Written by rjs, MarketWatch 666
July’s jobs report; June’s income and outlays, trade deficit, construction spending and factory inventories
The major economic releases from the past week included the Employment Situation Summary for July from the Bureau of Labor Statistics and four June reports that included metrics which were either estimated or included in last week’s release of 2nd quarter GDP: the June report on Personal Income and Spending from the Bureau of Economic Analysis, the BEA report on our International Trade for June, and the June report on Construction Spending (pdf) and the Full Report on Manufacturers’ Shipments, Inventories and Orders for June, both from the Census Bureau.(NAR).
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The week’s privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 16.68 million annual rate in July, down from the 17.38 million annual rate in June, but not much changed from the 16.69 million annual rate in July a year ago, and the Case-Shiller house price indexes for May from S&P Case-Shiller, wherein their national home price index was reported as 6.4% higher than in the same month’s report a year ago…
This week also saw both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.1% in July, down from 60.2% in June, suggesting a somewhat slower expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.7% in July, from 59.1% in June, also indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July…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 157,000 Jobs in July, Unemployment Rate Down 0.1% on Employment Increase
The Employment Situation Summary for July from the Bureau of Labor Statistics indicated that payroll job growth was somewhat below average, while the unemployment rate fell because hundreds of the unemployed found work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 157,000 jobs in July, after the payroll job increase for May was revised up from 244,000 jobs to 268,000, and the June jobs increase was revised up from 213,000 jobs to 248,000, and hence the combined number of jobs created over those two months was 59,000 more than was previously reported….the unadjusted data shows that there were actually 1,156,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments…
Seasonally adjusted job increases were widespread through throughout the private goods producing and service sectors, with only the government sector seeing a significant loss of 13,000 jobs, as both local government and school districts shed more employees than they normally do at this time of year…the broad professional and business services category added 51,000 jobs, as 27,900 more workers found work with temporary employment services and 8,300 were added in computer systems design and related services….the leisure and hospitality sector added a seasonally adjusted 40,000 jobs, with the addition of 26,200 more jobs in bars and restaurants….meanwhile, employment in manufacturing increased by 37,000, mostly in the manufacture of durable goods, with 13,100 of those jobs in transportation equipment factories….employment in health care and social assistance rose by 33,500, with the addition of 15,900 jobs in Individual and family social services and 6,800 jobs in hospitals….construction employment was higher by 19,000 in July, with the addition of 8,600 jobs with nonresidential specialty trade contractors….in addition, the retail sector added 7,000 jobs despite the loss of 31,800 in sporting goods, hobby, book, and music stores, reflecting job losses in hobby, toy, and game stores associated with the Toys R Us bankruptcy, due to the addition of 14,200 jobs in general merchandise stores, 10,000 jobs in clothing stores, and 8,200 jobs in foods stores…meanwhile, the other major sectors, including mining and logging, wholesale sales, transportation and warehousing, utilities, financial activities, and information all saw smaller changes in payroll employment over the month…
The establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $27.05 an hour, after it had increased by a revised 4 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 3 cents to $22.65 an hour…employers also reported that the average workweek for all private payroll employees decreased by a tenth of an hour to 34.5 hours, while hours for production and non-supervisory personnel remained at 33.8 hours for the fourth consecutive month….meanwhile, the average manufacturing workweek was unchanged at 40.9 hours, while factory overtime was also unchanged at 3.5 hours..
Meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by an estimated 389,000 to 155,965,000, while the similarly estimated number of those unemployed fell by 284,000 to 6,280,000; which therefore meant that July saw a net increase of 105,000 in the total labor force…however, since the working age population had grown by 201,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 96,000 to 95,598,000….therefore, the 105,000 increase of those in the labor force was not enough to raise the labor force participation rate, which remained unchanged at 62.9%….at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.5%…in addition, the increase in the total labor force combined with the drop in those unemployed was enough to lower the unemployment rate from 4.0% to 3.9%….meanwhile, the number who reported they were involuntarily working part time fell by 176,000 to 4,567,000 in July, which was enough to change the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 7.8% in June to 7.5% in July, the lowest since May 2001..
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.
