November jobs report, October trade deficit, construction spending, & factory inventories, et al

the major reports released this week were the Employment Situation Summary for November from the Bureau of Labor Statistics and the October report on our International Trade from the Census Bureau, which were both released on Friday….other regular monthly reports included the Full Report on Manufacturers’ Shipments, Inventories and Orders for October and the October report on Construction Spending, both also from the Census Bureau…this week also saw the Dallas Fed Texas Manufacturing Outlook Survey, the last of the regional Fed manufacturing surveys for November, which reported their general business activity composite index rose to -4.9 from last month’s -12.7, still the eleventh negative reading this year, the result of an going recession in the Texas oil patch economy…

privately issued reports this week included the report on light vehicle sales for November from Wards Automotive, which estimated that vehicles sold at a 18.12 million annual rate in November, the same annual rate as in October, and only the first time US auto sales have topped the 18 million rate three months in a row….we also saw the release of the Chicago Purchasing Managers Index (PMI) for October, which reported their Chicago Business Barometer fell 7.5 points, from 56.2 in October to 48.7 in November, in a manufacturing diffusion index where readings below 50 indicate that a plurality of area purchasing managers saw a slowdown in various facets of their business…in addition, the week also saw the release of the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the November Manufacturing Report On Business, which saw the manufacturing PMI (Purchasing Managers Index) slip from 50.1 in October to 48.6 in November, the lowest reading since June 2009, indicating a contraction in manufacturing firms nationally, and the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.9%, down from 59.1% in October, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business…both of those reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally..

November Payroll Jobs up by 211,000; Involuntary Part Time Workers Up by 319,000

the Employment Situation Summary for November showed a modest increase in payroll employment and a similar increase in those who reported they were employed, while the average workweek slipped and involuntary part time work increased….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 211,000 jobs in November, after the payroll job increase for September was revised up from 137,000 to 145,000, and the October jobs increase was revised up from 271,000 to 289,000, making the combined number of jobs going into October 35,000 more than was previously reported ….October job increases were spread through construction, government, and the private service sector, with just the motion picture and sound recording industries shedding 13,400 jobs, the resource extraction sector seeing a loss of 11,000 jobs, and manufacturing industries seeing a net decrease of 1,000 jobs…construction trades led the payroll job increases, with a jump of 46,000 jobs, 25,800 of which were with residential specialty trade contractors, followed by the leisure and hospitality sector, where 39,000 jobs were added, 31,500 of which were in bars and restaurants….27,000 jobs were added in the broad professional and business services category, with the increase of 28,400 jobs in professional and technical services, of which 11,000 were in accounting and bookkeeping…the health care and social assistance sector added 32,200 jobs, with the addition of 13,400 jobs in hospitals, while another 30,700 seasonally adjusted jobs were added in retail, even as clothing and accessories stores appeared to have shed 14,200 jobs in November…(note that actual retail jobs increased by 394,100 in November, of which 79,400 were new jobs in clothing stores; however, a number of clothing stores that normally hire in November apparently hired in October this year, and hence the seasonally adjusted count for clothing store jobs showed an increase in October offset by a decrease vis a vis the normal gain in November)….employers also reported that average hourly earnings for all employees rose by 4 cents to $25.25 after an October increase of 9 cents, dropping the wages gain over the last 12 months to 2.3%…meanwhile, the average workweek for all private employees was slipped a tenth of an hour to 34.5 hours, although the factory workweek and factory overtime were both unchanged, at 40.7 hours and 3.2 hours, respectively…

meanwhile, the November household survey estimated that the seasonally adjusted count of those who were employed rose by 244,000 to 149,364,000, while the number of unemployed rose by 29,000 to 7,937,000, which left the unemployment rate unchanged at 5.0%…with the increase in the number employed and unemployed greater than the 206,000 increase in the civilian working age population, the count of those not in the labor force fell by 67,000 to 94,446,000, which was enough to increase the labor force participation rate from 62.4% in October to 62.5% in November, still just a bit more than 0.1% off a 38 year low …with the modest increase in the employed, the employment to population ratio, which we could think of as an employment rate, remained unchanged at 59.3%…however, there was a 319,000 jump in the number who reported they were involuntarily working part time, up from 5,767,000 in October to 6,086,000 in November…as a result, the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, rose by 0.1% to 9.9%… 

