Written by rjs, MarketWatch 666
January’s jobs report; November’s construction spending, new home sales and wholesale sales, et al
As is usual with the first Friday of the month, the major economic release of this past week was the Employment Situation Summary for January from the Bureau of Labor Statistics…in addition, the week also saw the release of three Census Dept reports that had been postponed during the shutdown; the November report on new home sales, which had originally been scheduled to be released on December 27th; the November report on Construction Spending (pdf), which had been scheduled for January 3rd, and the November report on Wholesale Trade, Sales and Inventories (pdf) , which had been scheduled for January 10th.
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At the same time, the 1st estimate of 4th quarter GDP and the December report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the December report on Construction Spending (pdf), which had originally been scheduled for Wednesday, Thursday and Friday of this week respectively, were postponed, with no revised release dates for those reports yet given.
This week also saw the release of the Chicago Fed National Activity Index (CFNAI) for December, a weighted composite index of 85 different economic metrics, which rose to +0.27 in December, up from +0.21 in November, which was revised from the +0.22 reported last month…as a result, the 3 month average of the index rose to +0.16 in December, up from a revised +0.11 in November, which indicates that national economic activity continued at a pace above the historical trend over the 4th quarter months…in addition, the week also saw the last Fed manufacturing survey for January; the January Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +1.0, up from last month’s -5.1, a near zero reading which the Dallas Fed says “suggests manufacturers were fairly balanced in their assessment of whether activity had improved or worsened from last month”…
The week’s privately issued reports included the ADP Employment Report for January, the light vehicle sales report for January from Wards Automotive, which estimated that vehicles sold at a 16.60 million annual rate in January, down from the 17.51 million annual rate reported in December, and down from the 17.07 million annual rate in January a year ago, and the Case-Shiller Home Price Index for November from S&P Case-Shiller, which reported that prices for homes that sold nationally during September, October and November averaged 5.2% higher than the prices for the same homes that sold during the same 3 month period a year earlier….in addition, the week also saw the release of the widely followed purchasing manager’s survey from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.6% in January, up from 54.3% in December, which suggests a somewhat faster paced expansion among manufacturing firms nationally.
See also:
November 2018 Leading Index Review: Growth Continues to Slow
Employers Add 304,000 Jobs in January, Unemployment Rate Rises to 4.0%
The Employment Situation Summary for January from the Bureau of Labor Statistics indicated greater than average job creation over the month, partly offset by revisions to December, while the household survey was impacted by the effects of the government shutdown during the survey week, wherein those on temporary layoff were counted as unemployed…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 304,000 jobs in January, after the previously estimated payroll job increase for December was revised down from 312,000 to 222,000, while the payroll jobs increase for November was revised up from 156,000 to 176,000…that means that this report represents a total of 234,000 more seasonally adjusted payroll jobs than the report of a month ago, just a bit better than the past year’s average monthly gain of 223,000 jobs per month…the unadjusted data, however, shows that there were actually 2,981,000 fewer payroll jobs remaining in January than in December, as the normal post holiday seasonal layoffs in areas such as retail, wholesale, goods transportation, leisure and hospitality were normalized by the seasonal adjustments..
As is usual for the January jobs report, this report included the results of the annual benchmark revision, which revised prior reports and set March 2018 (the benchmark) at 148,279,000 payroll jobs, 1,000 fewer jobs than was previously reported for that month, while job totals for every month in 2018 were concurrently revised by magnitudes of less than 97,000 per month as well (as is shown in Table A of the press release)…as a result of this revision, 2018 job growth totaled 2,674,000 payroll jobs, up a bit from the previously published totals of 2,638,000, while job growth in earlier years was revised slightly as well…since all the newly revised figures are now incorporated into this month’s report as if previously reported totals had never been reported, that’s the way we’ll cover it…
Seasonally adjusted job increases in January were spread through through both the goods producing and the private service sectors and government, with only the information services sector seeing a net loss of 4,000 jobs…leading the increases, seasonally adjusted employment in the leisure and hospitality sector increased by 74,000 jobs over the month, with the addition of 36,600 more jobs in bars and restaurants and 32,200 more working in amusements, gambling, and recreation…also after seasonal adjustments, 52,000 jobs were added in construction, with 34,300 of those working for specialty trade contractors, with sizable job increases with both nonresidential and residential specialty trade contractors…another 45,400 jobs were added in health care and social assistance, as 18,800 more employees were added by hospitals and 5,300 more were employed by medical and diagnostic laboratories…the broad professional and business services sector added 30,000 jobs, led by a 7,000 job increase in computer systems design and related services….the transportation and warehousing sector added 26,600 more seasonally adjusted workers, with 15,100 of those employed in warehousing and storage facilities…then, also after the typical seasonal adjustment, retail sales added 20,800 more workers, with a 17,400 increase in those working in sporting goods, hobby, book, and music stores offsetting a 12,400 decrease in employment in general merchandise stores…in addition, 13,000 more jobs were added by manufacturers, with factories producing a wide variety of durable goods of accounting for all of those, as employment with non-durable goods manufacturers fell by 7,000…13,000 jobs were also added in financial activities, with 5,700 of those in real estate…meanwhile, employment in the other major sectors, including mining, wholesale trade, utilities, private education and government, all saw smaller job gains over the month..
