January jobs report; December’s income and outlays, trade deficit, construction spending, factory inventories and Mortgage Monitor

in addition to the Employment Situation Summary for January from the Bureau of Labor Statistics, this week also saw the release of four December reports that input into our GDP, three of which could result in revisions to the 4th quarter GDP estimate released last week: the Census report on our International Trade for December, the Full Report on Manufacturers’ Shipments, Inventories and Orders for December and the December report on Construction Spending, both also from the Census Bureau…the December report on Personal Income and Spending from the BEA, which includes personal consumption expenditure data for December, was released on Monday and had already been incorporated into the advance GDP figures released Friday…in addition, this week brought us the Consumer Credit Report for December from the Fed, which showed that overall credit expanded by a seasonally adjusted $21.3 billion, or at a 7.2% annual rate, as non-revolving credit expanded at a 7.1% rate to $2,611.2 billion and revolving credit outstanding rose at a 8% rate to $935.6 billion…the BLS also released the 4th Quarter Report on Labor Productivity and Costs, which showed nonfarm business sector labor productivity decreased at a 3.0% annual rate during the fourth quarter, as hours worked increased 3.3% and output of goods and services from those hours increased just 0.1%…

privately issued reports this week included the report on light vehicle sales for January from Wards Automotive, which estimated that vehicles sold at a 17.46 million annual rate in January, the strongest January sales rate since 2006, the Mortgage Monitor for December (pdf) from Black Knight Financial Services, and both of the widely followed reports from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) increased from 48.0% in December to 48.2% in January, still indicating an ongoing contraction in manufacturing firms nationally, and the January Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 53.5%, down from 55.8% in December, 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…

Employers Add 151,000 Jobs in January; Official Jobless Rate Drops to 4.9%

the Employment Situation Summary for January indicated weakness in payroll job formation coupled with a decent increase in average hourly pay, while the unemployment rate fell and the labor force participation rate rose….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 151,000 jobs in January, after the payroll job increase for December was revised down from 292,000 to 262,000, and the November jobs increase was revised up from 252,000 to 280,000, making the combined number of jobs created in those months 2,000 less than was previously reported…as is usual for January, this report included the results of the annual benchmark revision, which revised prior reports and set March 2015 (the benchmark) at 140,099,000 payroll jobs, 206,000 less than previously reported, which was narrowed to 105,000 fewer jobs by December; hence, 2015 job growth totaled 2.74 million payroll jobs, up from the prior reading of 2.65 million, while job growth in earlier years was reduced…since all the revised figures are incorporated into this months 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 construction, manufacturing, and the private service sector, gains which were partially offset by job losses in the resource extraction sector, transportation and warehousing, educational services, government, and temporary help services…57,700 jobs were added in retail sales, with 13,300 of those in clothing stores and 13,200 in department stores…another 48,800 jobs were added in accommodation and food services, as bars and restaurants increased payrolls by 46,700…the health care and social assistance sector added another 44,000 jobs, with 23,700 of those in hospitals….29,000 jobs were added in manufacturing, spread through a large variety of both durable goods and non-durable goods manufacturers… and both the financial services sector and construction trades saw an addition of 18,000 jobs…meanwhile, private educational services shed 38,500 jobs in January, due to larger than normal seasonal layoffs, and the transportation and warehousing sector shed 20,300 jobs, as 14,400 more couriers and messengers than normal were let go, following stronger than normal seasonal hiring in the prior 2 months…there were also 7,000 fewer resource extraction jobs, as the mining and drilling industries cut 6,600…finally, the normally strong professional and business services category, which added 60,000 jobs in December, only added 9,000 in January, as temporary help service jobs were reduced by 25,000…partially offsetting the weak job creation, the average workweek for all private employees rose by 0.1 hour to 34.6 hours, with the manufacturing workweek up by 0.1 hour while factory overtime was unchanged at 3.3 hours…employers also reported that average hourly earnings for all employees rose by 12 cents to $25.39, after December’s hourly earnings were unchanged, leaving us with a 2.5% wage gain over the past 12 months…

