Written by rjs, MarketWatch 666
February’s jobs report; January’s trade deficit, construction spending, factory inventories, & wholesale sales
In addition to the Employment Situation Summary for February from the Bureau of Labor Statistics, this week’s major releases included four reports that will input into 1st quarter GDP: the Commerce Dept report on our International Trade for January, the January report on Construction Spending, the Full Report on Manufacturers’ Shipments, Inventories and Orders for January and the January report on Wholesale Trade, Sales and Inventories, all from the Census Bureau.
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In addition, the Fed released the Consumer Credit Report for January, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.0 billion, or at a 3.4% annual rate, as non-revolving credit expanded at a 5.8% annual rate to $3,112.6 billion while revolving credit outstanding contracted at a 3.3% rate to $1,090.1 billion.
The week’s privately issued reports included the ADP Employment Report for February and the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 16.83 annual rate in February, down 0.5% from the revised 16.92 million annual sales rate in January, and down 0.8% from the 16.96 million annual sales rate in February a year ago…in addition, this week saw both of the widely followed purchasing manager’s survey from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 50.1% in February, down from 50.9% in January, which suggests stagnation among manufacturing firms nationally, while the February Non-Manufacturing Report On Business reported their NMI (non-manufacturing index) rose to 57.3%, up from 55.5% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in February.
See also:
- February 2020 ISM and Markit Services Surveys Disagree
- February 2020 Monthly Budget Review: Outlays Up 9% From Last Fiscal Year-to-Date
- January 2020 Headline Consumer Credit Year-over-Year Growth Rate Significantly Declines
Employers Add 273,000 Jobs in February, Unemployment Rate Falls to 3.5%
The Employment Situation Summary for February reported a second consecutive large payroll job increase, probably at least in part due to unseasonably warm weather during the reference weeks of both January and February, while the employment rate and the unemployment rate both fell 0.1%,…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 273,000 jobs in February, after the previously estimated payroll job increase for change for January was revised up by 48,000 from 225,000 to 273,000, and the payroll jobs increase for December was revised from 147,000 to 184,000…hence, job gains have now averaged 243,000 per month over the past 3 months, quite a bit more than the 2019 average of 176,000 jobs per month…the unadjusted data shows that there were actually 880,000 more payroll jobs extant in February than in January, as large seasonal job increases in sectors such as professional & business services, leisure and hospitality and public and private education were leveled by the seasonal adjustments…
Seasonally adjusted job increases in February were spread through the private goods producing and service sectors and government, while retail sales, wholesale sales, and the transportation and warehousing sector saw seasonally adjusted job decreases of 7,000, 2,600, and 4,000 and respectively… employment in health care and social assistance rose by 56,500, led by the addition of 17,500 jobs in individual and family services and 9,500 jobs in doctor’s offices… the leisure and hospitality sector saw an increase of 51,000 jobs with the addition of 52,600 more jobs in bars and restaurants… …in addition, employment in the various branches of government increased by 45,000 with the addition of 15,500 jobs in state education systems and 12,200 jobs in local government excluding local school districts…seasonally adjusted construction jobs increased by 42,000, with 13,500 of those working for nonresidential specialty trade contractors and 12,200 more working for residential specialty trade contractors….the broad professional and business services sector added 41,000 jobs, with a increases of 10,300 jobs in both architectural and engineering services and in administrative and waste services…another 26,000 jobs were added by the financial sector, with 12,900 of those in real estate, rental and leasing….employment in manufacturing rose by 15,000, led by the addition of 7,800 jobs in the manufacture of transportation equipment…meanwhile, employment in other major sectors, including resource extraction, information, and utilities saw job gains of less than 10,000 over the month….
The establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $28.52 an hour in February, after it had increased by 5 cents an hour in January, revised from the 7 cent increase reported last month; at the same time, the average hourly earnings of production and non-supervisory employees increased by 8 cents an hour to $23.96 an hour…employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.4 hours in February, while hours for production and non-supervisory personnel increased by 0.1 hour to 33.7 hours…in addition, the manufacturing workweek increased by 0.2 hour to 40.7 hours, while average factory overtime was up 0.1 hour to 3.2 hours…
Meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 45,000 to 158,759,000, while the similarly estimated number of those unemployed fell by 105,000 to 5,787,000; which together meant there was a 60,000 decrease in the total labor force…since the working age population had grown by 126,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 186,000 to 95,082,000…with the decrease of those in the labor force statistically insignificant compared to the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.4%….however, the increase in number employed as a percentage of the increase in the population was small enough to lower the employment to population ratio, which we could think of as an employment rate, from 61.2% in January to 61.1% in February …at the same time, the decrease in the number unemployed was large enough reduce the unemployment rate from 3.6% in January to 3.5% in February….on the other hand, the number who reported they were involuntarily working part time rose by 136,000 to 4,318,000 in February, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 6.9% in January to 7.0% 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 the press release to access the data while avoiding the need to scroll up and down the page.
See also:
- February 2020 BLS Jobs Situation Again Shows Significant Improvement
- February 2020 ADP Job Growth Is 183,000
- Job Cuts Fall 16% in February 2020. Coronavirus Had No Effect Yet On Job Cuts.
US Trade Deficit Fell 6.7% in January, Led by Lower Imports of Nonmonetary Gold and Automobiles
Our trade deficit fell 6.7% in January, partly reversing the revised 11.0% increase in December, as the value of our exports decreased but the value of our imports decreased by more…the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit fell by $3.3 billion to $45.3 billion in January, from a December deficit which was revised from $48.9 billion to $48.6 billion….the value of our January exports fell by $0.9 billion to $208.6 billion as a $1.4 billion decrease to $136.4 billion in our exports of goods was partly offset by an increase of $0.5 billion to $72.2 billion in our exports of services, while our imports fell by $4.2 billion to $253.9 billion on a $4.1 billion decrease to$203.4 billion in our imports of goods and a $0.1 billion decrease to $50.5 billion in our imports of services…export prices averaged 0.7% higher in January, which means the relative real decrease in exports for the month was greater than the nominal decrease by that percentage, while import prices were unchanged, meaning that the real contraction in real imports was the same as the nominal decrease reported here…
The decrease in our January exports of goods was mostly due to lower exports of aircraft, oil & oil products, which were partially offset by an increase in our exports of automotive vehicles, parts, and engines…referencing the Full Release and Tables for January (pdf), in Exhibit 7, we find that our exports of capital goods fell by $1,002 million to $44,381 million on a $1,683 million decrease in our exports of civilian aircraft and a $260 million decrease in our exports of aircraft engines, partly offset by a $390 million increase in our exports of telecommunications equipment and a $232 million increase in our exports of medicinal equipment, while our exports of industrial supplies and materials fell by $970 million to $45,172 million on a $781 million decrease in our exports of crude oil, a $580 million decrease in our exports of fuel oil, and a $487 million decrease in our exports of non-monetary gold, which were partly offset by a $432 million increase in our exports of other precious metals…in addition, our exports of other goods not categorized by end use fell by $277 million to $5,382 million…partially offsetting the decreases in those end use categories, our exports of automotive vehicles, parts and engines rose by $851 million to $13,229 million on a $378 million increase in our exports of passenger cars and a $346 million increase in our exports of trucks, buses, and special purpose vehicles, and our exports of foods, feeds and beverages rose by $523 million to $10,993 million on a $314 million increase in our exports of soybeans, while our exports of consumer goods increased by $105 million to $16,550 million as a $214 million increase in our exports of gem diamonds and increased exports of several other consumer items were only partly offset by decreases of $411 million in our exports of artwork, antiques and other collectibles and $210 million cell phones and similar household goods…
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that the January decrease in our imports was led by lower imports of industrial supplies and materials and of uncategorized other goods….our imports our imports of industrial supplies and materials fell by $2,428 million to $42,355 million on a $1,291 million decrease in our imports of non-monetary gold, a $607 million decrease in our imports of petroleum products other than fuel oil, a $413 million decrease in our imports of crude oil, a $282 million decrease in our imports of fuel oil, and a $263 million decrease in our imports of natural gas, which were partially offset by a $391 million increase in our imports of organic chemicals, while our imports of other goods not categorized by end use fell by $1,390 million to $9,525 million…in addition, our imports of automotive vehicles, parts and engines fell by $671 million to $29,105 million as a $1,108 million decrease in our imports of passenger cars was partly offset by a $485 million increase in our imports of parts and accessories other than engines, chassis, or tires, and our imports of capital goods fell by $638 million to $55,426 million on a $341 million decrease in our imports of telecommunications equipment and a $324 million decrease in our imports of civilian aircraft…partly offsetting the decreases in those import categories, our imports of foods, feeds, and beverages rose by $602 million to $12,893 million on a $323 million increase in our imports of beer and wine and a $237 million increase in our imports of foods not otherwise listed, while our imports of consumer goods increased by $556 million to $52,453 million on a $853 million increase in our imports of pharmaceutical preparations and a $406 million increase in our imports of televisions and video equipment, which themselves were offset by a $630 million decrease in our imports of cellphones….