See also:
- July 2018 BLS Jobs Situation Continues Strong
- July 2018 ADP Job Growth Is 219,000
- July 2018 Job Cuts Lowest Monthly Total In 20 Months
- 28 July 2018 Initial Unemployment Claims Rolling Average Improves
June Personal Income and Personal Spending Both Up 0.4%; Savings Doubles
Like the GDP report last week, the June Income and Outlays report also went through a Comprehensive Update, with revisions from 1929 through May 2018 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets….since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we’ll only consider those revisions from recent months that are relevant to putting the June change in perspective…
Also like the GDP report, all the dollar values reported in this release are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for an entire year if June’s adjusted income and spending were extrapolated over a whole year…however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from May to June….thus, when the opening line of the press release for this report tell us “Personal income increased $71.7 billion (0.4 percent) in June..“, they mean that the annualized figure for all types of personal income in June, $17,572.4 billion, was $71.7 billion, or bit more than 0.4% more than the $17,500.7 billion annualized personal income figure for May; the actual increase in personal income in June over May is not given….similarly, disposable personal income, which is income after taxes, also increased by more than 0.4%, from an annual rate of $15,455.1 billion in May to an annual rate of $15,520.4 billion in June…the contributors to the June increase in personal income and disposable personal income can be viewed in table 1 of the Full Release & Tables (pdf) for this release, also as annualized amounts, and were led by a $31.5 billion increase to $8,834.9 billion annually wages and salaries and a $19.5 billion increase to $2,768.9 billion annually in interest and dividend income….with the comprehensive revision, the annualized figure for May personal income was revised from $17,005.4 billion up to $17,500.7 billion, and disposable personal income was revised from the originally reported $14,929.8 billion annually to $15,455.1 billion…
Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $57.1 billion annual rate to a level of $13,937.1 billion in consumer spending annually, an increase of a bit more than 0.4% from May’s PCE, which itself was revised from the previously reported annual rate of $13,920.7 billion to $13,880.0 billion….total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $62.7 billion to $14,470.8 billion, which left personal savings, which is disposable personal income less total outlays, at a $1,049.7 billion annual rate in June, up from the revised $1,047.1 billion in personal savings in May…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was at 6.8% in June, same as in May…we should note that as a result of the large upward revision to personal income and the slight downward revision to personal consumption expenditures, that savings rate has more than doubled from what had previously been published….in May’s report (pdf), before the rebenchmarking, personal savings were at a $482.0 annual rate, and the savings rate was at 3.2%..
While our personal consumption expenditures accounted for 69.4% of our second quarter GDP, before they were included in the national measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption…..that’s done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2012 prices = 100….from Table 9 in the pdf for the June release, we find that that index rose from 108.049 in May to 108.160 in June, giving us a month over month inflation rate of 0.10273%, which BEA reports as an increase of +0.1%; at the same time, Table 11 gives us a year over year PCE price index rounded to an increase of 2.2%, and a core price increase, excluding food and energy, of 1.9% for the past year, both pretty close to the Fed’s inflation target….applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.308% in June, which BEA reports as a 0.3% change in their rounded tables…note that when those PCE price indexes are applied to a given month’s annualized current dollar PCE, it yields that month’s annualized real PCE in chained 2012 dollars, which aren’t really dollar amounts at all, but merely the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another’s….those results are shown in tables 7 and 8 of the PDF, where you’ll see the quarterly figures given are identical to those shown in table 3B of last week’s GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP.
See also:
- June 2018 Headline Personal Income And Spending Completely Revised
- Getting It Right – Significant Underestimation Of Income
- Advance Estimate 2Q2018 GDP Quarter-over-Quarter Growth at 4.1 Percent
- 2Q 2018 GDP Is “Data Gone Wild”
June Trade Deficit Up 7.3% on Rising Imports of Oil & Pharmaceuticals, Falling Exports
Our trade deficit increased by 7.3% in June as the value of our exports decreased and the value of our imports increased….the Commerce Department report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit rose by $3.2 billion (rounded) to $46.3 billion in June from a revised May deficit of $43.2 billion, which had previously been reported as $43.1 billion…the value of our June exports fell by $1.5 billion to $213.8 billion on a $1.7 billion decrease to $143.2 billion in our exports of goods offset by a $0.2 billion increase to $70.6 billion in our exports of services, while our imports rose $1.6 billion to $260.2 billion on a $1.4 billion increase to $212.0 billion in our imports of goods and a $0.2 billion increase to $48.1 billion in our imports of services…export prices were on average 0.3% higher in June, so the relative real growth in exports for the month was less than the nominal dollar growth by that percentage, while import prices were 0.4% lower, meaning growth in real imports would be that percentage higher that the nominal dollar growth reported here…
