March jobs report; February’s trade deficit, construction spending, factory inventories, & wholesale sales, et al

in addition to the Employment Situation Summary for March from the Bureau of Labor Statistics, this week’s releases included four reports that will input into 1st quarter GDP:  the BEA report on our International Trade for February, the February report on Construction Spending, the Full Report on Manufacturers’ Shipments, Inventories and Orders for February, and the February report on Wholesale Trade, Sales and Inventories, all from the Census Bureau….in addition, the Fed released the Consumer Credit Report for February, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $15.2 billion, or at a 4.8% annual rate, as non-revolving credit expanded at a 5.3% annual rate to $2,791.5 billion and revolving credit outstanding grew at a 3.5% rate to $1000.4 billion…

privately issued reports released this week included  the ADP Employment Report for March, the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 16.53 annual rate in March, down from the 17.47 million rate in February, and also the lowest since a 16.4 million rate in October 2014, and the Mortgage Monitor for February (pdf) Black Knight Financial Services…in addition, the week saw both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 57.2% in March, from 57.7% in February, which still suggests a modest expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.2% in March, down from 57.6% in January, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March…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 98,000 Jobs in March, Unemployment Rate Drops to 4.5%

the Employment Situation Summary for March showed the weakest payroll job growth in 10 months, even as the unemployment rate dropped and the employment rate rose…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 98,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 238,000 to 216,000 and the payroll jobs increase for February was revised down from 235,000 down to 219,000…that means that this report represents a total of just 60,000 more seasonally adjusted payroll jobs than were reported last month, well below the past year’s average of 182,000 jobs per month…the unadjusted data shows that there were actually 670,000 more payroll jobs extant in March than in February, as normal seasonal job increases in sectors such as construction, administrative and waste services, and leisure and hospitality were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in March were weak but still spread through through both the goods producing and the service sectors, with only the retail sector dropping 29,700 jobs on a seasonally adjusted basis, as general merchandise stores cut 34,700 employees..the broad professional and business services sector added 56,000 jobs, as 16,800 more were employed in services to buildings and temporary help services added 10,500 workers….employment in health care rose by 13,500, with the addition of 8,700 jobs in hospitals…in addition, both the resource extraction and manufacturing sectors saw the addition of 11,000 jobs, with support activities for mining employing 8,800 more and metal fabrication factories adding 5,500….however, all the other major sectors, including construction, wholesale trade, transportation and warehousing, utilities, information, financial services, education, leisure and hospitality, and government, all saw little or no change in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.14 an hour in March, after it had increased by a revised 7 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.90 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in February, while hours for production and non-supervisory personnel slipped to 33.5 hours after 7 months at 33.6 hours…in addition, the manufacturing workweek was down 0.2 hours at 40.6 hours, and average factory overtime decreased by 0.1 hours to 3.2 hours…

meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 472,000 to 153,000,000, while the similarly estimated number of those unemployed fell by 326,000 to 7,202,000; which thus meant a net 145,000 increase in the total labor force…since the working age population had grown by 168,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 23,000 to 94,213,000….with the increase of those in the labor force  not much different than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.0%….at the same time, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, 0.1% to 60.1%…at the same time, the decrease in the number unemployed was also large enough to decrease the unemployment rate from 4.7% to 4.5%….meanwhile, the number who reported they were involuntarily working part time fell by 151,000 to 5,553,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 9.2% in February to 8.9% in March, the lowest since December 2007….

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..   

