September’s jobs; August’s trade, new construction, factory inventories, wholesale sales and Mortgage Monitor

in addition to the Employment Situation Summary for September from the Bureau of Labor Statistics, this week also saw the release of four August reports from the Census Bureau that entail major contributions to 3rd quarter GDP: the August report on our International Trade, the August report on Construction Spending (pdf), the Full Report on Manufacturers’ Shipments, Inventories and Orders for August and the August report on Wholesale Trade, Sales and Inventories…also released from the Fed this week was the Consumer Credit Report for August, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $25.8 billion, or at a 8.5% annual rate, as non-revolving credit expanded at a 9.0% rate to $2,712.1 billion and revolving credit outstanding rose at a 7.0% rate to $974.6 billion….among the privately issued reports released this week was the September report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 17.65 million annual rate in August, up from the 16.9 million annual pace in August but down from the 18.03 million rate in September of 2015, and the Mortgage Monitor for August (pdf) was released by Black Knight Financial Services, which we’ll also briefly review today…

Employers Add 156,000 Jobs in September; Employment and Unemployment Rates Both Rise

the Employment Situation Summary for September indicated another month of weak job creation, while the unemployment rate, the employment to population ratio and the labor force participation rate all increased by 0.1%…estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 156,000 jobs in September, after the previously estimated payroll job increase for July was revised down from 275,000 to 252,000, while the payroll jobs increase for August was revised up from 151,000 to 167,000…that means that this report represents a total of just 149,000 more seasonally adjusted payroll jobs than were reported last month, not even enough to keep up with the increase in the population…the unadjusted data, however, shows that there were actually 527,000 more payroll jobs in September, largely due to the beginning of the school year, so the seasonal adjustment brought the headline jobs number down to a level where that normal September impact was negated…

seasonally adjusted job increases in September were seen only in construction and in the private service sector, as total government payrolls were down by 11,000, manufacturing industries saw a 13,000 job decrease, while jobs in the resource exploitation industries were unchanged…the broad professional and business services sector added 67,000 jobs, with 23,200 more jobs in temporary help employment services and 15,900 more positions in management and technical consulting services….the health care sector saw 32,700 additional jobs with the addition of 9,400 jobs in doctor’s offices…there were also 23,000 more jobs in construction, as specialty contractors added 14,700 employees in both the residential and non-residential trades…in addition, there were 22,000 more jobs in retail, as clothing stores added 14,300 more workers and gas stations added 7,500…the leisure and hospitality sector added 15,000 more jobs as there were 29,700 more jobs in bars and restaurants, while there were concurrently 19,400 fewer jobs in performing arts and spectator sports…and other than the loss of 10,900 jobs in social assistance, employment in all other sectors was little changed…

the establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $25.79 an hour in September, after it had increased by 3 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by 5 cents to $21.68 an hour…employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.4 hours in September, reversing the August decrease, while hours for production and non-supervisory personnel was unchanged at 33.5 hours, after their August workweek was revised lower by a tenth of an hour…at the same time, the manufacturing workweek increased by 0.1 hour to 40.7 hours without a revision, while average factory overtime was unchanged at 3.3 hours…

meanwhile, the September household survey indicated that the seasonally adjusted number of those who would report being employed rose by an estimated 354,000 to 151,968,000, while the estimated number of unemployed rose by 90,000 to 7,939,000; and hence the labor force increased by a total of 444,000…however, since the working age population had grown by 237,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by just 207,000 to 94,184,000, which was nonetheless enough to increase the labor force participation rate from 62.8% to 62.9%…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, as it rose from 59.7% to 59.8%…but at the same time, with the relatively large increase in the number unemployed was also enough to increase the unemployment rate from 4.9% to 5.0%…meanwhile, the number of those who reported they were forced to accept just part time work fell by 159,000, from 6,053,000 in August to 5,894,000 in September, which left the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, unchanged at 9.7% of the labor force in September….

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..