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…thus, if you should see lines of interest while you’re reading it such as “In November, 1.7 million persons were marginally attached to the labor force, down by 392,000 from a year earlier. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)”,  you can quickly open Table A-16, where you will find that of the 1,717,000 so-called marginally attached workers, 594,000 were considered discouraged workers, because they said they didn’t look for work over the prior 4 weeks because they believed no jobs are available for them due to their lack of education, their age, or other type of discrimination…

October Trade Deficit Increased 3.3%; Deficits for July, August and September Revised Higher

our trade deficit rose by 3.3% October, after falling by a revised 12.9% in September, as the net value of both our exports and imports decreased….the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $1.4 billion to $43.9 billion in October from a September deficit which was revised from $41.8 billion to $42.5 billion ….the value of our October exports fell by $2.7 billion to $184.1 billion on a $3.1 billion decrease to $123.8 billion in our exports of goods which was partially offset by an increase of $0.4 billion to $60.3 billion in our exports of services, while our imports fell $1.3 billion to $228.0 billion on a $1.0 billion decrease to $186.8 billion in our imports of goods and a $0.2 billion decrease to $41.1 billion in our imports of services…export prices averaged 0.2% lower in October, so the real growth in exports was greater by that percentage, while import prices were 0.5% lower, similarly incrementally increasing growth in real imports…

the drop in our October exports included significant decreases in our exports of industrial supplies, capital goods, foods and feeds, and consumer goods…referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $1,609 million to $33,575 million on a $443 million drop in our exports of fuel oil, a $417 million drop in our exports of other petroleum products, a $183 million drop in our exports of fertilizers, and decreases in excess of $100 million in our exports of non-ferrous metals not otherwise listed, other unlisted chemicals, non-monetary gold and unmanufactured agricultural materials…our exports of capital goods fell by $928 million to $44,409 million on a $515 million decrease in our exports of industrial engines, a $457 million decrease in our exports of civilian exports, and a $345 million decrease in our exports of electrical apparatuses which were partially offset by a $565 million increase in our exports of telecommunications equipment…our exports of foods, feeds and beverages fell by $589 million to $10,209 million on a $203 million drop in our exports of corn, a $146 million drip in our exports of wheat, and a $145 million drop in our exports of nuts, which were partially offset by a $145 million increase in our exports of soybeans…our exports of consumer goods fell by $516 million to $16,515 million on decreases of $352 million in our exports of artworks and antiques and $316 million in our exports of jewelry…in addition, our exports of automotive vehicles, parts and engines fell by $162 million to $12,783 million, while only our exports of goods not categorized by end use rose saw an increase in October, rising by $813 million to $5,947 million.

Exhibit 8 in the Full Release and Tables gives us details on our imports and shows that a $2,040 drop to $36,409 million in our imports of industrial supplies and materials was largely responsible for the October drop in imports, as our imports of crude oil fell by $1,076 million, our imports of fuel oil fell by $319 million, our imports of other petroleum products fell by $427 million, and our imports of fertilizers fell by $171 million…in addition, our imports of foods, feeds, and beverages fell by $430 million to $10,323 on a $147 million decrease in our imports of meat and smaller decreases in most other food imports…meanwhile, our imports of capital goods rose by $538 million to $49,822 on a $358 million increase in our imports of telecommunications equipment and a $352 million increase in our imports of civilian aircraft, our imports of automotive vehicles, parts, and engines rose $287 million to $29,076 million, and our imports of consumer goods rose $245 million to $51,707 on increases of $704 million in our imports of cell phones, $511 million in our imports of artwork and antiques, and $265 million in our imports of gem diamonds, which were partially offset by decreases of $279 million in our imports of footwear and $204 million in our imports of pharmaceutical preparations…in addition, our imports of goods not categorized by end use rose by $232 to $7,376 million…