meanwhile, the January household survey estimated that the seasonally adjusted count of those who were employed rose by 615,000 to 150,544,000, while the number of unemployed fell by 113,000 to 7,791,000, resulting in a drop in the unemployment rate from 5.0% to 4.9%…after accounting for the annual adjustments to the population controls, the net increase in the number employed less the decrease in the number unemployed was greater than the 502,000 increase in the civilian working age population, so the count of those not in the labor force fell by 41,000 to 94,062,000, which was enough to increase the labor force participation rate from 62.6% in December to 62.7% in January, its third increase in as many months….with the decent increase in the employed, the employment to population ratio, which we could think of as an employment rate, also rose by 0.1% to 59.6%…January also saw a 34,000 drop in the number who reported they were involuntarily working part time, from 6,022,000 in December to 5,988,000 in January…however, that decrease was not enough to change the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, which remained at 9.9%, same as in December…

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, when you read a paragraph such as “The unemployment rates for adult men (4.5 percent) and Whites (4.3 percent) declined in January. The jobless rates for adult women (4.5 percent), teenagers (16.0 percent), Blacks (8.8 percent), Asians (3.7 percent), and Hispanics (5.9 percent) showed little change over the month. (See tables A-1, A-2, and A-3.)”, you can quickly open Table A-1, Table A-2.and Table A-3, where you would see that the unemployment rate for adult men fell 0.3%, from 4.2% in December to 3.9% in January, while the “little changed”  unemployment rate for Blacks actually rose from 8.3% to 8.8%…

December Personal Income Up 0.3%, Personal Consumption Flat

while our personal consumption expenditures (PCE), the major component of GDP, are probably the most important metric we get from the Personal Income and Outlays report for December from the BEA, this report also gives us personal income data, disposable personal income, which is income after taxes, our monthly savings rate and the PCE price index, the inflation gauge the Fed targets….it is also probably one of the least understood and most misreported of the monthly economic reports, which is largely due to the NIPA-related manner in which the press release from the BEA reports on it…to start with, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts… 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 November to December, making for a difficult report to unpack and report on correctly…

thus, when the opening line of the press release for this report tell us “Personal income increased $42.5 billion, or 0.3 percent, and disposable personal income (DPI) increased $37.8 billion,or 0.3 percent, in December“, they mean that the annualized figure for personal income in December, $15,648.0 billion, was $42.5 billion, or almost 0.3% greater than the annualized  personal income figure of $15,605.5 billion for November; the actual change in personal income from November to December is not reported…similarly, annualized disposable personal income, which is income after taxes, also rose by almost 0.3%, from an annual rate of an annual rate of $13,616.6 billion in November to an annual rate of $13,654.4 billion in December…likewise, the contributors to the increase in personal income, listed under “Compensation” in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release…so when the press release says, “Wages and salaries increased $13.1 billion in December” that really means wages and salaries would increase by $13.1 billion over an entire year if December’s seasonally adjusted increase were extrapolated over that year, just as current personal transfer receipts from government agencies, the largest contributor to the December income increase, rose at a $18.1 billion annual rate…so you can see what’s written in this press release is misleading, and often leads to media reports that misleadingly parrot those lines the same way the BEA wrote it,like the 24/7 Wall St site did this month

personal consumption expenditures (PCE) are reported in the same manner, ie, they fell at an annual rate of $0.7 billion to $12,448.3 billion annually in December, or virtually unchanged from the annual rate of $12,449.0 billion of PCE for November…however, when they’re included in the GDP report, the monthly personal consumption expenditures are adjusted with the price index for PCE, the BEA’s chained type price index based on 2009 prices equal to 100, to give us “real” PCE, and hence the change in the output of goods and services produced for consumers….in table 9 of the pdf for this report we see that that price index fell to 109.731 in December, from 109.835 in November, a decrease of 0.09%, which the BEA rounds to 0.1% when reporting it…hence, we find that real personal consumption expenditures, or PCE after the inflation adjustment, rose by 0.089% for the month, which the BEA rounds to a increase of 0.1%….using the same PCE price index, disposable personal income would be adjusted to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.4% in December, after an increase of 0.2% in November..

