July jobs, June income and outlays, trade deficit, construction spending, factory inventories, and Mortgage Monitor

in addition to the Employment Situation Summary for July from the Bureau of Labor Statistics, this week also saw the release of four June reports that included metrics which were either estimated or embodied in last week’s release of 2nd quarter GDP:  the June report on Personal Income and Spending from the Bureau of Economic Analysis, the Census report on our International Trade for June, the June report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for June…we also saw the Consumer Credit Report for June from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.3 billion, or at a 4.1% annual rate, as non-revolving credit expanded at a 2.1% rate to $2,673.1 billion and revolving credit outstanding rose at a 9.7% rate to $960.8 billion…

the week’s privately issued reports included the ADP Employment Report for July, the Mortgage Monitor for June (pdf) from Black Knight Financial Services, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 17.77 million annual rate in June, up 6.5% from the 16.61 million annual rate in June, and up nearly 2.0% from the same month a year ago, and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) slipped to 52.6% in July, down from 53.2% in June, which still suggests a sluggish expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.5%, from 56.5% in June, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July…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…

Employers Add 255,000 Jobs in July, Employment Rate and Participation Rate Tick Up

the Employment Situation Summary for July reported decent job creation during the month and increases in both the employment to population ratio and the labor force participation rate…estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 255,000 jobs in July, after the payroll job increase for June was revised up from 287,000 to 292,000 and the payroll jobs increase for May was revised up from 11,000 to 24,000…that means that this report represents a total of 273,000 more seasonally adjusted payroll jobs than were reported last month…the unadjusted data shows that there were actually 1,030,000 fewer payroll jobs in July, after June had produced 660,000 more, so payroll job changes in both months saw substantial seasonal adjustments to produce the reported headline numbers…

seasonally adjusted job increases in July were spread throughout the most sectors of the economy, while only the resource extraction sector saw a decrease of 7,000 jobs…the broad professional and business services sector added 70,000 jobs, with 17,000 of those in temporary help employment services, 8,200 in computer systems design and 8,100 in accounting and bookkeeping…another 48,800 jobs were added by the health care and social assistance sector, with 17,100 additional jobs in hospitals and 8,900 in offices of physicians…the leisure and hospitality sector added 45,000 more jobs with the addition of 21,200 more jobs in bars and restaurants and 10,000 more jobs in performing arts and spectator sports…in addition, various levels of government saw the addition of 38,000 jobs, with 21,600 of those in local school districts, and the financial sector saw the addition of 18,000 jobs, with 7,200 of those in real estate…14,700 more jobs were added in retail, 14,000 more in construction and 11,000 more in durable goods manufacturing, with 6,700 of those in the automotive sector…

the establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $25.69 an hour, after it had increased by 2 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $21.59 an hour…employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.5 hours in July, the first increase in 6 months, while hours for production and non-supervisory personnel also rose by a tenth of an hour to 33.7 hours…meanwhile, the manufacturing workweek was unchanged at 40.7 hours, while factory overtime rose a tenth of an hour to 3.3 hours after June overtime was revised a tenth of an hour lower…

at the same time, the July household survey indicated that the seasonally adjusted number of those who reported being employed rose by an estimated 420,000 to 151,517,000, while the estimated number of unemployed fell by 13,000 to 7,770,000; and hence the labor force increased by a total of 407,000…since the working age population had grown by 223,000 over the same period, that meant the number of employment aged individuals who weren’t in the labor force fell by 184,000 to 94,333,000, a reduction that was enough to boost the labor force participation rate by 0.1% to 62.8%…in addition, the relatively large increase in number employed was also enough to boost the employment to population ratio, which we could think of as an employment rate, by 0.1% to 59.7%…meanwhile, even with the large increase in the employed, the unemployment rate remained unchanged at 4.9%…at the same time, there was also an increase of 97,000 in those who reported they were forced to accept just part time work, from 5,843,000 in June to 5,740,000 in July, which meant the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, rose from 9.6% of the labor force in June to 9.7% in July….

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..