The Full Release and Tables pdf for this month’s report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected countries:
The January figures show surpluses, in billions of dollars, with South and Central America ($5.8), Hong Kong ($1.8), Brazil ($1.7), United Kingdom ($1.6), and OPEC ($1.3). Deficits were recorded, in billions of dollars, with China ($23.7), European Union ($13.5), Mexico ($9.2), Germany ($5.6), Japan ($5.3), Italy ($2.6), Taiwan ($1.8), India ($1.7), Canada ($0.7), France ($0.7), South Korea ($0.6), Singapore ($0.1), and Saudi Arabia (less than $0.1).
- The deficit with Canada decreased $3.7 billion to $0.7 billion in January. Exports increased $0.7 billion to $24.6 billion and imports decreased $2.9 billion to $25.3 billion.
- The deficit with China decreased $2.1 billion to $23.7 billion in January. Exports increased $0.2 billion to $7.7 billion and imports decreased $1.8 billion to $31.4 billion.
- The deficit with Japan increased $0.9 billion to $5.3 billion in January. Exports decreased $1.1 billion to $5.7 billion and imports decreased $0.2 billion to $10.9 billion.
To gauge the impact of January trade on 1st 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 for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here….from that table, we can figure that 4th quarter real exports of goods averaged 148,271 million monthly in chained 2012 dollars, while inflation adjusted January goods exports were at 146,902 million in that same 2012 dollar quantity index representation… computing the annualized change between those two figures, we find that January’s real exports of goods are thus falling at a 3.64% annual rate from those of the 4th quarter, or at a pace that would subtract about 0.29 percentage points from 1st quarter GDP growth if continued through February and March…in a similar manner, we find that our 4th quarter real imports of goods averaged 226,868.3 million monthly in chained 2012 dollars, while inflation adjusted goods imports in January were at 224,599 million…that would indicate that so far in the 1st quarter, we have seen our real imports of goods decrease at a 3.94% annual rate from those of the 4th quarter…since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 3.96% rate would conversely add 0.48 percentage points to 1st quarter GDP….hence, if our January trade in goods deficit is maintained at the same level throughout the 1st quarter, the modest improvement in our balance of trade in goods would add about 0.19 percentage points to the growth of our 1st quarter GDP….
Note that both exports and imports were revised from July through December to incorporate more comprehensive and updated quarterly and monthly data; in addition, seasonally adjusted data for all months in 2019 were revised so that the totals of the seasonally adjusted months equalled the annual totals…the obvious impact of these revisions will be to necessitate the revision of GDP figures for each quarter of 2019; however, for quarters other than the 4th, which still has another estimate due out at the end of the month, those GDP revisions will not take place until the annual GDP revisions, which are typically released near the end of July.
See also:
Construction Spending Up 1.8% in January after December and November Figures Are Revised Much Higher
The Census Bureau’s report on January construction spending (pdf) estimated that January’s seasonally adjusted construction spending would work out to $1,369.2 billion annually if extrapolated over an entire year, which was 1.8 percent (±0.8 percent) above the revised annualized estimate of $1,345.5 billion for construction spending in December, and 6.8 percent (±1.3 percent) above the estimated annualized level of construction spending of January last year…the December spending estimate was revised from the $1,327.7 billion published a month ago to $1,345.5 billion, while November’s annualized construction spending was revised from $1,329.9 billion to $1,342.49 billion…since those figures are annualized, the combined upward revisions of $30.2 billion to November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore raise the quarter’s annualized construction spending by over $10 billion, and would thus imply an upward revision of about 0.23 percentage points to fourth quarter GDP when the third estimate is released at the end of March, assuming there are major changes or imbalances in the previously applied inflation adjustments…
A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:
- Private Construction Spending on private construction was at a seasonally adjusted annual rate of $1,022.7 billion, 1.5 percent (±0.7 percent) above the revised December estimate of $1,007.6 billion. Residential construction was at a seasonally adjusted annual rate of $554.8 billion in January, 2.1 percent (±1.3 percent) above the revised December estimate of $543.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $468.0 billion in January, 0.8 percent (±0.7 percent) above the revised December estimate of $464.1 billion.
- Public Construction In January, the estimated seasonally adjusted annual rate of public construction spending was $346.5 billion, 2.6 percent (±1.5 percent) above the revised December estimate of $337.8 billion. Educational construction was at a seasonally adjusted annual rate of $81.5 billion, 0.7 percent (±1.8 percent)* above the revised December estimate of $80.9 billion. Highway construction was at a seasonally adjusted annual rate of $103.9 billion, 5.4 percent (±4.6 percent) above the revised December estimate of $98.6 billion.
As you can tell from that summary, construction spending would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of January’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…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 all of those types of construction separately, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate… that index showed that aggregate construction costs were up 0.8% in January, after they had been unchanged in both December and in November…
On that basis, we can thus estimate that January construction costs were roughly 0.8% more than those of November, and about 0.8% more than October, and of course, 0.8% more than December…we’ll then use those percentages to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, which is arithmetically the same as deflating January construction spending, for purposes of comparison.…this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,345,467 in December, $1,342,490 in November, and $1,320,788 in October…thus to compare January’s nominal construction spending of $1,369,223 million to inflation adjusted figures of the fourth quarter, our calculation is: (1,369,223 / ((( 1,345,467 * 1.008) + (1,342,490 * 1.008) + (1,320,788 *1.008)) / 3) = 1.0165447, hence indicating that adjusted for inflation, construction spending in January was up 1.6545% vis a vis that of the 4th quarter, or up at a 6.78% annual rate…then, to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and January’s inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is rising at a rate that would add about 0.51 percentage points to 1st quarter GDP, if in the unlikely event that there is no further change in real construction over the next two months.
See also:
January Factory Shipments Down 0.5%, Factory Inventories 0.1% Lower
The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by a rounded $2.3 billion or 0.5 percent to $497.9 billion in January, following an increase of 1.9% to $500.2 billion in December, which was revised from the increase of 1.8% to $499.3 billion that was reported for December a month ago….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate in respect to its revised updates to the January advance report on durable goods which was released last week..on those durable goods revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:
- Summary: New orders for manufactured goods in January, down two of the last three months, decreased $2.3 billion or 0.5 percent to $497.9 billion, the U.S. Census Bureau reported today. This followed a 1.9 percent December increase. Shipments, down following three consecutive monthly increases, decreased $2.3 billion or 0.5 percent to $501.8 billion. This followed a 0.5 percent December increase. Unfilled orders, up three of the last four months, increased $0.1 billion or virtually unchanged to $1,157.0 billion. This followed a virtually unchanged December increase. The unfilled orders‐to‐shipments ratio was 6.63, down from 6.65 in December. Inventories, down following four consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $703.4 billion. This followed a 0.4 percent December increase. The inventories‐ to‐shipments ratio was 1.40, unchanged from December.
