February’s jobs report, January’s trade deficit, construction spending and factory inventories, et al

with the first Friday of the month, the Employment Situation Summary for February from the Bureau of Labor Statistics was obviously the most widely watched release this week…but the week also saw the release of three reports for January from the Census Bureau that input into GDP, all of which hint at revisions to 4th quarter results, in addition to setting the pace for 1st quarter growth: the Census report on our International Trade for January, the Full Report on Manufacturers’ Shipments, Inventories and Orders for January and the January report on Construction Spending (pdf)…in addition to the jobs report, the BLS also released the revised 4th Quarter Report on Labor Productivity and Costs, which showed nonfarm business sector labor productivity decreased at a 2.2% annual rate during the fourth quarter, as hours worked increased 3.2% and the output of goods and services from those hours increased just 1.0%…with the 2.2% decrease in labor productivity and a 1.1-percent increase in hourly compensation, unit labor costs thus rose 3.3% in the fourth quarter of 2015..

privately issued reports this week included the report on light vehicle sales for February from Wards Automotive, which estimated that vehicles sold at a 17.43 million annual rate in February, down a bit from the 17.46 million annual pace of January, but 6.7% greater than vehicles sales in February of 2015, 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 48.2% in January to 49.5%, which still indicates a slight contraction in manufacturing firms nationally, and the January Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) slip to 53.4%, down from 53.5% in January, indicating a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…

February Payroll Jobs Up 242,000; Average Weekly Earnings Drops 0.7%, Most on Record

the Employment Situation Summary for February showed decent payroll job formation which was offset by fewer hours and lower average hourly pay, while the labor force participation rate and employment rate both increased significantly…..

estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 242,000 jobs in February, after the payroll job increase for January was revised up from 151,000 to 172,000, and the December jobs increase was revised up from 262,000 to 271,000, meaning the combined number of jobs created in those months was 30,000 more than was previously reported…seasonally adjusted job increases in February were fairly concentrated in the private service sector, although 19,000 jobs were added in construction, mostly by residential specialty trade contractors, and 12,000 jobs were added by local governments…..57,400 jobs were added in.the health care and social assistance sector, with 23,600 of those spread through ambulatory health care services and another 19,300 in various social services; another 54,900 jobs were added in retail, with 15,100 of those in food and beverage stores and another 12,500 in general merchandise stores, not including department stores, which shed 4,100 employees….the leisure and hospitality sector added 48,000 jobs, including 40,200 spots in bars and restaurants, while the broad professional and business services netted another 23,000 payroll jobs, as 17,600 jobs were added in professional and technical services while temporary help service jobs were reduced by 9,800…at the same time, there were also 15,000 fewer resource extraction jobs, as 15,900 jobs were cut in support activities, while manufacturers reduced payrolls by 16,000, as fabricated metal products producers cut 9,500 jobs…

however, offsetting February’s decent job creation numbers were decreases in both hourly pay and the average workweek….the average workweek for all private payroll employees fell by by 0.2 hour to 34.4 hours, while hours for production and non-supervisory personnel fell 0.1 hour to 33.7 hours…meanwhile, with less working, the manufacturing workweek was unchanged at 40.8 hours and factory overtime was 3.3 hours for the third month in a row…employers also reported that average hourly earnings for all employees fell by 3 cents to $25.35, after January’s hourly earnings rose 12 cents, leaving us with a 2.2% wage gain over the past 12 months…combining the decrease in pay with the decrease in the workweek meant that average weekly earnings fell from $878.15 to $872.04, the largest decrease for weekly earnings on record

meanwhile, the February household survey estimated that the seasonally adjusted count of those who were employed rose by more than 530,000 to 151,074,000 and the number of unemployed rose by more than 24,000 to 7,815,000, while the labor force increased by 555,000, suggesting that the rounding of the total people who were either employed or unemployed added 1,000 to the labor force…the relatively large increase in the employed was not enough to statistically change the unemployment rate, however, as it remained at 4.9%, same as in January…that odd labor force rounding glitch notwithstanding, since the civilian working age population only rose by 180,000, the count of those not in the labor force fell by 374,000 to 93,688,000, enough to raise the labor force participation rate from 62.7% in January 62.9% in February, its fourth increase in as many months…likewise, with the decent increase in the employed, the employment to population ratio, which we could think of as an employment rate, also rose by 0.2% to 59.8%….at the same time, the number who reported they were involuntarily working part time was unchanged at 5,988,000 in February while the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from 9.9% in January to 9.7% in February, as the count of those marginally attached to the labor force fell by 356,000 from a year earlier…

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 average workweek for all employees on private nonfarm payrolls declined by 0.2 hour to 34.4 hours in February… The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.7 hours. (See tables B-2 and B-7.), you can quickly open Table B-2. and Table B-7, where you will find tables of the average workweek by industry, and where you’ll see that despite the increase in construction jobs, the average workweek for construction workers fell from 39.3 hours in January to 38.9 hours in February…