August Trade Deficit Up 3.8% on Olympics’ Broadcast Rights

our trade deficit rose by 3.8% in August as the value of our exports increased but the value of our imports increased by a greater amount….the Census report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by $1.2 billion to $40.7 billion in August from a little revised July deficit of $39.5 billion…the value of our August exports rose by $1.5 billion to $187.9 billion on a $1.2 billion increase to $125.3 billion in our exports of goods and a $0.3 billion increase to $62.5 billion in our exports of services, while our imports rose by $2.7 billion to $228.6 billion on a $1.1 billion increase to $185.6 billion in our imports of goods while our imports of services rose more than $1.5 billion to $43.0 billion…the unusual increase in our services imports included a $1.2 billion increase in charges for the use of intellectual property relating to the rights to broadcast the 2016 Summer Olympic Games…export prices were on average 0.8% lower in August, so the relative amount of real August exports would be higher than the nominal amount by that percentage, while import prices were 0.2% lower, meaning real imports were larger than the nominal dollar values reported here by that small percentage….

the increase in our August exports of goods resulted from higher exports of industrial supplies and of automotive equipment, which was partially offset by lower exports of capital goods…referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,371 million to $34,281 million on a $932 million increase in our exports of nonmonetary gold, a $270 million increase in our exports of crude oil, and a $249 million increase in our exports of nonferrous metals other than copper and aluminum, and that our exports of automotive vehicles, parts, and engines rose by $365 million to $12,520 million on a $378 million increase in our exports of new and used passenger cars and a $159 million increase in our exports of vehicle parts other than engines, bodies, or tires….in addition, our exports of consumer goods rose by $104 million to $16,085 million on a $212 million increase in our exports of pharmaceuticals offset by a $105 million decrease in our exports of artwork and antiques….offsetting those catagory increases, our exports of capital goods fell by $701 million to $42,101 million on a decrease of $790 million in our exports of civilian aircraft and a $296 million decrease in our exports of electric apparatuses, and our exports of foods, feeds and beverages fell by $339 million to $14,333 million on decreases in our exports of fish and shellfish, miscellaneous animal feeds, corn and several food products…there was also $29 million decrease to $4,857 million in our exports of other goods not categorized by end use..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of capital goods were responsible for the $1.1 billion increase in our goods imports, as they rose rose by $1,160 million to $50,167 million on a $606 million increase in our imports of civilian aircraft, a $333 million increase in our imports of telecommunications equipment, and a $245 million increase in our imports of computers…in addition, our imports of foods, feeds, and beverages rose by $254 million to $10,922 million on a $92 million increase in our imports of fruits and juices, and our imports of automotive vehicles, parts and engines rose by $240 million to $28,609 million on a $184 million increase in our imports of engines and engine parts, and our imports of goods not categorized by end use rose by $651 million to $7,950 million…partially offsetting those increases, our imports of industrial supplies and materials fell by $839 million to $38,046 million on a $1,425 million decrease in our imports of non-monetary gold, and our imports of consumer goods fell by $289 million to $48,021 million on a $435 million decrease in our imports of pharmaceuticals and a $347 million decrease in our imports of cotton apparel and cotton household goods, which were partially offset by a $430 million increase in our imports of cellphones…

to gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which 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 2nd quarter real exports of goods averaged 118,135.3 million monthly in 2009 dollars, while inflation adjusted July and August exports were at 120,804 million and 123,001 million respectively, in that same 2009 dollar quantity index representation…. annualizing the change between the two figures, we find that the 3rd quarter’s real exports are running at a 13.4% annual rate above those of the 2nd quarter, or at a pace that would add about 1.18 percentage points to 3rd quarter GDP if continued through September…..in a similar manner, we find that our 2nd quarter real imports averaged 179,054 million monthly in chained 2009 dollars, while inflation adjusted July and August imports were at 179,029 million and 180,479 million respectively…that would indicate that so far in the 3rd quarter, real imports have been growing at annual rate of less than 1.57% from those of the 2nd 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 increase at a 1.57% rate would in turn subtract about 0.21 percentage points from 3rd quarter GDP….hence, if our July and August trade deficit in goods is maintained throughout September, our improving balance of trade in goods would add about 0.97 percentage points to the growth of 3rd quarter GDP….however, the usually stable trade in services also saw a $1.2 billion deficit in the 3rd quarter, due to fees incurred in broadcasting the Olympics…without knowing how to adjust that for inflation, we’d note that the related services deficit would likely subtract about 0.03 or 0.04 percentage points from 3rd quarter GDP at the same time…