- New orders for manufactured durable goods in January, down two of the last three months, decreased $0.4 billion or 0.2 percent to $246.0 billion, unchanged from the previously published decrease. This followed a 2.8 percent December increase. Transportation equipment, down four of the last five months, drove the decrease, $1.7 billion or 2.1 percent to $82.2 billion. New orders for manufactured nondurable goods decreased $1.9 billion or 0.8 percent to $251.9 billion.
- Shipments of manufactured durable goods in January, down seven consecutive months, decreased $0.4 billion or 0.2 percent to $249.9 billion, unchanged from the previously published decrease. This followed a 0.2 percent December decrease. Transportation equipment, also down seven consecutive months, drove the decrease, $1.2 billion or 1.4 percent to $82.3 billion. Shipments of manufactured nondurable goods, down following three consecutive monthly increases, decreased $1.9 billion or 0.8 percent to $251.9 billion. This followed a 1.1 percent December increase. Petroleum and coal products, down following four consecutive monthly increases, drove the decrease, $2.1 billion or 3.8 percent to $53.9 billion.
- Unfilled orders for manufactured durable goods in January, up three of the last four months, increased $0.1 billion or virtually unchanged to $1,157.0 billion, unchanged from the previously published increase. This followed a virtually unchanged December increase. Fabricated metal products, up following four consecutive monthly decreases, drove the increase, $0.2 billion or 0.2 percent to $86.1 billion.
- Inventories of manufactured durable goods in January, down following sixteen consecutive monthly increases, decreased less than $0.1 billion or virtually unchanged to $435.3 billion, down from the previously published virtually unchanged increase. This followed a 0.3 percent December increase. Machinery, down six consecutive months, drove the decrease, $0.5 billion or 0.7 percent to $71.0 billion. Inventories of manufactured nondurable goods, down following two consecutive monthly increases, decreased $0.5 billion or 0.2 percent to $268.1 billion. This followed a 0.4 percent December increase. Chemical products, down six of the last seven months, drove the decrease, $0.6 billion or 0.7 percent to $89.8 billion.
To gauge the effect of January’s nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories decreased 0.2% to $244,560 million; the value of work in process inventories was down 0.1% at $221,582 million, while materials and supplies inventories were valued 0.1% higher at $237,261 million…the producer price index for January indicated that prices for finished goods increased 0.1%, that prices for intermediate processed goods were 0.3% lower, and that prices for unprocessed goods were on average 0.6% lower….assuming similar valuations for like inventories, that would suggest that January’s real finished goods inventories were about 0.3% less than December’s, that real inventories of intermediate processed goods were about 0.2% greater, and that real raw material inventory inventories were around 0.7% greater…while the 4th quarter quarter GDP inventory increase was relatively small, resulting in almost a full point hit to GDP, that was as a large increase in real factory inventories was offset by decreases in real retail and wholesale inventories….hence, taken alone, the relatively small January increase in real factory inventories will have a modest negative impact on 1st quarter GDP.
See also:
January Wholesale Sales Up 1.6%, Wholesale Inventories Down 0.4%
The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $504.6 billion, up 1.6 percent (±0.5 percent) from the revised December level and up 2.2 percent (±0.7 percent) from the revised wholesale sales of January 2019….the December preliminary estimate of wholesale sales was revised up from $494.4 billion to $496.743 billion, which meant December’s sales were 0.2% below the November level, rather than down 0.7% as was reported a month ago…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 sold….
On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $669.9 billion at month end, a decrease of 0.4 percent (+/-0.4%) from the revised December level but 0.4 percent (±0.9)* percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $674.5 billion to $674.0 billion, now down 0.3% from November…
Like factory inventories, these wholesale inventories will also be adjusted the producer price index for January in national accounts data…with notable exceptions such as farm products, chemicals and petroleum, we’ve estimated that wholesale inventories appear to be roughly 70% finished goods…with the January producer price index for finished goods up by 0.1% while the producer price indexes for intermediate goods & raw goods were 0.3% and 0.6% lower respectively, we can thus figure that January’s real wholesale inventories would be down by close to 0.4%…however, since the real wholesale inventory decrease over the 4th quarter was even greater, January’s wholesale inventories decrease alone would not yet be enough to hit 1st quarter GDP.
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