in March, as the hiring rate as a percentage of all those employed remained at 4.4%, but was up from the 4.2% hiring rate of April a year earlier (details of hiring by industry since December are in table 2)....meanwhile, total separations were also lower, falling by 215,000, from 6,248,000 in March to 6,033,000 in April, as the separations rate as a percentage of the employed fell from 4.1% in March to 4.0% in April, which was the same as the separations in April a year ago (see table 3)...subtracting the 6,033,000 total separations from the total hires of 6,586,000 would imply an increase of 553,000 jobs in April, quite a few more than the revised payroll job increase of 436,000 for April reported by the May establishment survey above, and just outside of the expected +/-110,000 margin of error in these incomplete extrapolations...
Breaking down the seasonally adjusted job separations, the BLS found that 4,424,000 of us voluntarily quit our jobs in April, down by 25,000 from the revised 4,449,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.9% in April, which was up from the quits rate of 2.8% a year earlier (see details in table 4)....in addition to those who quit, a record low1,246,000 were either laid off, fired or otherwise discharged in April, down by 170,000 from the revised 1,416,000 who were discharged in March, as the discharges rate fell from 0.9% to a record low of 0.8% of all those who were employed during the month, which was down from the 1.0% rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 363,000 in April, down from 384,000 in March, for an 'other separations' rate of 0.2%, down from 0.3% in March but the same rate as in April a year ago....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and layoffs..
Construction Spending Up 0.2% on Higher Prices in April, after March Spending was Revised 0.6% Higher
The Census Bureau's report on construction spending for April (pdf) estimated that the month's seasonally adjusted construction spending was at a $1,744.8 billion annual rate during the month, up 0.2 percent (±0.8 percent)* from the revised March annual spending rate of $1,740.6 billion, and 12.3 percent (±1.3 percent) above the estimated annualized level of construction spending in April of last year...the annualized March construction spending estimate was revised 0.5% higher, from $1,730.5 billion to $1,740.6 billion, while the annual rate of construction spending for February was revised 0.4% higher, from $1,728.6 billion to $1,736.. billion...taken together, those $17.7 upward revisions would suggest an upward revision of $5.9 billion to first quarter construction spending on a annualized basis, which would in turn add around 0.10 percentage points to 1st quarter GDP when the third estimate is released at the end of June...
A further breakdown of the different subsets of construction spending are provided by a Census summary, which precedes the detailed spreadsheets, is included below:
- Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,394.7 billion, 0.5 percent (±0.7 percent)* above the revised March estimate of $1,387.9 billion. Residential construction was at a seasonally adjusted annual rate of $891.5 billion in April, 0.9 percent (±1.3 percent)* above the revised March estimate of $883.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $503.2 billion in April, 0.2 percent (±0.7 percent)* below the revised March estimate of $504.4 billion.
- Public Construction In April, the estimated seasonally adjusted annual rate of public construction spending was $350.1 billion, 0.7 percent (±1.6 percent)* below the revised March estimate of $352.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.6 billion, 0.7 percent (±2.1 percent)* below the revised March estimate of $80.1 billion. Highway construction was at a seasonally adjusted annual rate of $103.4 billion, 0.1 percent (±5.3 percent)* below the revised March estimate of $103.5 billion.
This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of April's construction spending reported in this release on 2nd 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...there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately the way the BEA will do, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate...that index showed that aggregate construction costs were up 4.0% from March to April, up 0.6% from February to March and up 0.5% from January to February....
On that basis, we can estimate that April construction costs were roughly 4.6% greater than those of February and at least 5.1% greater than those of January, and obviously 4.0% greater than those of March....we then use those percentage differences to inflate spending for each of those three months, which is arithmetically the same as deflating April construction spending against the first quarter, for comparison purposes....annualized construction spending in millions of dollars for the first quarter months is given as 1,740,614 for March, 1,736,213 for February, and 1,719,129 for January....thus to compare April's annualized construction spending of $1,744,801 million to our 'inflation adjusted' figures of the first quarter, our calculation is: 1,744,801 / (( 1,740,614 * 1.040 + 1,736,213 * 1.046 + 1,719,129 * 1.051) / 3) = 0.9634, meaning real construction spending in April was down roughly 3.66% vis a vis the 1st quarter, or down at a 13.85% annual rate....to estimate the potential effect of that change on 2nd quarter GDP, we take the annualized difference between the first quarter average inflation adjusted construction spending and April's spending as a fraction of the annualized 1st quarter GDP figure, and from that estimate that real April construction spending was falling at a rate that would subtract about 0.59 percentage points from the growth rate of 2nd quarter GDP, in the unlikely event that May and June's inflation adjusted construction is little changed from that of April…
Factory Shipments Rose 0.2% in April, Factory Inventories Rose 0.6%, Both on Higher Prices
The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $1.8 billion or 0.3 percent to $533.2 billion in April, the eleventh increase in twelve months, following an increase of 1.4% to $531.4 billion in March, which was revised from the 2.2% increase to $557.3 billion reported for March last month....note that other than the usual monthly revisions to the underlying data, this month's report also reflects the May 13th re-benchmarking of shipments and inventories data to the 2020 and 2019 Annual Survey of Manufactures data, revised back to January 2012, and then the adjusting of the new orders data to be consistent with the re-benchmarked benchmarked shipments and unfilled orders data...
However, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", and uses non-durables shipments data in its place instead, we believe that this month's "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on last week... for those durable goods orders 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 April, up eleven of the last twelve months, increased $1.8 billion or 0.3 percent to $533.2 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent March increase. Shipments, up twenty-three of the last twenty-four months, increased $0.9 billion or 0.2 percent to $532.1 billion. This followed a 2.2 percent March increase. Unfilled orders, up twenty consecutive months, increased $6.0 billion or 0.5 percent to $1,106.8 billion. This followed a 0.5 percent March increase. The unfilled orders-to-shipments ratio was 6.07, up from 6.06 in March. Inventories, up twenty of the last twenty-one months, increased $4.4 billion or 0.6 percent to $786.1 billion. This followed a 1.4 percent March increase. The inventories-to-shipments ratio was 1.48, up from 1.47 in March.
- New orders for manufactured durable goods in April, up six of the last seven months, increased $1.3 billion or 0.5 percent to $265.5 billion, up from the previously published 0.4 percent increase. This followed a 0.7 percent March increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $0.6 billion or 0.7 percent to $86.8 billion. New orders for manufactured nondurable goods increased $0.5 billion or 0.2 percent to $267.7 billion.
- Shipments of manufactured durable goods in April, up eleven of the last twelve months, increased $0.4 billion or 0.1 percent to $264.4 billion, unchanged from the previously published increase. This followed a 1.4 percent March increase. Primary metals, up four of the last five months, led the increase, $0.2 billion or 1.0 percent to $20.9 billion. Shipments of manufactured nondurable goods, up twenty-three of the last twenty-four months, increased $0.5 billion or 0.2 percent to $267.7 billion. This followed a 2.9 percent March increase. Food products, up eight of the last nine months, drove the increase, $0.8 billion or 1.0 percent to $76.1 billion.
- Unfilled orders for manufactured durable goods in April, up twenty consecutive months, increased $6.0 billion or 0.5 percent to $1,106.8 billion, unchanged from the previously published increase. This followed a 0.5 percent March increase. Transportation equipment, up fourteen of the last fifteen months, led the increase, $4.3 billion or 0.7 percent to $637.3 billion.
- Inventories of manufactured durable goods in April, up fifteen consecutive months, increased $3.9 billion or 0.8 percent to $479.7 billion, unchanged from the previously published increase. This followed a 0.9 percent March increase. Transportation equipment, up five of the last six months, led the increase, $1.1 billion or 0.7 percent to $156.9 billion. Inventories of manufactured nondurable goods, up eighteen of the last nineteen months, increased $0.4 billion or 0.1 percent to $306.4 billion. This followed a 2.1 percent March increase. Chemical products, up twelve of the last thirteen months, drove the increase, $0.5 billion or 0.5 percent to $102.8 billion..
To estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the total value of finished goods inventories rose 0.4% to $275,311 million; the value of work in process inventories inched up by 0.1% to $223,620 million, and the value of materials and supplies inventories rose 1.1% to $287,121 million...the April producer price index reported that prices for finished good were on average 1.3% higher, that prices for intermediate processed goods were on average 2.2% higher, and that prices for unprocessed goods were 5.3% higher....assuming similar valuations for like types of inventories, those prices would suggest that April's real finished goods inventories were about 0.9% smaller than those of March, that real inventories of intermediate processed goods were roughly 2.1% smaller, and that real raw material inventory inventories were about 4.2% smaller...since real NIPA factory inventories were slightly greater in the 1st quarter, and this report seems to indicate a large decrease in April’s real inventories, it appears that the real change in April factory inventories could have a major negative impact on the growth rate of 2nd 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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