January’s Trade Deficit Up 2.2% After December Revised 3.0% Higher

our trade deficit rose by 2.2% January, while the net value of both our exports and our imports decreased….the Census report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $1.0 billion to $45.7 billion in January from a December deficit which was revised from $43.4 billion to $44.7 billion, as our December exports were revised down by $1.3 billion from last month’s report…the value of our January exports fell by $3.8 billion from there to $176.5 billion on a $4.0 billion decrease to $116.9 billion in our exports of goods and a $0.2 billion increase to $59.6 billion in our exports of services, while our imports fell $2.8 billion to $222.1 billion on a $2.9 billion decrease to $180.6 billion in our imports of goods and less than a $0.1 billion increase to $41.5 billion in our imports of services…export prices averaged 0.8% lower in January, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 1.1% lower, similarly incrementally increasing growth in real imports from the dollar values reported here…

the January decrease in our exports of goods resulted from lower exports of capital goods, industrial supplies, consumer goods and foods and feeds, and was only offset by a $19 million increase in our exports of automotive vehicles, parts and engines…referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1,214 million to $42,801 million on a $432 million decrease in our exports of oilfield drilling equipment, a $383 million decrease in our exports of civilian aircraft, a $368 million decrease in our exports of telecommunications equipment and a $274 million decrease in our exports of industrial engines….our exports of industrial supplies and materials fell by $932 million to $31,498 million on a $737 million drop in our exports of fuel oil, a $460 million drop in our exports of non-monetary gold, and a $180 million decrease in our exports of fertilizers, which was only partially offset by a $297 million increase in our exports of organic chemicals and a $350 million increase in our exports of other petroleum products…at the same time, our exports of consumer goods fell by $839 million to $15,979 on a $650 million drop in our exports of artwork and antiques and a $126 million decrease in our exports of gem diamonds and our exports of foods, feeds and beverages fell by $472 million to $9,429 million on a $337 million drop in our exports of soybeans…in addition, our exports of other goods not categorized by end use fell by $440 million to $4,365 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of industrial supplies and materials and capital goods together more than accounted for the January decrease in our imports….our imports of industrial supplies and materials fell by $2,076 million to $34,567 million on an $1,848 million drop in our imports of crude oil, a $233 million decrease in our imports of iron and steel mill products, and a $224 million decrease in our imports of non-monetary gold…our imports of capital goods fell $1,811 million to $47,947 million on a $911 million drop in our imports of civilian aircraft, a $404 million decrease in our imports of telecommunications equipment and a $328 million decrease in our imports of computers…at the same time, our imports of consumer goods fell $108 million to $47,876 million on a $722 million drop in our imports of pharmaceutical preparations and a $191 million decrease in our imports of furniture which was partially offset by a $626 million increase in our imports of cell phones and similar household goods, and a $164 million increase in our imports of photography equipment…in addition, our imports of goods not categorized by end use fell by $134 million to $7,068 million…meanwhile, our imports of automotive vehicles, parts and engines rose $508 million to $30,584 million on a $356 million increase in our imports of trucks, buses, and special purpose vehicles and a $236 million increase in our imports of parts and accessories, and our imports of foods, feeds, and beverages rose by $161 million to $10,742 million on a $129 million increase in our imports of alcoholic beverages (not including wine)…

the revised $1.3 billion increase to December’s trade deficit will have an impact on 4th quarter GDP, but to properly assess that we’d have to take each changed component, which include a $1.0 billion downward revision to exports of services, a $0.3 billion downward revision to exports of goods, a 0.3 billion upward revision to imports of services, and a $0.2 billion downward revision to imports of goods, and adjust them for inflation vis-a-vis third quarter prices…for now, we’ll forego all that detailed computation and just estimate that the reduction in net December exports will subtract about 0.04 percentage points from previously reported 4th quarter GDP….

to assess the impact of January trade on 1st quarter growth figures, we should similarly first adjust the value of January imports and exports for inflation and then compare those figures to the similarly adjusted 4th quarter figures…however, 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 can estimate that 4th quarter real exports of goods averaged 118,760 million monthly in 2009 dollars, while inflation adjusted January exports were at 116,023 million in the same 2009 dollar quantity index representation…annualizing the change between the two figures, we find that January’s real exports are running at a 8.9% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.75 percentage points from 1st quarter GDP…..in a similar manner, we find that our 4th quarter real imports averaged 178,901 million monthly in chained 2009 dollars, while inflation adjusted January imports were at 177,996 million…that would indicate that so far in the 1st quarter, our real imports have decreased at a 2.01% annual rate from those of the 4th 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 decrease at a 2.01% rate would thus add about 0.25 percentage points to 1st quarter GDP….hence, if the January trade deficit is maintained throughout the 1st quarter, our deteriorating balance of trade in goods would subtract about 0.50 percentage points from the growth of 1st quarter GDP….note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those and we don’t have easy access to their price changes…