June Personal Income Rose 0.2%, Personal Spending Up 0.4%

like the GDP report last week, the June Income and Outlays report also went through an annual revision with revisions back to 2013 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targetsZero Hedge has a useful review of those revisions, if you can get past their hyperbole….since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we’ll only consider those revisions from recent months that are relevant to putting this month’s change in perspective…

also like the GDP report, all the dollar values reported in this report are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if June’s adjusted income and spending were extrapolated over an entire year…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 May to June….thus, when the opening line of the press release for this report tell us “Personal income increased $29.3 billion (0.2 percent) in June..“, they mean that the annualized figure for all types of personal income in June, $15,883.0 billion, was $29.3 billion, or 0.2% greater than the annualized personal income figure for May; the actual increase in personal income in June over May is not given….similarly, disposable personal income, which is income after taxes, rose by less than 0.2%, from an annual rate of $13,916.4 billion in May to an annual rate of $13,941.0 billion in June…with the annual revision, the annualized figure for May personal income was revised from $15,896.7 billion to $15,853.7 billion, and disposable personal income was revised from the originally reported $13,891.1 billion annually to $13,916.4 billion…

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $53.0 billion annual rate to a level of $12,738.8 billion in consumer spending annually, more than 0.4% higher than in May, which itself was revised from the originally reported annual rate of $12,699.4 to $12,685.8 billion…the current dollar increase in June spending was driven by a $39.2 billion annualized increase to an annualized $8,644.2 billion spending for services and a $17.8 billion increase to $2,712.8 billion in annualized spending for non-durable goods, while outlays for durable goods fell at an annualized $4.0 billion rate to an annualized $1,381.9 billion…total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $58.3 billion to $13,209.0 billion, which left personal savings, which is disposable personal income less total outlays, at a $732.0 billion annual rate in June, down from the revised $765.8 billion in personal savings in May…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 5.3%, from 5.5% in May, which itself was originally reported at 5.3%..

while our personal consumption expenditures accounted for 68.8% of our second quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption…..that’s done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100….from Table 9 in the pdf, we find that that index rose from 110.525 in May to 110.637 in June, giving us a month over month inflation rate of 0.1013%, which BEA reports as an increase of +0.1%; at the same time, Table 11 gives us a year over year PCE price index increase of 0.9%, and a core price increase, excluding food and energy, of 1.6% for the year, both still below the Fed’s inflation targetapplying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.316%, which BEA reports as a 0.3% change in their tables…note that when those PCE price indexes are applied to a given month’s annualized current dollar PCE, it yields that month’s annualized real PCE in chained 2009 dollars, which aren’t really dollar amounts at all, but merely the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3B in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP…for more details on this report, see Consumer Spending Outpaces Income Growth Again from Robert Oak at the Economic Populist, where he includes 13 FRED graphs showing the revised longer term trend of the metrics we’ve discussed here…

May Trade Deficit Up 8.7% on Higher Oil, Drugs, and Cellphone Imports

our trade deficit increased by 8.7% in June as the value of both our exports and our imports increased, but our imports increased by much more….the Census report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit rose by $3.6 billion (rounded) to $44.5 billion in June from a revised May deficit of $41.0 billion…the value of our June exports rose by $0.6 billion to $183.2 billion on a $0.5 billion increase to $120.4 billion in our exports of goods and a $0.1 billion increase to $62.8 billion in our exports of services, while our imports rose $4.4 billion to $227.7 billion on a $4.4 billion increase to $186.4 billion in our imports of goods while our imports of services fell $0.2 billion to $41.2 billion…export prices were on average 0.8% higher in June, so the relative real amount of June exports would be lower than the nominal amount by that percentage, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage….