with disposable personal income up and personal consumption expenditures virtually unchanged, it only goes to reason that our personal savings for December would be higher…to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and subtracts that from disposable personal income, to show personal savings at a $753.5 billion annual rate in December, up from the $717.8 billion that we would have ‘saved”’ over a year had November’s savings been extrapolated for a year…this brought the personal savings rate, or personal savings as a percentage of disposable personal income, to 5.5% in December, up  from the savings rate of 5.3% in November…

Trade Deficit Rises in December, Subtracts 5 Basis Points from GDP

our trade deficit rose by 2.6% December, as the net value of our exports decreased and the value of our imports increased….the Census report on our international trade in goods and services for December indicated that our seasonally adjusted goods and services trade deficit rose by $1.1 billion to $43.4 billion in December from a November deficit which was revised from $42.4 billion to $42.2 billion (rounded)…the value of our December exports fell by $0.5 billion to $181.5 billion on a $0.8 billion decrease to $121.2 billion in our exports of goods and a $0.3 billion increase to $60.3 billion in our exports of services, while our imports rose $0.6 billion to $224.9 billion on a $0.5 billion increase to $183.7  billion in our imports of goods and a $0.1 billion increase to $41.2 billion in our imports of services…export prices averaged 1.1% lower in December, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 1.2% lower, similarly incrementally increasing growth in real imports from the dollar values reported here…

the decrease in our December goods exports resulted from lower exports of autos, industrial supplies, capital goods, and foods and feeds, only offset by an increase in our exports of consumer goods…referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of automotive vehicles, parts and engines fell by $599 million to $12,296 million, and our exports of industrial supplies and materials fell by $414 million to $32,434 million on a $491 million drop in our exports petroleum products other than fuel oil and a $429 million drop in our exports of organic chemicals, which were only partially offset by a $373 million increase in our exports of non-monetary gold…in addition, our exports of foods, feeds and beverages fell by $347 million to $9,900 million on a $183 million drop in our exports of soybeans, and our exports of capital goods fell by $339 million to $44,013 million as a $1,454 million decrease in our exports of civilian aircraft was only partially offset by a $413 million increase in our exports of oilfield drilling equipment, a $279 million increase in our exports of computers and a $278 million increase in our exports of aircraft engines, and our exports of goods not categorized by end use fell by $155 million to $4,083 million….on the other hand, our exports of consumer goods rose by $937 million to $16,818 on a $614 million increase in our exports of artwork and antiques and a $175 million increase in our exports of jewelry…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that an increase of $980 million to $30,080 million in our imports of automotive vehicles, parts and engines accounted for more than the total increase in our December imports, as our imports of consumer goods and other goods fell…also increasing in December were our imports of industrial supplies and materials, which rose $507 million to $36,644 million on a $263 million increase in our imports of non-monetary gold and a $203 million increase in our imports of crude oil, and our imports of foods, feeds, and beverages, which rose by $181 million to $10,581 million….on the other hand, our imports of consumer goods fell by $631 million to $48,093 million on a $526 million drop in our imports of artwork and antiques and a $451 million reduction in our imports of televisions and video equipment, our imports of goods not categorized by end use fell by $443 million to $7,210 million, and our imports of capital goods fell by $27 million to $49,162 million as a $345 million increase in our imports of civilian aircraft was offset by a $439 decrease in our imports of computer accessories…..