Construction Spending increased 1.5% in January after December and November Revised Higher

the report on January construction spending (pdf) from the Census Bureau estimated that January’s seasonally adjusted construction spending would work out to $1,140.8 billion annually if extrapolated over an entire year, which was 1.5 percent (±1.0%)* above the revised annualized estimate of $1,116.0 billion of construction spending in December and 10.4 percent (±1.6%) above the estimated annualized level of construction spending of January last year…the December spending estimate was revised 0.6% higher, from $1,116.6 billion to $1,123.5 billion, while November’s construction spending was revised from $1,116.0 billion to $1,116.9 billion, which together would suggest an upward revision to 4th quarter GDP of 0.19 percentage points…

private construction spending was at a seasonally adjusted annual rate of $831.4 billion in January, 0.5 percent (±0.8%)* above the revised December estimate, with residential spending of $433.2 billion statistically unchanged (±1.3%) from the upwardly revised annual rate of $433.1 billion in December, while private non-residential construction spending rose 1.0 percent (±0.8%) to $398.2 billion on a 4.2% increase in private spending for construction of manufacturing facilities and a 6.7% increase in spending on lodging, which is now up 37.1% year over year…meanwhile, public construction spending was estimated to be at a rate of  $309.4 billion, 4.5 percent (±1.6%) above the revised December estimate, with spending for highway construction up 14.7 percent (±4.3%) to an annual rate of  $110.4 billion, 33.9% higher than a year ago…

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 impact of the January spending reported here 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…moreover, 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….so to come up with rough estimate on real construction in January, we’ll just use the producer price index for final demand construction, which showed that aggregate construction prices were down 0.4% in January, after they were unchanged in December and down 0.3% in November…on that basis, we can estimate real January construction spending to be $22.1 billion, or 1.97% higher than the 4th quarter average, or growing at a 26.3% annual rate, a pace which, if sustained throughout the 1st quarter, would add 1.35 percentage points to 1st quarter GDP

Factory Shipments Up 0.3% in January, Factory Inventories Down 0.4%

the Census Bureau reported that new orders for manufactured goods rose by $7.5 billion or 1.6 percent to $463.9 billion in January, following decreases of 2.9% in December and 0.7% in November, which were essentially unrevised from the last report…however, as we learned 4 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), aka “the factory orders report”; instead, they use shipments data as a proxy for non-durable orders, in effect leaving both the “new orders” and “unfilled orders” sections of this report useful only as a revised update to the advance report on durable goods we reported on last week…in the case of January’s new orders for durable goods, then, the January Full Report showed that new orders for manufactured durable goods rose $10.7 billion or 4.7 percent to $237.1 billion, revised down from the 4.9% increase to $237.5 billion reported last week, which followed a December decrease of 4.6% that was essentially unrevised from last week’s advance report…subtracting the $3.2 billion decrease in shipments of non-durable goods from those orders for durables, then, the Census Bureau reported that new orders for manufactured goods rose by $7.5 billion or 1.6%, which thus became the headline for this report carried in the news media…

more importantly, then, this report indicated that the value of January factory shipments rose by $1.4 billion or 0.3 percent to $468.4 billion, the 1st increase in 7 months, following a 1.4 percent drop in December….shipments of durable goods were up $4.7 billion or 2.0 percent to $241.6 billion, revised from the 1.9% increase reported in the durables report, as shipments of transportation equipment led the increase, rising $4.3 billion or 5.6 percent to $79.9 billion, on a 30.4% increase in shipments of commercial aircraft…without those transportation sector shipments, however, factory shipments were actually 0.7% lower, as the value of shipments (and hence of “new orders”) of non-durable goods fell by $3.3 billion, or 1.4%, to $226.8 billion with a 11.6% drop in shipments from refineries accounting for all of that decrease and and then some…without the decrease in the value of refinery shipments, the value of shipments of other non-durable goods would have been up 0.9 billion or 0.4%..

meanwhile, the aggregate value of January factory inventories fell by $2.7 billion or 0.4 percent to $637.5 billion, their 7th decrease in a row, following a December decrease of 0.2% that was reported as a 0.2% increase last month, which thus suggests a downward revision to 4th quarter GDP on the order of 0.07 percentage points….inventories of durable goods fell by $0.6 billion or 0.1 percent to $395.7 billion, $0.2 billion lower than was reported last week but unchanged in terms of statistical significance, following a 0.2% decrease in December, which was revised from 0.5% last week and already included in the GDP release…..the value of non-durable goods’ inventories fell nearly $1.0 billion or 0.9 percent to $241.74 billion, following a decrease of 0.7% in December…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 $1.9 billion or 5.9% percent to $31.1 billion, which was undoubtedly mostly due to lower prices…producer prices for finished goods were down 0.7% in January, with producer prices for energy goods down 5.0%, so once factory inventories are adjusted for inflation in our national accounts data, they will likely show a real January increase on the order of 0.3%…

(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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