February Trade Deficit Falls 9.6% on Lower Imports of Cars and Cell Phones

our trade deficit fell by 9.6% February, as the value of our exports increased while the value of our imports decreased….the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell by $4.62 billion to $43.56 billion in February, from a January deficit that was revised from the originally reported $48.5 billion to $48.17 billion…the value of our February exports rose by $0.4 billion to $192.2 billion on a  $0.4 billion increase to $128.5 billion in our exports of goods and an increase of less than $0.1 billion to $61.4 billion in our exports of services, while our imports fell $4.3 billion to $240.6 billion on a $4.2 billion decrease to $193.4 billion in our imports of goods and a less than $0.1 billion increase to $43.0 billion in our imports of services…export prices averaged 0.3% higher in February, so the real growth in exports was less than the nominal dollar value 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 February exports of goods came about as a result of higher exports of consumer goods, industrial supplies and of other goods, offset by decreases in our exports of foods and feeds and capital goods…referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $665 million to $17,143 million on a $522 million increase in our exports of pharmaceuticals and a $222 increase in our exports of gem diamonds….our exports of industrial supplies and materials rose by $411 million to $38,397 million on a $604 million increase in our exports of fuel oil and a $407 million increase in our exports of crude oil, which were partially offset by a $388 million decrease in our exports of nonmonetary gold….in addition, our exports of automotive vehicles, parts, and engines rose by $196 million to $13,817 million, and our exports of other goods not categorized by end use rose by $540 million to $4,949 million…partially offsetting those increases, our exports of foods, feeds and beverages fell by $676 million to $10,552 million on a $578 million decrease in our exports of soybeans, and our exports of capital goods fell by $623 million to $42,874 million on a $628 million decrease in our exports of civilian aircraft and a $381 million decrease in our exports of engines for civilian aircraft, which were partially offset by a $244 million increase in our exports of semiconductors..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of consumer goods and passenger cars were largely responsible for the decrease in February imports…our imports of consumer goods fell by $3,064 million to $48,997 million on a $1,865 million decrease in our imports of cellphones, a $275 million decrease in our imports of gem diamonds, a $205 million decrease in our imports of nonwool or cotton clothing and textiles, and a $201 million decrease in our imports footwear…our imports of automotive vehicles, parts and engines fell by $2,648 million to $29,113 million on a $2,107 million decrease in our imports of new and used passenger cars, a $322 million decrease in our imports of vehicle parts other than engines and tires, and a $236 million decrease in our imports of trucks, buses, and special purpose vehicles…in addition, our imports of other goods not categorized by end use fell by $213 million to $7,390 million…offsetting those decreases, our imports of industrial supplies and materials rose by $1,389 million to $43,410 million, as our imports of crude oil rose by $1,672 million and our imports of gold rose by $294 million, our imports of foods, feeds, and beverages rose by $263 million to $11,532 million, and our imports of capital goods rose by $124 million to $51,217 million on a $495 million increase in our imports of computers…

to gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the 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 figure that 4th quarter real exports of goods averaged 121,037.7 million monthly in chained 2009 dollars, while inflation adjusted 1st quarter goods exports were at 124,083 million and 124,506 million for January and February respectively in that same 2009 dollar quantity index representation…averaging January and February goods exports and then annualizing the change between that average and the average of the fourth quarter, we find that the 1st quarter’s real exports of goods are running at a 11.2% annual rate above those of the 4th quarter, or at a pace that would add about 0.92 percentage points to 1st quarter GDP… a similar manner, we find that our 4th quarter real imports of goods averaged 183,210.3 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 189,184 million and 184,216 million respectively after that same adjustment…that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 7.84% 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 increase at a 7.84% rate would thus subtract 0.90  percentage points from 1st quarter GDP….hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add 0.02 percentage points to 1st quarter GDP…

Construction Spending Rose 0.8% in February after January Revised Higher

the Census Bureau’s report on February construction spending (pdf)  estimated that the month’s seasonally adjusted construction spending would work out to $1,192.8 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.0%)* above the revised annualized rate of $1,192.2 billion of construction spending for January and 3.0 percent (±1.5%) above the estimated annualized level of construction spending for February last year…the January spending estimate was revised 0.3% higher, from $1,180.3 billion to $1,183.84 billion, while December’s construction spending was revised from $1,192.2  billion to $1,188.94 billion, which would suggest a small downward revision to 4th quarter GDP when the annual revisions are released later this summer…

private construction spending was at a seasonally adjusted annual rate of $917.36 billion in February, 0.8 percent (± 1.2 percent)* above the downwardly revised January estimate, with residential spending of $484.7 billion up 1.8% (±1.3 percent)* from the revised annual rate of $476.1 billion in January, while private non-residential construction spending of $435.3 billion was 0.3 percent (± 1.2 percent)* below the revised January estimate of $433.8 billion….meanwhile, public construction spending was estimated to be at an annual rate of $275.5 billion, 0.6 percent (±1.8 percent)* above the revised January estimate, with construction spending for public safety up 8.2% (±2.3%) to an annual rate of $8,021 million…