to assess the impact of October trade on 4th quarter growth figures, we must first adjust the value of October imports and exports for inflation and then compare those figures to the similarly adjusted 2nd quarter figures…exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here…from that table, we find that 3rd quarter real exports of goods averaged 120,999 million monthly in 2009 dollars, while inflation adjusted October exports were at 119,660 million in the same 2009 dollar quantity index representation…annualizing the change between the two figures, we find that 4th quarter real exports are running at a 4.5% annual rate below those of the 3rd quarter, or at a pace that would subtract about 0.36 percentage points from 4th quarter GDP….in a similar manner, we find that our 3rd quarter real imports averaged 179,814 million monthly in chained 2009 dollars, while inflation adjusted October imports were at 179,987 million…that would indicate that so far in the 4th quarter, our real imports have increased at a 0.39% annual rate over those of the 3rd quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their 0.39% rate of increase would subtract another 0.05 percentage points from quarter GDP…hence, if October trade figures are maintained throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.41 percentage points from the growth of 4th quarter GDP…note that we have not computed the impact of the change in services here because we don’t have access to their price changes…

in addition to the revision to the September trade data, this report also indicates revisions to trade for each of the months from April to August, which would thus also revise GDP for the 2nd quarter and the 3rd quarter…revisions to 2nd quarter data will not be made until the next annual revision, which wont be until next summer, but the revisions to third quarter trade will be incorporated into the 3rd estimate of 3rd quarter GDP, which will be released on the 22nd of this month…this report indicates that the trade deficit for September was revised from $40,812 million to $42,457 million (see table 1, pdf) and also indicates that the trade deficit for August was revised from $48,017 million to $48,811 million, while the trade deficit for July was revised from $41,807 million to $42,433 million (NB: last month’s pdf is here)…that gives us a total increase in the trade deficit of $3,065 million for those months vs previously published figures, or worsening of the trade deficit for the quarter at a $12.3 billion annual rate…such a further deterioration of our third quarter trade would subtract another 0.07 percentage points from previously published GDP figures, even before counting any inflation adjustments…  

October Construction Spending Up 1.0% on 1.0% Higher Costs

the October construction spending report (pdf) from the Census Bureau estimated that our seasonally adjusted rate of construction spending in October would work out to $1,107.4 billion annually if extrapolated over an entire year, which was 1.0 percent (±1.8%)* above the revised estimate of construction spending at a $1,096.6 billion annual rate in September and 13.0 percent (±2.5%) above the estimated annualized level of construction spending in October of last year…the annualized September spending estimate was revised up more than 0.2%, from $1,094.2 to $1,096.6 billion, and the annualized level of August construction spending was also revised up up more than 0.2%, from $1,087.5 billion to $1,089.8 billion, which together should add about 0.03 percentage points to the 3rd estimate of 3rd quarter GDP growth, when that report is released on December 22nd..

private construction spending was at a seasonally adjusted annual rate of $802.4 billion, 0.8 percent (±1.0%) above the revised September estimate, with residential spending rising 1.0 percent (±1.3%) to an annual rate of $399.0 billion while private non-residential construction spending rose 0.6 percent (±1.0%) to an annual rate of $403.4 billion, led by a 3.0% increase to $90,079 million in spending for manufacturing facilities…..meanwhile, public construction spending was estimated to be at a rate of  $304.9 billion annually, 1.4 percent (±3.0%) above the revised September estimate, led by a 16.3% increase to $9,768 in spending for public safety and underpinned by a 1.1% increase to $94,072 million for highways and streets..

