December jobs report; November trade deficit, construction spending, and factory inventories…

in addition to the Employment Situation Summary for December from the Bureau of Labor Statistics, this week also saw the release of three November reports from the Census Bureau that will input into 4th quarter GDP: the November report on our International Trade, the November report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November….among the privately issued reports released this week were the ADP Employment Report for December and the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 18.29 million annual rate in November, up 3.2% from the 17.73 million annual pace of vehicle sales in October and up 5.5% from the 17.34 million vehicle rate in December of 2015…as a result of those strong December sales, total vehicle sales in 2016 were at a record 17.465 million vehicles, up from the previous record of 17.396 million that was set in 2015…

in addition to those reports, the week saw the release of both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the December Manufacturing Report On Business reported that the manufacturing PMI (Purchasing Managers Index) rose to 54.7% in December, up from 53.2% in November, which suggests a stronger expansion in manufacturing firms nationally, and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 57.2%, unchanged from November, indicating that the same plurality of service industry purchasing managers reported expansion in various facets of their business in December as did in November…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 156,000 Jobs in December, Unemployment Rate Rises to 4.7%

the Employment Situation Summary for December indicated another month of weak job creation, which was confirmed by even weaker figures from the household survey, leading to a 0.1% uptick in the unemployment rate…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 156,000 jobs in December, after the previously estimated payroll job increase for November was revised up from 178,000 to 204,000, while the payroll jobs increase for October was revised down from 142,000 to 135,000…that means that this report represents a total of 175,000 more seasonally adjusted payroll jobs than were reported last month, better than the 3 month average of 165,000 jobs per month, but below the 6 month average of 189,000 jobs per month…the unadjusted data, however, shows that there were actually 270,000 less payroll jobs extent in December than in November, as normal seasonal layoffs in areas such as construction and recreational services were smoothed over by the seasonal adjustments..

seasonally adjusted job increases in December, however, did show that construction was one of the two sectors that actually saw relative job losses as well, as construction employment fell by 3,000 as an 11,700 job increase in residential specialty trade contractors was offset by employment decreases in heavy and civil engineering construction and all kinds of building construction…2,000 jobs were also lost in resource extraction, with 1,300 of those coming out of the oil and gas fields…on the other hand, employment in health care and social assistance rose by 63,300 in December, with the addition of 29,700 jobs in ambulatory care services, of which 8,200 were in doctor’s offices, and 21,100 jobs in individual and family social assistance services…another 34,500 seasonally adjusted jobs were added in accommodation and food services, with the addition of 29,600 jobs in bars and restaurants…17,000 jobs were added by manufactures, with factories producing fabricated metal products accounting for 5,800 of those…the broad professional and business services sector, which usually leads in monthly job gains, only added 15,000 jobs, as janitorial jobs increased by 10,600, while there were 13,200 fewer accounting and bookkeeping jobs and temporary help agencies employed 15,500 less than in November…other sectors with employment increases in December included transportation and warehousing, where 14,700 jobs were added, finance and insurance, which added 12,800 employees, and local governments, which added 11,000…meanwhile, employment in wholesale trade, retail, and information was little changed for the month…

even with a number of the job increases in generally poorer paying jobs, the establishment survey also showed that average hourly pay for all employees still rose by 10 cents an hour to $26.00 an hour in December, after it had decreased by a revised 2 cents an hour in November; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $21.80 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.6 hours…at the same time, the manufacturing workweek increased by 0.1 hour to 40.7 hours, while average factory overtime was unchanged at 3.3 hours…

meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 63,000 to 152,111,000, while the estimated number of those unemployed rose by 120,000 to 7,520,000; which led to a 184,000 (rounded up) increase in the total labor force…since the working age population had grown by 202,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 18,000 to a record high of 95,102,000…however, with the increase in those in the labor force almost equal to the increase in the civilian noninstitutional population, the labor force participation rate ticked up from 62.7% in November to 62.8% in December….meanwhile, the increase in number employed as a percentage of the increase in the population was nearly stable and left the employment to population ratio, which we could think of as an employment rate, unchanged at 59.7%…at the same time, the increase in the number unemployed was also large enough to increase the unemployment rate from 4.6% to 4.7%…meanwhile, the number of those who reported they were forced to accept just part time work fell by 61,000, from 5,659,000 in November to 5,598,000 in December, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, down to 9.2% of the labor force in December, its lowest since April 2008….

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.. 