The decrease in our June exports resulted from lower exports of consumer goods, capital goods, and automotive vehicles, which were partially offset by an increase in our exports of industrial supplies and materials….referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $1433 million to $16,362 million on a $619 million decrease in our exports of pharmaceuticals, a $436 million decrease in our exports of jewelry, and a $276 million decrease in our exports of gem diamonds, that our exports of capital goods fell by $893 million to $47,280 million on decreases of $361 million in our exports of civilian aircraft engines and $209 million in our exports of civilian aircraft, and that our exports of automotive vehicles, parts, and engines fell by $709 million to $12,850 million on a $864 million decrease in our exports of new and used passenger cars…in addition, our exports of foods, feeds and beverages fell by $43 million to $14,063 million, and our exports of other goods not categorized by end use fell by $205 million to $5,399 million….partially offsetting those decreases, our exports of industrial supplies and materials rose by $1,961 million to $46,335 million on a $535 million increase in our exports of petroleum products other than fuel oil, a $472 million increase in our exports of nonmonetary gold, a $453 million increase in our exports of fuel oil, and a $385 million increase in our exports of crude oil…
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of pharmaceuticals and crude oil were the major reasons for the June increase in our imports…our imports of consumer goods rose by $1,966 million to $53,390 million on a $1,511 million increase in our imports of pharmaceuticals, a $319 million increase in our imports of cellphones, and a $209 million increase in our imports of toys, games, and sporting goods, while our imports of industrial supplies and materials increased by $896 million to $48,751 million on a $1,199 million increase in our imports of crude oil and a $363 million increase in our imports of organic chemicals…in addition, our imports of automotive vehicles, parts and engines rose by $510 million to $30,211 million on a $343 million increase in our imports of trucks, buses, and special purpose vehicles….partially offsetting the increases in those three categories, our imports of capital goods fell by $1482 million to $57,494 million on $835 million lower imports of computers and $477 million lower imports of telecommunications equipment, our imports of foods, feeds, and beverages fell by $205 million to $12,175 million, and our imports of other goods not categorized by end use fell by $180 million to $8,380 million..
In the advance report on 2nd quarter GDP released last week, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was also released last week, just before the GDP release…that report estimated that our June goods trade deficit was at $68,332 million on a Census basis, up from the $64,767 million goods deficit reported in May…this report revises those figures and shows that our actual goods trade deficit in June was $68,813 million on a balance of payments basis, and $67,920 million on a Census basis..at the same time, the May goods deficit was revised to $64,688 million on a Census basis…together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit was roughly $491 million less than was included in last week’s GDP report, or roughly $2.0 billion more at an annual rate, which would indicate a upward revision of roughly 0.04 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August, assuming there is no revision to the price adjustment.
See also:
- June 2018 Trade Exports Decline
- Advance Estimate 2Q2018 GDP Quarter-over-Quarter Growth at 4.1 Percent
- 2Q 2018 GDP Is “Data Gone Wild”
Construction Spending Fell 1.1% in June after Prior Months Were Revised Higher
The Census Bureau report on construction spending for June (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,317.2 billion annually if extrapolated over an entire year, which was 1.1 percent (±1.0 percent) below the revised annualized estimate of $1,332.2 billion of construction spending for May but still 6.1 percent (±1.6 percent) above the estimated annualized level of construction spending in June of last year…the May annualized construction spending estimate was revised nearly 1.0% higher, from $1,309.5 billion to $1322.2 billion, while the annual rate of construction spending for April was revised nearly 0.8% higher, from $1,304.5 billion to $1,314.7 billion….
Further details on different subsets of construction spending are provided by the Census release summary:
- Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,019.8 billion, 0.4 percent (±0.8 percent)* below the revised May estimate of $1,023.9 billion. Residential construction was at a seasonally adjusted annual rate of $568.3 billion in June, 0.5 percent (±1.3 percent)* below the revised May estimate of $570.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $451.5 billion in June, 0.3 percent (±0.8 percent)* below the revised May estimate of $453.0 billion.
- Public Construction: In June, the estimated seasonally adjusted annual rate of public construction spending was $297.4 billion, 3.5 percent (±2.0 percent) below the revised May estimate of $308.3 billion. Educational construction was at a seasonally adjusted annual rate of $67.9 billion, 11.0 percent (±2.1 percent) below the revised May estimate of $76.3 billion. Highway construction was at a seasonally adjusted annual rate of $93.9 billion, 1.3 percent (±5.6 percent)* below the revised May estimate of $95.1 billion.