Construction Spending Down 0.7% in August, still adds to Q3 GDP

the August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,142.2 billion, which was 0.7 percent (±1.5%)* below the revised annualized estimate of $1,150.6 billion in construction spending in July and 0.3 percent (±1.8%)* below the estimated annualized level of construction spending of August of last year….July construction spending was originally reported at a $1,153.2 billion annual rate, and it has thus been revised down to a $1,150.6 billion annual rate, while June construction spending was revised up from a $1,153.5 billion annual rate to a $1,154.134 billion rate, a revision that’s probably not statistically significant enough to affect reported 2nd quarter GDP…

private construction spending was at a seasonally adjusted annual rate of $871.6 billion in August, 0.3 percent (±1.2%)* below the upwardly revised July estimate of $874.6 billion, with residential spending of $449.2 billion down 0.3% (±1.3%)* from the upwardly revised annual rate of $450.4 billion in July, while private non-residential construction spending fell 0.4 percent (±1.2%)* to $422.4 billion from the downwardly revised July level, as August’s figures included a 1.5% decrease in construction spending for power supply and a 1.4% decrease in spending for construction of manufacturing facilities….at the same time, public construction spending was estimated to be at an annual rate of $270.5 billion, 2.0 percent (±2.5%)* below the revised July estimate of $276.0 billion, with public spending for highway construction down 2.9%(±5.9%)* to an annual rate of $84.6 billion…

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, getting an accurate read on the impact of August spending reported in this release on 3rd quarter GDP is difficult because all the figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price… in lieu of the multiple prices indexes for construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make that adjustment and thereby produce an estimate… that index showed that aggregate construction costs were unchanged in August after being down 0.6% in July, but after rising 0.1% in June and falling 0.1% from April in May…on that basis, we can estimate that construction costs for both July and August were roughly 0.6% less than June, 0.5% less than those of May and 0.6% less than those of April…we then use those percentages to deflate higher priced spending figures for each of those months, which is arithmetically the same as adjusting lower priced July and August construction spending upward, for comparison purposes…annualized construction spending in millions of dollars for the second quarter months is given as 1,154,134 for June, 1,143,750 for May, and 1,142,525 for April, while it was $1,150,638 million for July and $1,142,152 million for August…thus to compare July’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,150,638 + 1,142,152) / 2) / ( (1,154,134 *.994 + 1,143,750 *.993 + 1,142,525 *.994) / 3) = 1.006015, meaning real construction over July and August was still up 0.6015% vis a vis the 2nd quarter, despite being down slightly in dollars…in GDP terms, that means real construction for the 3rd quarter increased at an annual rate 2.428% over that of the 2nd quarter, or at a pace that would add about 0.04 percentage points to 3rd quarter GDP, should September follow the same trend… 

Factory Shipments Flat in August, Factory Inventories Up 0.2% in Big Boost to Q3 GDP

the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for August from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $8.4 billion or 0.2 percent to $453.1 billion in August, following an increase of 1.4% in July, which was revised from the 1.9% increase 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 rose by $0.3 billion or 0.1 percent to $227.3 billion, revised up from last week’s published report indicating new orders were virtually unchanged..

this report also indicated that the seasonally adjusted value of August factory shipments rose for the fifth time in six months, increasing by a statistically insignificant $0.1 billion to $458.1 billion, following a 0.4% increase in July…shipments of durable goods were down by $0.4 billion or 0.2 percent to $232.2 billion, revised from the previously published $0.8 billion, 0.4% increase….meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods increased by $0.4 billion, or 0.2%, to $225.88 billion, as most non-durable producers saw small increases in shipments…

meanwhile, the aggregate value of August factory inventories rose for the 2nd consecutive month, following 12 months of contraction, increasing by $1.0 billion or 0.2 percent to $622.0 billion, following a July increase of 0.2%….July inventories of durable goods increased in value by $0.6 billion or 0.2 percent to $383.8 billion, revised from the 0.1% increase that was reported in the advance report last week….at the same time, the value of non-durable goods’ inventories increased by $0.4 billion or 0.2% to $238.1 billion, on a $0.4 billion or 1.5% increase in the value of petroleum and coal inventories…

for GDP purposes, factory inventories are adjusted with the appropriate components of the producer price index, which showed that aggregate prices were down 0.4% in both July and August, with producer prices for food, a major non-durable component, down 1.1% and 1.6% respectively, and producer prices for energy down 1.0% and 0.8% for those same months…these price drops followed producer price increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively…higher prices over those months meant that their real inventories were comparatively even lower than the decreases reported by the Census by those percentages, while lower prices for July and August means that real 3rd quarter inventories were that much higher…hence, the relatively small nominal increases in July and August inventories thus loom as a large boost to 3rd quarter GDP from the manufacturer’s component of business inventories… 