Further Deterioration of Trade Deficit in November Will Hit 4th Quarter GDP

our trade deficit rose by 6.8% in November as the value of our imports increased while the value of our exports was somewhat lower….the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by $2.88 billion to $45.24 billion in November from a revised October deficit of $42.36 billion…the value of our November exports fell by $0.4 billion to $185.8 billion on a $0.7 billion decrease to $122.4 billion in our exports of goods which was partially offset by a $0.3 billion increase to $63.5 billion in our exports of services, while our imports rose $2.4 billion to $231.1 billion on a $2.7 billion increase to $189.0  billion in our imports of goods which was slightly offset by a $0.3 billion decrease to $42.1 billion in our imports of services…export prices were on average 0.1% lower in November, so our real November exports would be greater than the nominal value by that percentage, while import prices were 0.3% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage….

the drop in our November exports of goods resulted from lower exports of capital goods and automotive vehicles, which were partially offset by increases in our exports of industrial supplies and consumer goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1733 million to $41,936 million on a $1,256 million drop in our exports of civilian aircraft, a $285 million decrease in our exports of industrial engines, and a $207 million drop in our exports of engines for civilian aircraft, and our exports of automotive vehicles, parts, and engines fell by $300 million to $12,113 million on a $285 million decrease in our exports of trucks, buses, and special purpose vehicles…in addition, our exports of foods, feeds and beverages fell by $195 million to $11,049 million on a $313 million decrease in our exports soybeans, and our exports of other goods not categorized by end use fell by $691 million to $5,172 million…offsetting the decreases in those export categories, our exports of industrial supplies and materials rose by $1463 million to $35,176 million on a $362 million increase in our exports of fuel oil, a $339 million increase in our exports of nonmonetary gold, and a $206 million increase in our exports of other petroleum products, and our exports of consumer goods rose by $481 million to $16,401 million on a $297 million increase in our exports of pharmaceuticals…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of industrial supplies and materials accounted for the lions share of the November increase in our imports…our imports of those industrial supplies and materials rose by $2,246 million to $39,870 million as our imports of crude oil rose by $914 million, our imports of nonmonetary gold rose by $258 million and our imports of bauxite and aluminum rose by $208 million….in addition, our imports of foods, feeds, and beverages rose by $228 million to $11,163 million, our imports of automotive vehicles, parts and engines rose by $140 million to $29,272 million on a $248 million increase in our imports of parts and accessories which was offset by a $283 million decrease in our imports of trucks, buses, and special purpose vehicles, and our imports of other goods not categorized by end use rose by $130 million to $7,955 million….slightly offsetting those import increases, our imports of capital goods fell by $131 million to $49,404 million on a $241 million decrease in our imports of computers and a $221 million decrease in our imports of computer accessories, which were partially offset by a $131 million increase in our imports of civilian aircraft, and our imports of consumer goods fell by $85 million to $49,486 million on a $599 million decrease in our imports of artwork, antiques and other collectables, a $390 million decrease in our imports of gem diamonds, and a $209 million decrease in our imports of toys, games, and sporting goods which were mostly offset by a $292 million increase in our imports of pharmaceuticals and a $736 million increase in our imports of cellphones..

to gauge the impact of October and November goods trade on 4th 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 3rd quarter real exports of goods averaged 122,746.7 million monthly in 2009 dollars, while inflation adjusted October and November exports were at 120,470 million and 119,353 million respectively, in that same 2009 dollar quantity index representation…. annualizing the change between the average of the two quarters, we find that the 4th quarter’s real exports of goods are falling at a 8.9% annual rate from those of the 3rd quarter, or at a pace that would subtract about 0.67 percentage points from 4th quarter GDP if continued through December… a similar manner, we find that our 3rd quarter real imports averaged 179,347.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 180,786 million and 182,935 million respectively…that would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 5.7% from those of the 3rd quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 5.7% rate would in turn subtract another 0.72 percentage points from 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our worsening balance of trade in goods would subtract about 1.39 percentage points from the growth of 4th quarter GDP….

Finally, note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don’t have easy source of all their price changes.  With changes in services trade usually small compared to volatile goods trade, that’s not usually a concern, but note that our services surplus did show a significant improvement that could partially ameliorate the losses to growth seen in trade in goods.  To quickly estimate the magnitude of that offset, we’ll note that the 3rd quarter average of our nominal services surplus was $20,421 million, while our services surplus rose by $525 million to $21,387 million in November.  Thus our unadjusted services surplus is rising at rising at an unusual 14.5% annual rate so far in the 4th quarter.  If that were to be maintained throughout December, it would add about 0.17 percentage points of the trade goods losses back to 4th quarter GDP.

Construction Spending Rose 0.9% in November After Prior Months Were Revised Lower

the Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,182.1 billion annually if extrapolated over an entire year, which was 0.9 percent (±1.5%)* above the revised October annualized estimate of $1,166.5 billion and also 4.1 percent (±2.0%)* above the estimated annualized level of construction spending in November of last year…the annualized October construction spending estimate was revised 0.1% lower, from $1,172.6 billion to $1,171.4 billion, while the annual rate of construction spending for September was revised 0.2% lower, from $1,166.5 billion to $1,164.4 billion…the downward revision to September construction spending would imply that the 3rd estimate of 4th quarter GDP was overstated, but by less than 0.02 percentage points, not likely enough to change the published figure…

private construction spending was at a seasonally adjusted annual rate of $892.8 billion in November, 1.0 percent (±1.5%)* above the revised October estimate of $884.3 billion, which was revised down from the $885.9 billion reported for October last month…residential spending was at a $462.9 billion annual rate in November, 1.0 percent (±1.3%)* higher than the downwardly revised annual rate of $458.2 billion in October, while private non-residential construction spending rose 0.9 percent (±1.5%)* to $429.9 billion from the upwardly revised October level, led by a 7.0% increase in spending for construction of lodging facilities….at the same time, public construction spending was estimated to be at an annual rate of $289.3 billion, 0.8 percent (±2.5%)* above the revised October estimate of $287.1 billion, with public spending for education up 2.1% to an annual rate of $72.2 billion and spending for highways and streets up 1.1% to an annual rate of $94.6 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 November spending reported in this release on 4th 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 price indexes for construction specified 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 price adjustment and thereby get a rough estimate of the real change… that index showed that aggregate construction costs were up 0.1% in November after being up 0.7% in October, and up 0.1% in both August and September…on that basis, we can estimate that construction costs for October were up 0.7% from September, up 0.8% from August, and up 0.9% from July, while construction costs for November were up 0.8% from September, up 0.9% from August, and up 1.0% from July…we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison…annualized construction spending in millions of dollars for the third quarter months is given as 1,164,432 for September, 1,166,513 for August, and 1,160,407 for July, while it was at 1,171,436 in October and 1,182,097 in November…thus to compare the inflation adjusted construction spending of the 4th quarter months to those of the third quarter, our formula would be ((1,182,097 + 1.001* 1,171,436)/2 ) / ((1.008 * 1,164,432 + 1.009 *1,166,513 + 1.01 * 1,160,407)/3) = 1.002636, meaning real construction over October and November was only up 0.2636% vis a vis the 3rd quarter, despite being up quite a bit more in dollars…in GDP terms, that means real construction for the 4th quarter increased at an annual rate 1.059% over that of the 3rd quarter, or at a pace that would add about 0.08 percentage points to 4th quarter GDP, should December construction remain on the same trend…

Factory Shipments Down 0.1%, Inventories Inch Higher

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for November (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $11.3 billion or 2.4 percent to $458.3 billion, the first decrease in five months, following an increase of 2.8% in October, which was revised from the 2.7% 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 November advance report on durable goods we reported on two weeks ago…this report showed that new orders for manufactured durable goods fell by $10.8 billion or 4.5 percent to $228.8 billion in November, revised from the previously published 4.6% decrease to $228.2 billion….

this report also indicated that the seasonally adjusted value of November factory shipments fell for the first time in 4 months, decreasing by $0.3 billion or 0.1 percent to $463.8 billion, following a 0.2% increase in October, revised from the previously published 0.4% increase…shipments of durable goods were down by $0.2 billion or 0.1 percent to $234.2 billion, essentially unrevised from the decrease that was published two weeks ago…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods were down by $0.5 billion, or 0.2%, to $229.6 billion, as a $0.7 billion, 1.7% decrease in the value of shipments of petroleum and coal accounted for the increase…

meanwhile, the aggregate value of November factory inventories rose for the fourth time in five months, increasing by $1.4 billion or 0.2 percent to $623.1 billion, after an October increase of 0.1%… November inventories of durable goods increased in value by $0.7 billion to $383.7 billion, revised from the previously published 0.1% increase, following a revised 0.1% decrease in October durable inventories…..the value of non-durable goods’ inventories increased by $0.7 billion or 0.3 percent to $239.0, following a revised 0.3% increase in October non-durable inventories…

to gauge the effect of November factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was up 0.3% to $222.46 billion in November; the value of work in process inventories was up 0.3% to $191.74 billion, and the value of materials and supplies inventories was virtually unchanged at $208.9 billion…the November producer price index reported prices for finished goods increased 0.2%, prices for intermediate processed goods inventories were 0.3% higher, while prices for unprocessed goods were unchanged, thus indicating that real finished goods inventories were 0.1% higher, while real inventories of intermediate processed goods and raw material inventory inventories were both essentially unchanged…the aggregate November change in real factory inventories is thus up less than 0.1%, following a full 0.1% decrease in October, and thus 4th quarter factory inventories are still fractionally lower, after increasing in the 3rd quarter, and thus would fractionally subtract from 4th quarter GDP…


(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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