The establishment survey also showed that average hourly pay for all employees rose by 3 cents an hour to $27.56 an hour in January, after it had increased by a revised 10 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees also increased by 3 cents to $23.12 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in January, while hours for production and non-supervisory personnel was unchanged at 33.7 hours…however, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime was down by 0.1 hour to 3.5 hours…
Reflecting the effects of the government shutdown, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 251,000 to 156,694,000, while the estimated number of those unemployed rose by 241,000 to 6,535,000; which led to a rounded 11,000 decrease in the total labor force…however, those numbers were skewed from what they should have been because a number of federal workers were classified as employed but absent from work, who also should have been classified as unemployed on temporary layoff…about those “employed” workers, the BLS says “they are accepted as recorded” & that “no ad hoc actions are taken to reassign survey responses”…further complicating the January results, the benchmark revision to 2018’s civilian noninstitutional population indicated that December’s population had been overstated by 800,000, which meant that all the population dependent metrics had to be adjusted for that revision….with a January population increase of 151,000 partially offsetting that, that meant the number of employment aged individuals who were not in the labor force was down by 639,000 from previously published figures to 95,010,000, the labor force participation rate increased from 63.1% to 63.2%, and the employment to population ratio, which we could think of as an employment rate, increased from 60.6% in December to 60.7% in January, all despite fewer workers being employed.…at the same time, the increase in the number unemployed was large enough to increase the unemployment rate, as it rose from 3.9% to 4.0%, and it would have even been higher had the aforementioned furloughed federal employees been properly classified…meanwhile, the number of those who reported they were forced to accept just part time work, which includes many of those federal employees, rose by 490,000, from 4,657,000 in December to 5,147,000 in January, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 7.6% of the labor force in December to 8.1% in January…however, we can expect most of that to be reversed in February…
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 of the press release to avoid the need to scroll up and down the page to view the tables you want to see.
See also:
- January 2019 BLS Jobs Situation – Much Higher Growth Than Predicted
- January 2019 ADP Job Growth Is 213,000
Construction Spending Rose 0.8% in November After Prior Months Were Revised Much Lower
The Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,299.9 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.3%)* above the revised October annualized estimate of $1,289.7 billion and also 3.4 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year…however, the annualized October construction spending estimate was revised nearly 1.5% lower, from $1,308.8 billion to $1,289.7 billion, while the annual rate of construction spending for September was revised more than 1.7% lower, from $1,310.8 billion to $1,287.9 billion…the $22.9 billion downward revision to September construction spending would imply that the 3rd estimate of 3rd quarter GDP growth was overstated by more than 0.19 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer…
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 $993.4 billion, 1.3 percent (±0.8 percent) above the revised October estimate of $980.4 billion. Residential construction was at a seasonally adjusted annual rate of $542.5 billion in November, 3.5 percent (±1.3 percent) above the revised October estimate of $524.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $450.8 billion in November, 1.2 percent (±0.8 percent) below the revised October estimate of $456.1 billion.
- Public Construction: In November, the estimated seasonally adjusted annual rate of public construction spending was $306.5 billion, 0.9 percent (±2.3 percent)* below the revised October estimate of $309.3 billion. Educational construction was at a seasonally adjusted annual rate of $76.7 billion, 2.0 percent (±1.6 percent)* below the revised October estimate of $78.3 billion. Highway construction was at a seasonally adjusted annual rate of $93.4 billion, 1.7 percent (±5.6 percent)* above the revised October estimate of $91.8 billion.
As you can infer from that summary, construction spending would be 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 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… there are multiple prices 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 the prices changes of all of those types of construction separately, we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and thereby get a rough estimate of the real change in construction…
That index showed that aggregate construction costs were up 0.2% in November after being up 1.9% in October, down 0.1% in September and up 0.2% in August…on that basis, we can estimate that construction costs for November were up 2.1% from September, up 2.0% from August, and up 2.2% from July, while they were obviously up 0.2% from October…we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, 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 $1,287,893 for September, $1,311,824 for August, and $1,317,701 for July, while it was at 1,289,658 annually in October and 1,299,875 annually in November…thus to compare the inflation adjusted construction spending of the two recent 4th quarter months to those of the third quarter, our calculation would be ((1,299,875 + 1.002 * 1,289,658) / 2) /(( 1,287,893 *1.021 + 1,311,824 * 1.020 + 1,317,701 * 1.022) / 3) = 0.9721, meaning real construction over the months of October and November was down 2.788% vis a vis the 3rd quarter…in GDP terms, that means real construction for the 4th quarter decreased at an annual rate of 10.695% from that of the 3rd quarter, or at a pace that would subtract about 0.94 percentage points from 4th quarter GDP, should real December construction continue at the same pace as that of October and November.
See also:
November New Home Sales Reported Higher On Much Lower Prices
The Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 657,000 homes annually during the month, which was 16.9 percent (±19.9 percent)* above the revised October rate of 562,000 new single family home sales a year but 7.7 percent (±20.7 percent)* below the estimated annual rate that new homes were selling at in November of last year…the figures in parenthesis indicate the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report, sales new single family homes in October were revised up from the annual rate of 544,000 reported two months ago to 562,000, while home sales in September, initially reported at an annual rate of 553,000 and revised to a 597,000 a year rate with the last report, were also revised higher, to a 613,000 a year rate with this report, and while August’s annualized home sale rate, initially reported at an annual rate of 629,000 and revised from the initially revised 608,000 a year rate to a 603,000 a year rate last report, were further revised lower to a 601,000 rate with this release…
The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 48,000 new single family homes sold in November, up from the estimated 44,000 new homes that sold in October and the 46,000 that sold in September…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $302,400, down from the median sale price of $325,100 in October and down from the median sales price of $343,400 in November a year ago, while the average November new home sales price was $362,400, down from the $395,500 average sales price in October, and down from the average sales price of $388,500 in November a year ago….a seasonally adjusted estimate of 330,000 new single family houses remained for sale at the end of November, which represented a 6.0 month supply at the November sales rate, down from the previously reported 7.4 months of new home supply in October…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increased to 657,000 Annual Rate in November and A few Comments on November New Home Sales.
See also:
- November 2018 Headline New Home Sales Improved?
- December 2018 Pending Home Sales Seasonally Adjusted Index Remains In Contraction Year-over-Year. Flood Insurance Is Now A Problem With
- S and P CoreLogic Case-Shiller 20 City Home Price Index November 2018 Year-over-Year Growth Slowed
November Wholesale Sales Down 0.6%, Wholesale Inventories Up 0.3%
The November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at “$505.3 billion, down 0.6 percent (±0.4 percent) from the revised October level, but [was] up 4.0 percent (±3.5 percent) from the November 2017 level. The September 2018 to October 2018 percent change was revised from the preliminary estimate of down 0.2 percent (±0.5 percent)* to down 0.6 percent (±0.5 percent).*“…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold…
On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this November report estimated that wholesale inventories were valued at a seasonally adjusted “$654.0 billion at the end of November, up 0.3 percent (±0.2 percent) from the revised October level. Total inventories were up 6.5 percent (±4.4 percent) from the revised November 2017 level.“
To estimate the impact of November wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index…although details are not broken out in this report, we’ve previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories…the producer price index for November indicated that prices for finished goods fell 0.4%, prices for intermediate goods intermediate goods fell 0.7%, and prices for unprocessed goods fell 5.3%; thus the 0.3% increase in the nominal value of wholesale inventories was despite falling prices, and hence real wholesale inventories were at least 0.7% higher for the month…however, since real wholesale inventories in the 3rd quarter were much higher each month, any smaller increase real wholesale inventories change in the 4th quarter would still subtract from the growth of 4th quarter GDP.
See also:
- November 2018 Headline Wholesale Sales Declined
- October 2018 Manufacturing New Orders Decline
- January 2019 ISM and Markit Manufacturing Surveys Growth Rate Improved
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