when computing last week’s GDP report, the BEA used the estimates from the advance report on our trade in goods for December which was released the same day; that report showed a deficit in our trade of goods of $61,513 million for the month…this report indicates an increase in the goods deficit of $1.3 billion to $62.514 billion from a revised November deficit of $61,241 million…also with this report, November exports of goods were revised downward $0.3 billion, November exports of services were revised upward less than $0.1 billion, November imports of goods were revised downward $0.3 billion and November imports of services were revised downward $0.1 billion…in round numbers, that suggests the trade data used in the GDP report had underreported our 4th quarter trade deficit by $0.8 billion, which suggests a downward revision of 0.02 percentage points to GDP when the 2nd estimate of GDP is released at the end of this month…

December Construction Spending Up 0.1% after November revised down 0.5%

in the report on December construction spending (pdf), the Census Bureau estimated that December’s seasonally adjusted construction spending would work out to $1,116.6 billion annually if extrapolated over an entire year, which was barely 0.1 percent (±1.2%)* above the revised annualized estimate of $1,116.0 billion of construction spending in November and 8.2 percent (±1.8%) above the estimated annualized level of construction spending of December last year…the November spending estimate was revised down from $1,122.5 billion to $1,116.0 billion, which when combined with less than expected spending in December, suggests another downward revision to 4th quarter GDP…..private construction spending was at a seasonally adjusted annual rate of $824.0 billion, 0.6 percent (±0.8%)* below the revised November estimate, with residential spending rising  0.9 percent (±1.3%) to an annual rate of $429.6 billion in December, 0.9 percent (±1.3%) above the revised November estimate, while private non-residential construction spending fell 2.1 percent (±0.8%) to $394.4 billion on a 7.3% decrease of private spending for construction of manufacturing facilities…meanwhile, public construction spending was estimated to be at a rate of  $292.5 billion, 1.9 percent (±2.0%)* above the revised November estimate, with spending for highway construction up 9.4% to $95.4 billion while spending for conservation and development was off 9.6% to an annualized $6,839 million for the month…for the entirety of 2015, construction spending totaled $1,097.3 billion, 10.5 percent (±1.2%) above the $993.4 billion spent in 2014…

in reporting 4th quarter GDP, the BEA assumed an increase in nonresidential construction and an increase in residential construction in December….however, gauging the actual impact of this December 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 is adjusted for changes in price, using a multitude of privately published price indexes for the various components of non-residential investment…furthermore, the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling that are not captured by this report…for instance, if we look at the aggregate figures here for the residential construction portion of this report and compare them to the change shown for the nominal value of residential construction in the pdf for the 1st estimate of 4th quarter GDP, we find the numbers barely correspond at all…but we do have two certain number to work with from this report; first, we know that overall annualized construction spending for November was revised down by $6.5 billion annualized; secondly, we also know that the advance GDP report overestimated non-residential construction spending for December by at least $8.6 billion annualized, because it decreased by that much, and they had assumed an increase…that means that the annualized estimates for 4th quarter GDP were at least $15.1 billion too high, or approximately 0.09% of inflation adjusted GDP…thus the annualized change in construction spending implies a subtraction of at least 0.36 percentage points from 4th quarter GDP when the second estimate is released at the end of February..

December Factory Shipments Down 1.4%, Factory Inventories Up 0.2%

press reports say that the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for December, aka “the factory orders report,” showed that new orders for factory goods fell by 2.9% in December, after falling by 0.7% in November…however, as we learned in October from a conversation with the Census personnel responsible for that report, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “Full Report on …Orders” because, due to the quick turnaround time on non-durable goods orders, they figured that the data they have for shipments of those goods would be a fair proxy for orders….that lack of hard data, in effect, leaves the “new orders” and “unfilled orders” sections of this report useful only as a revised update to the advance report on durable goods from last week…in the case of December new orders for durable goods, then, the December Full Report showed that new orders for manufactured durable goods fell $11.8 billion or 5.0% to $225.6 billion, a slight upward revision from last week’s reported 5.1% decrease, following a November decrease of 0.5% that was reported as unchanged a month ago…including the 0.8% decrease in shipments of non-durable goods with that, then, the Census Bureau reported that new orders for manufactured goods decreased $13.5 billion or 2.9 percent to $456.5 billion in December, after falling 0.7% in November and 4 out of the last 5 months..

more importantly, then, this report indicated that the value of December factory shipments fell by $6.8 billion or 1.4 percent to $467.0 billion, the 8th decrease in 9 months, with only a 0.1% increase in November…shipments of durable goods were down by $5.1 billion or 2.1 percent to $236.1 billion, revised from the 2.2% decrease reported in the durables report, as shipments of transportation equipment fell 6.7% on a 32.4% drop in shipments of commercial aircraft…without those transportation sector shipments, factory shipments were still 0.4% lower….the value of shipments (and hence of “new orders”) of non-durable goods fell by $1.75 billion, or 0.8%, with a 3.3% drop in shipments from refineries accounting for nearly three-fourths of that decrease and a 2.4% drop in shipments of meat, poultry and seafood products accounting for most of the rest…however, with producer prices for finished goods down 0.2% in December, and prices for intermediate goods down 1.0%, real shipments of non-durable goods were certainly higher than the nominal change in their value would lead us to believe…

meanwhile, the aggregate value of December factory inventories rose for the first time in 6 months, increasing by $1.0 billion or 0.2 percent to $642.3 billion, following an November decrease that was revised from 0.2% to a 0.3% decrease from October…inventories of durable goods rose by $1.9 billion or 0.5 percent to $397.6 billion, the first increase in six months, following a decrease of 0.3% in November…the value of non-durable goods’ inventories fell nearly $1.0 billion or 0.4 percent to $246.0 billion, following a decrease of 0.3% in November…the value of inventories of petroleum and coal products, down in value most of the year, drove the decrease in non-durable inventories, as they fell by $0.8 billion or 2.6% percent to $32.6 billion, which was undoubtedly mostly due to lower prices…as we previously noted, producer prices for finished goods were down 0.2% in December, and prices for intermediate goods were down 1.0%, so real factory inventories of other goods might have also increased as well…in computing last week’s GDP estimate, the BEA assumed a decrease in nondurable manufacturing inventories in December, without quantifying the amount of the decrease, so unless their estimate was significantly lower than this report indicates, the change to 4th quarter GDP estimates should be minimal..

New Foreclosures Up 17.2% in December, Delinquencies Down 2.8%; Mean Time in Foreclosure at 1060 Days

the Mortgage Monitor for December (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 688,672 home mortgages, or 1.37% of all mortgages outstanding, remaining in the foreclosure process at the end of December, which was down from 721,435, or 1.38% of all active loans that were in foreclosure at the end of November, and down from 1.75% of all mortgages that were in foreclosure in December of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the December “foreclosure inventory” is now showing the lowest percentage of homes that were in the foreclosure process since the fall of 2007… new foreclosure starts, meanwhile, were at their highest level since September, rising to 78,088 in December from 66,626 in November, but still down from 89,357 in December a year ago…while foreclosure starts have been volatile from month to month, 2015’s new foreclosure starts remained in a range about one-third higher than number of new foreclosures we saw in the precrisis year of 2005…

in addition to homes in foreclosure, BKFS data showed that 2,408,249 mortgages, or 4.78% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in December, down from 4.92% of homeowners with a mortgage who were more than 30 days behind in November, but still up from this year’s lowest delinquency rate of 4.66% in March, while still down from the mortgage delinquency rate of 5.42% in December a year earlier…of those who were delinquent in December, 807,656 home owners, or 1.60% of those with a mortgage, were considered seriously delinquent, meaning they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month…combining these totals, we find that a total of 6.15% of homeowners with a mortgage were either late in paying or in foreclosure at the end of December, and that 2.97% of all homeowners were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

for the details of the history of both those metrics, we’re including below that part of one Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 15 of the pdf….the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past  and for each January shown going back to January 2005….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure slipped from the April record of 536 days and is now at 491 days, while the average time for those who’ve been in foreclosure without a resolution is just a day off its record high set in November but at 1060 days is still nearly three years…

December 2015 LPS loan counts and days delinquent table

(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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