the increase in our June exports largely resulted from higher exports of foods, feeds and beverages, consumer goods and capital goods, which were partially offset by an decrease in exports of automotive vehicles, parts, and engines…. referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages rose by $587 million to $10,960 million on a $344 million increase in our exports of corn, our exports of consumer goods rose by $427 million to $15,995 million on a $182 million increase in our exports of artwork and antiques and a $138 million increase in our exports of pharmaceuticals, and our exports of capital goods rose by $339 million to $43,034 million on increases of $1,081 million in exports of civilian aircraft and $227 million in exports of civilian aircraft engines, which were partially offset by a $204 million decrease in exports of computer accessories….on the other hand, our exports of automotive vehicles, parts, and engines fell by $433 million to $12,172 million on a $376 million decrease in our exports of new and used passenger cars, our exports of industrial supplies and materials fell by $92 million to $32,443 million on a $355 million decrease in our exports of crude oil which was partially offset by a $206 million increase in our exports of fuel oil, and our exports of other goods not categorized by end use fell by $117 million to $5,301 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that increased imports of industrial supplies and materials, consumer goods, and capital goods were responsible for the jump in our imports and hence the increase in our trade deficit…our imports of industrial supplies and materials rose by $2296 million to $38,466 million on increases of $1428 million in our imports of crude oil, $287 million in our imports of fuel oil, $438 million in our imports of other petroleum products, and $236 in our imports of nuclear fuel materials….in addition, our imports of consumer goods rose by $1,567 million to $49,808 million on a $1,388 million increase in our imports of pharmaceuticals and a $1071 million increase in our imports of cellphones, and our imports of capital goods rose by $1027 million to $49,725 million on a $740 million increase in our imports of civilian aircraft…partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $541 million to $28,460 million on a $738 million decrease in our imports of trucks, buses, and special purpose vehicles, our imports of foods, feeds, and beverages fell by $336 million to $10,464 million on a $138 million decrease in our imports of fruits and juices, and smaller decreases in several other food line items, and our imports of goods not categorized by end use fell by $86 million to $7,520 million…

in the advance report on 2nd quarter GDP, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was released last week, before the GDP release…that report estimated that our June goods trade deficit was at $63.3 billion on a Census basis, up from the $61.1 goods deficit in May, on goods exports of $120.2 billion and goods imports of $183.5 billion…this report revises that and shows that our actual goods trade deficit in June was $66.0 billion on a balance of payments basis, and $65.5 billion on a Census basis, on Census adjusted goods imports of $184.4 billion and Census adjusted goods exports of $119.4 billion…in addition, the May trade deficit was revised lower by $0.1 billion, as exports of services were revised upward $0.2 billion, while exports of goods were revised upward less than $0.1 billion and small revisions to May goods and services imports balanced each other out…together, those revisions from the previously published data mean that the 2nd quarter trade deficit was roughly $2.1 billion more than was included in last week’s GDP report, or roughly $8.4 billion more annually, indicating a downward revision of 0.12 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August…

Construction Spending Fell 0.6% in June after Prior Months Were Revised Lower

the Census Bureau report on construction spending for June (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,133.5 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.3%)* below the revised annualized estimate of $1,140.9 billion of construction spending in May and only 0.3 percent (±1.6%)* above the estimated annualized level of construction spending in June of last year…the May construction spending estimate was revised 0.2% lower, from $1,143.3 billion to $1,140.9 billion, while the annual rate of construction spending for April was revised down 0.9%, from $1,152.4 billion to $1,142.5 billion….

private construction spending was at a seasonally adjusted annual rate of $851.0 billion in June, 0.6 percent (±1.0%)* below the revised May estimate of $856.6  billion, with residential spending of $445.8 billion statistically unchanged (±1.3%)* from the downwardly revised annual rate of $445.9 billion in May, while private non-residential construction spending fell 1.3 percent (±1.0%) to $405.2 billion from the revised May level, which included a 4.5% decrease in spending for construction of manufacturing facilities….at the same time, public construction spending was estimated to be at an annual rate of $282.5 billion, 0.6 percent (±2.5%)* below the revised May estimate of $284.3 billion, with public spending for highways down 1.4 percent (±5.4%)* to an annual rate of $88.0 billion…

construction spending for all three months of the 2nd quarter was lower than reported by the BEA in the advance report for 2nd quarter GDP…as we saw above, annualized construction spending for April was revised $9.9 billion lower, and annualized construction spending for May was revised $2.4 billion lower…in reporting 2nd quarter GDP, the BEA’s technical note indicated that they had estimated June residential construction would be $3.9 billion greater than that of the previously reported May figure, and that June nonresidential construction would be $1.4 billion greater than that of the reported May figure…with this report, May residential construction spending was revised from the originally reported $451.9 billion to $445.9 billion, while May nonresidential construction spending was revised from the originally reported $407.4 billion to $410.7 billion….that means the BEA overestimated June construction spending by $8.0 billion…the annualized figure for 2nd quarter construction spending would thus be $6.8 billion less than the figure used by the BEA when computing 2nd quarter GDP, implying a .23 percentage point reduction to 2nd quarter GDP…