Construction spending for April and May was higher than what was reported by the BEA in the advance report for 2nd quarter GDP last week, while construction spending for June was lower…as we saw above, annualized construction spending for April was revised $10.2 billion higher, and annualized construction spending for May was revised $12.7 billion higher…in reporting 2nd quarter GDP, the Excel file with key source data and assumptions accompanying the report indicated on line 84 that they had estimated that the value of June nonresidential construction would be $0.1 billion greater than that of the previously reported May figure, that June residential construction on lines 110 and 111 would be $1.4 billion greater than that of the reported May figure, and that the value of June public construction shown on line 200 would be $0.7 billion lower than the previously published May figure…hence, the figures used by the BEA for total June construction in the 2nd quarter GDP report were $0.8 billion greater than the previously published May figure…with June construction now reported down $15.0 billion from a May figure which was revised $12.7 billion higher, that means that they had overestimated annualized June construction spending by $3.1 billion…thus, after averaging the revision to the three months, the total revised annualized figure for 2nd quarter construction spending would thus be $6.6 billion more than the figures used by the BEA when computing 2nd quarter GDP, implying an upward revision of roughly 0.15 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August.
See also
- June 2018 Headline Construction Spending Down
- June 2018 Pending Home Sales Seasonally Adjusted Index Remains In Contraction Year-over-Year
Factory Shipments Up 1.0% in June, Factory Inventories Up 0.1%
The 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 $3.3 billion or 0.7 percent to $501.7 billion in June, following an increase of 0.4% to $498.4 billion in May, which was revised from the 0.4 percent increase to $498.2 billion reported last month….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 as a revised update to the advance report on durable goods we reported on last week…for those revisions, the Census Bureau’s 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 June, up four of the last five months, increased $3.3 billion or 0.7 percent to $501.7 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent May increase. Shipments, up thirteen of the last fourteen months, increased $4.9 billion or 1.0 percent to $501.4 billion. This followed a 0.6 percent May increase. Unfilled orders, up seven of the last eight months, increased $4.4 billion or 0.4 percent to $1,165.2 billion. This followed a 0.5 percent May increase. The unfilled orders-to shipments ratio was 6.64, down from 6.67 in May. Inventories, up twenty consecutive months, increased $0.7 billion or 0.1 percent to $669.3 billion. This followed a 0.2 percent May increase. The inventories-to shipments ratio was 1.33, down from 1.35 in May.
- New orders for manufactured durable goods in June, up following two consecutive monthly decreases, increased $2.1 billion or 0.8 percent to $251.5 billion, down from the previously published 1.0 percent increase. This followed a 0.3 percent May decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $1.8 billion or 2.1 percent to $87.7 billion. New orders for manufactured nondurable goods increased $1.2 billion or 0.5 percent to $250.2 billion.
- Shipments of manufactured durable goods in June, up ten of the last eleven months, increased $3.7 billion or 1.5 percent to $251.1 billion, down from the previously published 1.7 percent increase. This followed a 0.2 percent May increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $3.1 billion or 3.7 percent to $85.3 billion. Shipments of manufactured nondurable goods, up twelve of the last thirteen months, increased $1.2 billion or 0.5 percent to $250.2 billion. This followed a 1.1 percent May increase. Chemical products, up three of the last four months, led the increase, $0.5 billion or 0.8 percent to $65.4 billion.
- Unfilled orders for manufactured durable goods in June, up seven of the last eight months, increased $4.4 billion or 0.4 percent to $1,165.2 billion, unchanged from the previously published increase. This followed a 0.5 percent May increase. Transportation equipment, also up seven of the last eight months, led the increase, $2.4 billion or 0.3 percent to $802.3 billion.
- Inventories of manufactured durable goods in June, down following seventeen consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $402.9 billion, unchanged from the previously published decrease. This followed a 0.3 percent May increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease, $1.9 billion or 1.4 percent to $126.9 billion. Inventories of manufactured nondurable goods, up twelve consecutive months, increased $1.1 billion or 0.4 percent to $266.3 billion. This followed a virtually unchanged May increase. Chemical products, up eight of the last nine months, led the increase, $0.7 billion or 0.8 percent to $88.7 billion.
The BEA’s key source data and assumptions (xls) for the advance estimate of second quarter GDP indicates on line 130 that they had estimated that the value of non-durable goods inventories would increase by $2.1 billion before any inflation adjustment in June, while this report indicates that total non-durable goods inventories actually increased in value by $1.1 billion, and since the June inventory change is one-third of the quarterly change, that would indicate that they overestimated the change in the 2nd quarter GDP inventory component by about $1.3 billion on an annualized basis, which would seem to imply that 2nd quarter GDP would have to be revised downwards by 0.03 percentage points to account for what this report shows.
See also:
