The major economic reports released the past week were the Employment Situation Summary for December and the Job Openings and Labor Turnover Survey (JOLTS) for November, both from the Bureau of Labor Statistics (BLS), the November report on our International Trade from agencies within the Commerce Dept, and the November report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for November, both from the Census Bureau....
Privately issued reports released this week included the ADP Employment Report for December, the light vehicle sales report for December from Wards Automotive, which estimated that vehicles sold at a 13.31 million annual rate in December, down from the 14.14 million million annual pace of vehicle sales reported for November, and down from the 16.27 million vehicle sales rate reported for December of 2020, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM):the December Manufacturing Report On Business® indicated that the manufacturing PMI (Purchasing Managers Index) fell to 48.4% in December, down from 49.0% in November, indicating a slightly larger plurality of manufacturing purchasing managers reported worse conditions in various facets of their business in December than in November, and the December Services Report On Business, which saw the Services index tumble to 49.6% in December, down from 56.5% in November, with the below 50% reading meaning a small plurality of service industry purchasing managers now report worse conditions in various facets of their business in December, the first contraction in services since May 2020,...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 Added 223,000 Jobs in December, Unemployment Rate Fell to 3.5%
The Employment Situation Summary for December from the Bureau of Labor Statistics indicated the smallest increase in payroll jobs of the year, even as the headline increase was still more than was expected, while the unemployment rate fell to match a 52 year low and the employment rate rose to match a pandemic-era high…estimates extrapolated from the seasonally adjusted establishment survey dataprojected that employers added 223,000 jobs in December, after the previously estimated payroll job increase for November was revised down by 7,000, from 263,000 to 256,000, and the payroll jobs increase for October was revised down by 21,000, from 284,000 to 263,000….by offsetting December's increase, those revisions means that this report shows a net of 195,000 more payroll jobs than last month’s report did, which is a bit short of the 200,000 that were expected....the unadjusted data, meanwhile, shows that there were actually 244,000 fewer payroll jobs extent in December than in November, as the usual seasonal layoffs in areas such as construction and other outdoor services were normalized by the seasonal adjustments to show the job increases indicated..
Seasonally adjusted job increases in December were seen throughout the private goods producing and service providing sectors, with only the temporary help sector indicating a payroll job decrease....since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we'll again just quote from that summary here:
- Total nonfarm payroll employment increased by 223,000 in December. Notable job gains occurred in leisure and hospitality, health care, construction, and social assistance. Payroll employment rose by 4.5 million in 2022 (an average monthly gain of 375,000), less than the increase of 6.7 million in 2021 (an average monthly gain of 562,000). (See table B-1.)
- In December, employment in leisure and hospitality rose by 67,000. Employment continued to trend up in food services and drinking places (+26,000); amusements, gambling, and recreation (+25,000); and accommodation (+10,000). Leisure and hospitality added an average of 79,000 jobs per month in 2022, substantially less than the average gain of 196,000 jobs per month in 2021. Employment in the industry remains below its pre-pandemic February 2020 level by 932,000, or 5.5 percent.
- Health care employment increased by 55,000 in December, with gains in ambulatory health care services (+30,000), hospitals (+16,000), and nursing and residential care facilities (+9,000). Job growth in health care averaged 49,000 per month in 2022, considerably above the 2021 average monthly gain of 9,000.
- Employment in construction increased by 28,000 in December, as specialty trade contractors added 17,000 jobs. Construction employment increased by an average of 19,000 per month in 2022, little different than the average of 16,000 per month in 2021.
- Social assistance added 20,000 jobs in December. Employment in individual and family services continued to trend up over the month (+10,000). Job growth in social assistance averaged 17,000 per month in 2022, compared with the 2021 average of 13,000 per month.
- Employment in the other services industry continued to trend up in December (+14,000). Monthly job growth in other services averaged 14,000 in 2022, lower than the average of 24,000 per month in 2021. Employment in other services is below its February 2020 level by 174,000, or 2.9 percent.
- In December, mining employment increased by 4,000, reflecting job growth in support activities for mining (+5,000). Since a recent low in February 2021, mining employment has grown by 104,000.
- Employment in retail trade changed little in December (+9,000). Job growth in retail trade averaged 16,000 per month in 2022, less than half the average growth of 35,000 per month in 2021.
- Over the month, employment in manufacturing changed little (+8,000), as job gains in durable goods (+24,000) were partially offset by losses in nondurable goods (-16,000). In 2022, manufacturing added an average of 32,000 jobs per month, little different than the average of 30,000 jobs per month in 2021.
- In December, employment in transportation and warehousing changed little (+5,000). Air transportation (+3,000) added jobs over the month, while employment continued to trend down in couriers and messengers (-4,000) and in warehousing and storage (-3,000). In 2022, average job growth in transportation and warehousing (+17,000) was about half the average job growth in 2021 (+36,000).
- In December, government employment was essentially unchanged (+3,000). Employment in state government education declined by 24,000, reflecting strike activity among university employees.
- Employment in professional and business services remained little changed in December (-6,000). Employment in temporary help services declined by 35,000 over the month and has fallen by 111,000 since July. Job growth in professional and business services averaged 50,000 per month in 2022, roughly half of the average of 94,000 per month in 2021.
- Over the month, employment showed little change in other major industries, including wholesale trade, information, and financial activities.
The establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $32.82 an hour in December, after it had increased by a revised 13 cents an hour in November; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 6 cents to $28.07 an hour....employers also reported that the average workweek for all private payroll employees decreased by 0.1 hour to 34.3 hours in December, while hours for production and non-supervisory personnel edged down by 0.1 hour to 33.8 hours...at the same time, the manufacturing workweek was unchanged at 40.1 hours, while average factory overtime fell 0.2 hours to 2.9 hours...
Meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 717,000 to 159,244,000, while the estimated number of those who reported being unemployed and looking for work fell by 278,000 to 5,722,000, and as a result the total labor force increased by a net of 439,000....since the working age population had grown by 136,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 303,000 to 99,878,000...with the increase of those in the labor force above the increase in the civilian noninstitutional population, the labor force participation rate rose from 62.2% in November to 62.3% in December....meanwhile, the relatively large increase in the number employed as a percentage of the increase in the population was enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.2% to 60.1%...at the same time, the decrease in the number considered unemployed was enough to lower the unemployment rate from 3.6% in November to 3.5% in December, matching a 52 year low... meanwhile, the number of those who reported they were forced to accept just part time work rose by 190,000, from 3,688,000 in November 3,878,000 in December, whilethe alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.2% to 6.5% of the labor force in December, which is an all time low...
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..
Job Openings, Hiring, and Layoffs Were Lower in November; Job Quitting Rose
The Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 54,000, from 10,512,000 in October to 10,485,000 in November, after October’s job openings fell by 175,000 from September...November's jobs openings were also 4.2% lower than the 10,922,000 job openings reported for November a year ago, while the job openings ratio expressed as a percentage of the employed remained at 6.4% in November, while it was down from 6.8% in November a year ago....the largest percentage decrease in November openings appears to be a 75,000 job opening decrease to 344,000 openings in the finance and insurance sector, while the professional and business services sector saw job openings increase by 212,000 to 2,026,000 (see table 1 for more job openings details)...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 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 their jobs, and 'other separations', which includes retirements and deaths....in November, seasonally adjusted new hires totaled 6,055,000, down by 56,000 from the revised 6,111,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed fell from 4.0% in October to 3.9% in November, and it was also down from 4.5% in November a year ago (details on hiring by region and by sector since July are in table 2)....meanwhile, total separations rose by 114,000, from 5,756,000 in October to 5,870,000 in November, as the separations rate as a percentage of the employed was unchanged at 3.8%, while it was down from 4.2% in November a year ago (see table 3)...subtracting the 5,870,000 total separations from the total hires of 6,055,000 would imply an increase of just 185,000 jobs in November, somewhat less than the revised payroll job increase of 256,000 for November that was reported in the December establishment survey later in the week, but still within the expected +/-110,000 margin of error in these incomplete survey extrapolations.......
Breaking down the seasonally adjusted job separations, the BLS finds that 4,173,000 of us voluntarily quit our jobs in November, up by 126,000 from the revised 4,047,000 who quit their jobs in October, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.6% to 2.7% of total employment, while it was down from the record 3.0% a year earlier (see job quitting details in table 4)....in addition to those who quit, another 1,350,000 were either laid off, fired or otherwise discharged in November, down by 95,000 from the 1,445,000 who were discharged in October, as the discharges rate remained at a record low of 0.9% of total employment, which was the same as the discharges rate in November a year ago....meanwhile, other separations, which includes retirements and deaths, were at 347,000 in November, up from 264,000 in October, for an 'other separations rate’ of 0.2%, which was the same rate as in October but down from 0.3% in November of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed easily using the links to tables at the bottom of the press release...
Trade Deficit fell 21.0% in November, Largest Drop Since 2009, on Plunge in Imports
Our trade deficit fell 21.0% in November, the largest drop since the 2009 recession, as both the value of our exports and our imports decreased, but the value of our imports decreased by quite a bit more....the Commerce Dept report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by $16.3 billion to $61.5 billion in November, from an October deficit of $77.8 billion, which was revised from the $78.2 billion deficit reported for October a month ago....the value of our November exports fell by $5.1 billion to a rounded $251.9 billion as a $5.3 billion decrease to $170.8 billion in our exports of goods was slightly offset by a $0.2 billion increase to $81.0 billion in our exports of services, while the value of our imports fell by $21.5 billion to $313.4 billion on a $20.7 billion decrease to $254.9 billion in our imports of goods and a decrease of $0.8 billion to $58.5 billion in our imports of services...export prices were on average 0.3% lower in November, which means the decrease in the value of this month's exports was partly due to lower prices, and that real exports actually fell about 1.7%, while import prices were 0.6% lower, meaning that the drop in the value of our imports was also exacerbated by lower prices and that our real imports probably fell by about 5.8%.....
The $5.3 billion decrease in the value of our exports of goods in November largely resulted from lower exports of industrial supplies and materials and of capital goods...referencing the Full Release and Tables for November (pdf), in Exhibit 7, we find that the value of our exports of industrial supplies and materials fell by $3,613 million to $66,249 million on a $1,613 million decrease in the value of our exports of natural gas, a $842 million decrease in the value of our exports of nonmonetary gold, and a $1,358 million decrease in the value of our exports of crude oil, which were partially offset by a $386 million increase in the value of our exports of fuel oil, and that the value of our exports of capital goods fell by $1,256 million to $48,398 million, led by a $543 million decrease in our exports of civilian aircraft and a $249 million decrease in our exports of telecommunications equipment....in addition, our November exports of foods, feeds and beverages fell by $596 million to $13,546 million led by lower exports of meat, poultry and soybeans, and our exports of other goods not categorized by end use fell by $634 million to $5,976 million...partially offsetting the decreases in the value of those export categories, the value of our exports of consumer goods rose $871 million to $20,412 million due to a $1248 million increase in our exports pharmaceutical preparations, and the value of our exports of automotive vehicles, parts, and engines rose by $261million to $13,966 million led by a $475 million increase in our exports of trucks, buses, and special purpose vehicles, which were mostly offset by a $420 million decrease in our exports of new and used passenger cars...
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods, and shows that lower imports of consumer goods, of industrial supplies and materials, of automotive vehicles, parts, and engines, and of capital goods accounted for most of November's $20.7 billion decrease in our imports of goods...the value of our imports of consumer goods fell by $8,776 million to $59,775 million on a $2,885 million decrease in our imports of pharmaceutical preparations, a $2,700 million decrease in our imports of cellphones, a $608 million increase in our imports of toys, games, and sporting goods, and a $308 million increase in our imports of apparel and textiles other than those of wool or cotton, while the value of our imports of industrial supplies and materials fell by $3,711 million to $62,114 million, led by a $1,674 million decrease in the value of our imports of crude oil, and a $301 million decrease in the value of our imports of natural gas....in addition, the value of our imports of automotive vehicles, parts and engines fell by $3,272 million to $32,294 million on a $1,596 million decrease in our imports of new and used passenger cars, a $992 million decrease in our imports of automotive parts and accessories other than engines, chassis, and tires, and a $315 million decrease in our imports of trucks, buses, and special purpose vehicles, and the value of our imports of capital goods fell by $3,031 million to $71,523 million led by a $1,125 million decrease in our imports of computers and a $732 million decrease in our imports of telecommunications equipment, while the value of our imports of foods, feeds, and beverages fell by $977 million to $16,723 million led by decreases in our imports of wine, beer, and other alcoholic beverages and of green coffee, and our imports of other goods not categorized by end use fell by $853 million to $9,915 million....
The News Release for this month's report also summarizes Exhibit 19 in the Full Release and tables, which gives us surplus and deficit details on our goods trade with selected countries:
The November figures show surpluses, in billions of dollars, with South and Central America ($5.3), Netherlands ($2.4), Hong Kong ($1.6), United Kingdom ($1.2), Australia ($1.0), Singapore ($1.0), Brazil ($0.5), and Belgium ($0.1). Deficits were recorded, in billions of dollars, with China ($20.4), European Union ($19.5), Mexico ($10.9), Vietnam ($8.5), Germany ($7.2), Ireland ($5.6), Japan ($5.6), Taiwan ($4.1), South Korea ($3.7), Canada ($3.5), Italy ($3.4), Malaysia ($3.1), India ($2.3), Switzerland ($1.3), Saudi Arabia ($0.9), Israel ($0.7), and France ($0.6).
- The deficit with China decreased $5.8 billion to $20.4 billion in November. Exports decreased $0.1 billion to $13.5 billion and imports decreased $5.8 billion to $33.9 billion.
- The deficit with the European Union decreased $3.6 billion to $19.5 billion in November. Exports decreased $0.3 billion to $28.5 billion and imports decreased $3.9 billion to $48.0 billion.
- The deficit with Switzerland increased $0.8 billion to $1.3 billion in November. Exports decreased $1.8 billion to $3.0 billion and imports decreased $1.0 billion to $4.2 billion.
To estimate the impact of October's and November's trade in goods on the eventual 4th quarter GDP growth figures, we use exhibit 10 in the 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, with the exception that they are not annualized here....from that table, we can figure that our 3rd quarter real exports of goods averaged 162,229.7 million monthly in 2012 dollars, while our similarly inflation adjusted October and November exports were at 158,155 million and 154,116 million respectively, in that same 2012 dollar quantity index representation... annualizing the change between the average monthly real exports of the two quarters, we find that the 4th quarter's real exports of goods are running at a 14.2% annual rate below those of the 3rd quarter, or at a pace that would subtract about 1.60 percentage points from 4th quarter GDP if it were to continue at the same pace through December....in a similar manner, we find that the 3rd quarter real imports of goods averaged 263,682 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 271,229 million and 251,265 million in 2012 dollars respectively... those chained dollar representations of real goods imports would indicate that so far in the 4th quarter, our real imports have been falling at annual rate of 3.64% from those of the 3rd quarter...since imports are subtracted from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their decrease at a 3.64% rate would conversely add about 0.60 percentage points back to 4th quarter GDP....hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our deteriorating balance of trade in goods would subtract a net of roughly 1.00 percentage points from the growth of 4th quarter GDP.....
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 because we don't have a straightforward way to adjust the various services for all their price changes...however, we do know that our exports in services grew by $2.0 billion over October and November, whereas our imports in services fell $1.0 billion over those two months, which would suggest a moderate boost to GDP on the services side of the trade ledger...
Construction Spending Rose 0.2% in November After Prior Months Were Revised Higher
The Census Bureau's report on construction spending for November (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,807.5 billion annually if extrapolated over an entire year, which was 0.2 percent (±0.8%) above the revised October annualized estimate of $1,803.2 billion and also 8.5 percent (±1.3 percent) above the estimated annualized level of construction spending in November of last year....for the first eleven months of this year, construction spending has now amounted to $1,657.6 billion, which was 10.5 percent (±1.0 percent) above the $1,499.8 billion spent on construction over the same period in 2021…
The annualized October construction spending estimate was revised nearly 0.5% higher with this release, from $1,794.9 billion to $1,803.2 billion, while the annual rate of construction spending for September was revised 0.4% higher, from $1,800.1 billion to $1,807.5 billion...the annualized $7.4 billion upward revision to September's construction spending would be averaged over the 3 months of the 3rd quarter and increase the annualized 3rd quarter construction figures by nearly $2.5 billion, before any inflation adjustment, which would imply that the 3rd estimate of 3rd quarter GDP growth was understated by roughly 0.03 percentage points, a correction which will not be applied to published GDP figures until the annual revision is released in the middle of next summer...
A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:
- Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,426.4 billion, 0.3 percent (±0.5 percent)* above the revised October estimate of $1,421.6 billion. Residential construction was at a seasonally adjusted annual rate of $868.0 billion in November, 0.5 percent (±1.3 percent)* below the revised October estimate of $872.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $558.3 billion in November, 1.7 percent (±0.5 percent) above the revised October estimate of $549.2 billion.
- Public Construction: In November, the estimated seasonally adjusted annual rate of public construction spending was $381.1 billion, 0.1 percent (±1.5 percent)* below the revised October estimate of $381.6 billion. Educational construction was at a seasonally adjusted annual rate of $81.3 billion, 0.1 percent (±1.5 percent)* above the revised October estimate of $81.2 billion. Highway construction was at a seasonally adjusted annual rate of $115.0 billion, 1.0 percent (±3.3 percent)* below the revised October estimate of $116.2 billion
As you can infer from that summary, construction spending is included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of the November spending reported in this release on 4th 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...that’s problematic because the National Income and Product Accounts Handbook, Chapter 6, lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, ie, such as using the Handy-Whitman construction cost indexes for electric light and power plants and for utility building...in lieu of trying to find and adjust for all of the obscure price indices the BEA uses separately, we've opted to use the producer price index for final demand construction as an inexact shortcut in an attempt to make a reasonable price adjustment on the total..
That price index showed that aggregate construction costs were up 0.1% in November after being up 2.8% in October, and rising 0.2% in September and 0.2% in August...on that basis, we can estimate that construction costs for November were up 2.9% from September, up 3.1% from August, and up 3.3% from July, while they were obviously up 0.1% from October...we then use those percentage changes to adjust the spending figures for each of those 3rd quarter months against November, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as $1,807,497 for September, $1,797,771 for August, and $1,817,862 for July, while it was at annual rates of $1,803,208 in October and $1,807,505 in November....thus to estimate the difference between the inflation adjusted construction spending of the two recent 4th quarter months and those of the third quarter, our calculation would be ((1,807,505 + 1,803,208 * 1.001)/2) / ((1,807,497 *1.029 + 1,797,771 * 1.031 + 1,817,862 * 1.033) / 3) = 0.96915, meaning average real construction over the months of October and November was down 3.085% vis a vis the 3rd quarter....in NIPA terms, that means real construction for the 4th quarter has fallen at an annual rate of 11.78% from that of the 3rd quarter so far...
To figure the effect of that change on GDP, we figure the difference between the third quarter inflation adjusted average and that of October and November and take the annualized result of that as a fraction of the inflation adjusted 3rd quarter GDP figure, and find that real construction spending is falling at a rate that would subtract about 1.51 percentage points from 4th quarter GDP, should real December construction continue at the same pace as that of October and November… note that we again have a low confidence in that estimate at this time, given that it is largely due to the 2.8% increase in producer price index for final demand construction for October, which might be quite different than the price change indicated by the indices that the BEA will use to compute real construction for October and November when they figure 4th quarter GDP at the end of January...
(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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