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 February spending that’s 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…adding to the difficulty, 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, making an accurate estimate a real chore to undertake manually…so in lieu of trying to adjust for all of those different indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment…

that index showed that aggregate construction costs were down 0.1% in February, after they had increased by 0.3% in January, decreased by 0.1% in December and increased by 0.1% in November…on that basis, we can estimate that February construction costs were roughly 0.2% more than those of December, 0.1% more than those of November, and 0.2% more than October…we then use those relative percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison….this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,188,941 in December, $1,191,468 in November, and $1,173,749 in October, while it was at $1,192,822 in February and $1,183,840 in January….thus to compare January’s nominal construction spending of $1,183,840 and February’s figure of $1,192,822  to inflation adjusted figures of the fourth quarter, our formula becomes:((1,192,822 +  1,183,840 *0.999)/2) / ((1,188,941 * 1.002 + 1,191,468 * 1.001 + 1,173,749 *1.002)/3) = 1.000883, meaning real construction spending over January and February was up by 0.0883% from that of the 4th quarter period, or up at a 0.35% annual rate…to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and that of January’s & February’s adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add just about 0.02 percentage points to 1st quarter GDP, assuming there is little change in real construction in March..

Factory Shipments Up 0.3%, Inventories Up 0.2%

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for February (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $4.8 billion or 1.0 percent to $476.5 billion, the seventh increase in eight months, following an increase of 1.5% in December, which was revised from the 1.2% 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 February advance report on durable goods we reported on two weeks ago…this report now shows that new orders for manufactured durable goods rose by $4.2 billion or 1.8 percent to $236.0 billion in February, revised from the 1.7% increase to $235.4 billion figure that was published two weeks ago….

this report also indicated that the seasonally adjusted value of February factory shipments rose for the 11th time in 12 months, increasing by $1.4 billion or 0.3 percent to $480.0 billion, following a 0.3% increase in January….shipments of durable goods were up $0.8 billion or 0.3 percent from January at $239.4 billion, revised from the $239.2 billion figure reported by the durables report last week…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods were up by $0.6 billion or 0.2 percent to $240.5 billion, after the value of January’s shipments was revised from $239.5 billion to $240,529 million..

meanwhile, the aggregate value of February factory inventories rose for the 7th time in 8 months, increasing by $1.2 billion or 0.2 percent to $630.0 billion, after a January increase of 0.3% that was revised from the originally reported 0.2%…February inventories of durable goods increased in value by $0.8 billion or 0.2 percent to $385.2 billion, unchanged from the previously published figure, following a 0.1% increase in January durable inventories…..the value of non-durable goods’ inventories rose by $0.3 billion or 0.1 percent to $244.8 billion, following a revised 0.6% increase in January non-durable inventories…to gauge the effect of these February inventories on 1st 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 statistically unchanged at $225,415 million in February; the value of work in process inventories was up 0.5% to $195,541 million, and materials and supplies inventories were valued 0.1% higher at $209,010 million…the February producer price index reported prices for finished goods increased 0.3%, prices for intermediate processed goods inventories were 0.4% higher, while prices for unprocessed goods were 0.2% lower….that would means that real finished goods inventories were roughly 0.3% lower, real inventories of intermediate processed goods were 0.1% higher, and real raw material inventory inventories were 0.3% higher.. 

February Wholesale Sales Up 0.6%, Wholesale Inventories Up 0.4%

the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $464.9 billion, up 0.6 percent (±0.4 percent) from the revised January level and 8.4 percent (±0.9 percent) higher than wholesale sales of January 2016… the January preliminary estimate of wholesale sales was revised from down 0.1 percent (±0.5 percent)* to up 0.3 percent (±0.7 percent)* in conjunction with an annual revision based on the results of the 2015 Annual Wholesale Trade Survey, which makes comparisons to previous published amounts nonsense.. February wholesale sales of durable goods rose 0.4% percent (+/-0.4%) from January and were up 7.3% prcent (+/-0.6%) from a year earlier, while wholesale sales of nondurable goods were up 0.7% percent (+/-0.2%) from January and were up were 12.4 percent (+/-0.9%) from last February…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 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 February report estimated that wholesale inventories were valued at $594.2 billion at month end, an increase of 0.4 percent (+/-0.2%) from the revised January level and also 3.2 percent (±0.7 percent) higher than February a year ago, with the January preliminary inventory estimate revised downward but still 0.2% lower than December….inventories of durable goods were valued 0.2 percent (+/-0.2%)* higher than January and were valued 1.7 percent higher than February a year earlier, while the value of wholesale inventories of nondurable goods was up 0.7 percent (+/-0.2%) from January and was up 5.6 percent from last February…with the February producer price index for finished goods up by 0.3% and producer prices for intermediate goods up by 0.3%, most real additions to February inventories appear to be minor, and should have little impact on 1st quarter GDP growth…


(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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