construction spending inputs 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, gauging the actual impact of this October construction spending report on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price…the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, such as the Turner Construction building-cost indices for several types of buildings and the Engineering News Record construction cost index for utilities construction, while it specifies use of the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction for residential investment…that index, based on 2005 construction costs = 100, was at 114.3 in October, up from 113.9% in September, which suggests real residential construction rose 0.6% for the month, but more importantly was 1.7% higher than the inflation adjusted average of residential construction in the 3rd quarter months of July, August, and September…that would mean real residential investment has risen at a 7.2% annual rate so far in the quarter, a pace that could add about 0.24 percentage points to 4th quarter GDP….on the other hand, the 1.0% increase in the producer price index for final demand construction suggests that the October increase in non-residential construction spending was entirely due to higher prices, which would suggest that real construction was unchanged for the month and would contribute little to GDP…that’s the way the Atlanta Fed saw it, as they reduced their estimate of the contribution of construction to 4th quarter GDP by 3 basis points with this release…

October Factory Inventories Down Again, September Revised Lower

as we learned a few months ago, the Census Bureau does not collect data on new orders for non durable goods for their widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), aka “the factory orders report” because, due to the quick turnaround time on non-durable goods orders, they figured that shipments of those goods would be a fair proxy for orders…that, in effect, leaves the “new orders” and “unfilled orders” sections of this report useful as not much more than revised updates to the advance report on durable goods we covered last week…in the case of October new orders for durable goods, then, the October Full Report showed that new orders for manufactured durable goods rose $6.8 billion or 2.9 percent to $238.8, which was revised from the 3.0% increase reported last week…adding the virtually unchanged shipments of non-durable goods to that, the Census Bureau reported that new orders for manufactured goods increased $6.8 billion or 1.5% to $473.9 billion in October, after falling 0.8% in September..

more importantly, then, this report indicated that the value of factory shipments fell by $2.5 billion or 0.5 percent to $475.2 billion, which followed a decrease of 0.3% in September, and hence factory shipments have now been down 6 out of the last 7 months…shipments of durable goods were down by 1.0%, unrevised from last week’s durables report, as shipments of automobiles fell 6.4% and shipments of commercial aircraft were down 4.7%, leading to a 2.5% drop in overall shipments of transportation equipment…without the transportation sector, factory shipments were still 0.1% lower….the value of shipments (and hence “new orders”) of non-durable goods rose by $45 million, which is considered statistically unchanged, as a 2.7% drop in shipments of agricultural chemicals was offset by a 2.2% increase in shipments from pulp, paper, and paperboard mills…however, since producer prices for foodstuffs, which account for 28% of non-durable factory shipments, were down 0.8%, and most other non-durable producers prices were down as well, real shipments of non-durable goods were certainly much higher than the nominal value would lead us to believe…

meanwhile, the aggregate value of October factory inventories, which have been down 4 months in a row, fell by $0.6 billion or 0.1 percent to $643.6 billion, following a revised 0.5% decrease in September…inventories of durable goods, down five of the last six months, fell by $1.0 billion or 0.3 percent to $397.0 billion, revised from the 0.2% drop reported last week, as the value of inventories of primary metals, which were priced 1.0% lower, fell $0.3 billion or 0.9 percent to $35.7 billion…the value of non-durable goods’ inventories rose $0.4 billion or 0.2 percent to $246.5 billion, their first increase in 4 months, following a decrease of 0.4% in September…the value of inventories of petroleum and coal products, which increased for the first time in 4 months, drove the increase in non-durables, as they rose by $0.5 billion or 1.4 percent to $34.1 billion, which is likely a real increase as October energy prices were flat…similarly, since producer prices for goods fell 0.4% in October, real factory inventories would have increased by around 0.3%, suggesting a small boost to 4th quarter GDP….meanwhile, the revision of September factory inventories from the previously reported $645.1 billion to $644.1 billion with this report should result in a downward revision to 3rd quarter GDP on the order of 2 or 3 basis points…

(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 from the aforementioned GGO posts, contact me…)

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