Factory Shipments Up 0.7% in June, Factory Inventories Down 0.1% in Big Hit to GDP

the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $6.9 billion or 1.5 percent to $447.4 billion in June, following a decrease of 1.2% in May, which was revised from the 1.0% decrease reported last month….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 useful as a revised update to the advance report on durable goods we reported on last week…this report showed that new orders for manufactured durable goods fell by $9.0 billion or 3.9 percent to $219.8 billion, revised from the previously published 4.0% decrease to $219.8 billion, by virtue of a $0.3 billion downward revision to May orders..

this report also indicated that the seasonally adjusted value of June factory shipments rose for the fourth month in a row, after being down 8 straight months, increasing by $3.1 billion or 0.7% to $460.0 billion, following a $0.2 billion increase in May that was considered statistically unchanged…shipments of durable goods were up by $2.2 billion or 1.0 percent or 0.4 percent to $232.4 billion, virtually unchanged from what was published last week…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods rose by $0.8 billion, or 0.3%, to $227.6 billion, as a $1.4 billion, 3.9% increase in the value of shipments of coal and petroleum products accounted for the increase…

meanwhile, the aggregate value of June factory inventories fell for the 13th time in the past fourteen months, decreasing by $0.5 billion or 0.1 percent to $619.1 billion, following a May decrease of 0.1% that was virtually unrevised from the previously published figure….June inventories of durable goods decreased in value by $1.0 billion or 0.3 percent to $381.3 billion, revised from the 0.2% decrease that was reported in the advance report….the value of non-durable goods’ inventories increased by $0.5 billion or 0.2% to $237.9 billion, following a decrease of 0.3% in May…the BEA’s technical note for 2nd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $19.3 billion, so if i’m reading this right, that would indicate a substantial reduction to the 2nd quarter GDP inventory component on the order of $18.8 billion, or a 0.57 percentage point hit to GDP…

Mortgage Delinquencies and New Foreclosures Up Again in June, Mean Time in Foreclosure Slips to 1087 Days

the Mortgage Monitor for June (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 558,345 home mortgages, or 1.10% of all mortgages outstanding, remaining in the foreclosure process at the end of June, which was down from 574,035, or 1.13% of all active loans, that were in foreclosure at the end of May, and down from 1.56% of all mortgages that were in foreclosure in June of last year…..these are homeowners who at least had a foreclosure notice served but whose homes had not yet been seized, and the June “foreclosure inventory” now represents the lowest percentage of homes that remained in the foreclosure process since the summer of 2007… new foreclosure starts, which have been volatile from month to month, rose to 69,250 in June from 62,085 in May but were down from 78,100 in June a year ago; the 58,728 new foreclosures in April was the lowest in over ten years, so new foreclosures are now on a par with the foreclosure start level we saw before the mortgage crisis began…

in addition to homes in foreclosure, BKFS data also showed that 2,177,765 mortgages, or 4.31% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of May, up from the 4.25% of homeowners with a mortgage who were more than 30 days behind in May, but down from the mortgage delinquency rate of 4.79% in June a year earlier…of those who were delinquent in May, 692,370 home owners, or 1.36% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was down from 719,283 such “seriously delinquent” mortgages in May…combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,736,110 mortgage loans, or 5.41% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of May, and that 1,225,715, or 2.47% of all homeowners, were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

for the details of the historical mortgage crisis metrics covered by the Mortgage Monitor, we’re including below that part of the monthly table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 16 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 6 months 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 delinquent and stuck in foreclosure because of the lengthy foreclosure pipelines…with the recent slowing of new foreclosures, the average length of delinquency for those who have been more than 90 days delinquent without foreclosure remains stuck at 519 days, but is still down from the April 2015 record of 536 days, while the average time of delinquency for those who’ve been in foreclosure without a resolution has dropped back to 1087 days from the record 1092 days set last month, but that’s still means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year’s new foreclosure starts were all less than 6 months old, suggests that many foreclosures started early in the crisis are still not yet completed… 

June 2016 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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