August Wholesale Sales Up 0.7%, Wholesale Inventories Down 0.1%

the August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $444.3 billion, up 0.7 percent (+/-0.5%) from the revised July level, and were up 0.6 percent (+/-1.2%) from wholesale sales of August 2015… the July preliminary estimate was revised down to $441.0 billion from the  $441.9 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of a  0.4% percent (+/0.4) decrease to one of 0.6 percent (+/0.4)…. August wholesale sales of durable goods were u down 0.5 percent (+/-0.7%) from last month, but were up 0.7 percent (+/-1.8%) from a year earlier, with a 2.7% drop in wholesale sales of machinery, equipment, and supplies leading the decrease for the month, partially offset by 1.4% higher wholesale sales of automotive equipment….wholesale sales of nondurable goods were up 2.0 percent (+/-0.7%) from July and were up 0.5 percent (+/-1.8%) from last August, with a 6.7% increase in wholesale sales of raw farm products accounting for more than a quarter of the August increase…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $589.1 billion at month end, down 0.2 percent (+/-0.4%) from the revised July level and 0.1 percent (+/-1.8%)* lower than in August a year ago….July’s inventory value was revised from $591.3 billion to $590.2 billion, which meant that the July to August percent change was revised from the advance estimate of down 0.1 percent (+/-0.4%) to down 0.2 percent (+/-0.4%)…inventories of durable goods were up up 0.2 percent (+/-0.4%) from July, but were down 1.9 percent (+/-1.8%) from a year ago, with wholesale inventories of computer and computer peripheral equipment and software up 1.9% in the most significant August increase…at the same time, the value of wholesale inventories of nondurable goods were down 0.7 percent (+/-0.5%) from July, but were up 2.8 percent (+/-3.0%) from last August, as the value of inventories of raw farm products fell 7.8%, not unexpected considering the large increase in wholesale sales..

like factory inventories, August wholesale inventories would be deflated with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were down 0.4% in August, with producer prices for food down 1.6% and producer prices for energy down 0.8%, following producer price index decrease of 0.4% in July and increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively…since both July and prices were down 0.4%, that means the real quantity of end of August wholesale inventories, down 0.2% nominally in both July andAugust, was actually about 0.4% greater than June, following a second quarter when aggregate business inventories decreased….hence, the real increase in August inventories vis a vis the 2nd quarter also appears to provide a boost to 3rd quarter GDP from the wholesale component of business inventories…

Mortgage Delinquencies Down 6.0% in August, New Foreclosures Up 12.2%

the Mortgage Monitor for August (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 527,298 home mortgages, or 1.04% of all mortgages outstanding, remaining in the foreclosure process at the end of August, which was down from 550,075, or 1.09% of all active loans, that were in foreclosure at the end of July, and down from 1.48% of all mortgages that were in foreclosure in August of last year…..these are homeowners who at least had a foreclosure notice served, but whose homes had not yet been seized, and the July “foreclosure inventory” now represents the lowest percentage of homes that remained in the foreclosure process since the spring of 2007… new foreclosure starts, which have been volatile from month to month, rose to 68,820 in August from 61,253 in July but were down from 76,200 new foreclosures we saw in August a year ago…with foreclosure starts in April at the lowest level in over ten years, new foreclosures for this year have remained close to the levels of foreclosure starts we saw during 2005 and 2006, before the mortgage crisis began…

in addition to homes in foreclosure, BKFS data also showed that 2,150,689 mortgages, or 4.24% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of August, down from the 4.51% of homeowners with a mortgage who were more than 30 days behind in July, and down from the mortgage delinquency rate of 4.79% in August a year earlier, but up from the mortgage crisis low of 4.08% of all mortgages which were delinquent in March …of those who were delinquent in August, 669,173 home owners, or 1.32% 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 up from 695,148 such “seriously delinquent” mortgages in July…combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,677,996 mortgage loans, or 5.28% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of August, and that 1,196,471, or 2.36% of all homeowners, were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

(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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