July jobs report; June income and outlays, trade deficit, construction spending and factory inventories

the major economic releases from the past week included the Employment Situation Summary for July from the Bureau of Labor Statistics and four June reports that included metrics which were either estimated or included in last week’s release of 2nd quarter GDP:  the June report on Personal Income and Spending from the Bureau of Economic Analysis, the BEA report on our International Trade for June, and the June report on Construction Spending (pdf) and the Full Report on Manufacturers’ Shipments, Inventories and Orders for June, both from the Census Bureau…the week’s privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 16.69 million annual rate in July, up 1.7% from the 16.41 million annual rate in June, but down 6.1% from the 17.77 million annual rate in July 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) fell to 56.3% in July, down from 57.8% in June, suggesting a somewhat slower expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 53.9% in July, from 57.4% in June, indicating a somewhat 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 209,000 Jobs in July, Unemployment Rate Down 0.1% on Employment Increase

the Employment Situation Summary for July from the Bureau of Labor Statistics indicated near average payroll job growth, while the employment rate and the labor force participation rate rose and the unemployment rate fell…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 209,000 jobs in July, after the payroll job increase for May was revised down from 152,000 jobs to 145,000 while the June job increase was revised up from 222,000 jobs to 231,000, and hence the combined number of jobs created over those two months was 2,000 more than was previously reported….the unadjusted data shows that there were actually 1,039,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments…

seasonally adjusted job increases were spread through throughout government and the private goods producing and service sectors, with only the transportation and warehousing sector seeing a loss of 900 jobs…the leisure and hospitality sector added a seasonally adjusted 62,000 jobs, with the addition of 53,100 more jobs in bars and restaurants…..the broad professional and business services category added 49,000 jobs, as 15,500 more workers found work with employment services and 7,000 were added by management and technical consulting services…employment in health care and social assistance rose by 45,000, with the addition of 11,300 jobs in home health care services and 6,800 jobs in doctor’s offices….employment in manufacturing increased by 16,000, mostly in the manufacture of durable goods, with 5,000 of those jobs in fabricated metal products factories…meanwhile, the other major sectors, including construction, wholesale and retail sales, utilities, financial activities, information, private education and government, all saw smaller increases in payroll employment over the month, while the mining and logging sector saw no net change…

the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.36 an hour, after it had increased by a revised 5 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents to $22.10 an hour…employers also reported that the average workweek for all private payroll employees increased was unchanged at 34.5 hours, while hours for production and non-supervisory personnel remained at 33.7 hours for the fourth consecutive month….meanwhile, the average manufacturing workweek was unchanged at 40.9 hours, while factory overtime was also unchanged at 3.3 hours..

meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by an estimated 345,000 to 153,513,000, while the similarly estimated number of those unemployed rose by 4,000 to 6,981,000; which together meant that July saw a net increase of 349,000 in the total labor force…since the working age population had grown by 194,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 156,000 (rounded) to 94,657,000….the 349,000 increase of those in the labor force was enough to raise the labor force participation rate 0.1% to 62.9%….at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.2%…in addition, the increase in the total labor force combined with little change in those unemployed was enough to lower the unemployment rate from 4.4% to 4.3%, a sixteen year low first hit in May….meanwhile, the number who reported they were involuntarily working part time fell by 44,000 to 5,282,000 in June, which wasn’t enough to change the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, and which remained at 8.6% 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 and Personal Spending Both Flat

like the GDP report last week, the June Income and Outlays report also went through an annual revision with revisions back to 2014 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 review of some of those revisions, if you can get past their usual 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 the June change in perspective…

also like the GDP report, all the dollar values reported in this report are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for an entire year if June’s adjusted income and spending were extrapolated over a whole 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 decreased $3.5 billion (less than -0.1 percent) in June ..“, they mean that the annualized figure for all types of personal income in June, $16,377.6 billion, was $3.5 billion less than the $16,381.1 billion 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, was also little changed, falling from an annual rate of $14,368.9 billion in May to an annual rate of $14,364.7 billion in June…with the annual revision, the annualized figure for May personal income was revised down from $16,487.9 billion to $16,381.1 billion, and disposable personal income was revised from the originally reported $14,490.1 billion annually to $14,368.9 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 $8.1 billion annual rate to a level of $13,304.7 billion in consumer spending annually, an increase of less than 0.1% from May, which itself was revised from the originally reported annual rate of $13,214.0 billion to $13,296.6 billion….total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $14.1 billion to $13,818.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $546.4 billion annual rate in June, down from the revised $564.7 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 3.8%, from 3.9% in May, which itself was originally reported at 5.1%..

while our personal consumption expenditures accounted for 69.1% 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 for the June release, we find that that index rose from 112.257 in May to 112.283 in June, giving us a month over month inflation rate of 0.02316%, which BEA reports as an increase of +0.0%; at the same time, Table 11 gives us a year over year PCE price index increase of 1.4%, and a core price increase, excluding food and energy, of 1.5% for the past year, both still below the Fed’s inflation target….applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.03775%, which BEA reports as a 0.0% change in their rounded 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’s….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..

June Trade Deficit Down 5.9% on Rising Exports, Lower Imports of Oil, Cellphones

our trade deficit decreased by 5.9% in June as the value of our exports increased and the value of our imports decreased….the Census report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit fell by $2.7 billion (rounded) to $43.6 billion in June from a revised May deficit of $46.4 billion, which had previously been reported as $46.5 billion…the value of our June exports rose by $2.4 billion to $194.4 billion on a $1.7 billion increase to $129.0 billion in our exports of goods and a $0.6 billion increase to $65.4 billion in our exports of services, while our imports fell $0.4 billion to $238.0 billion on a $0.4 billion decrease to $194.3 billion in our imports of goods while our imports of services were statistically unchanged at $43.8 billion…export prices were on average 0.2% lower in June, so the relative real amount of June exports would be higher than the nominal amount by that percentage, while import prices were also 0.2% lower, meaning real imports were on average greater than the nominal dollar values reported here by that percentage….

the increase in our June exports resulted from higher exports of capital goods, foods, feeds and beverages, automotive vehicles, parts, and engines, and industrial supplies and materials….referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of capital goods rose by $826 million to $43,941 million on increases of $285 million in exports of computer accessories, $230 million in our exports of electric apparatuses, $220 million in our exports of civilian aircraft engines, and $220 million in our exports of industrial machines other than those itemized separately…..our exports of foods, feeds and beverages rose by $664 million to $11,837 million on a $591 million increase in our exports of soybeans, our exports of automotive vehicles, parts, and engines rose by $386 million to $13,564 million on a $195 million increase in our exports of new and  used passenger cars, our exports of industrial supplies and materials rose by $192million to $37,602 million on a $355 million increase in our exports of petroleum products other than fuel oil, and our exports of other goods not categorized by end use rose by $205 million to $5,399 million…offsetting those increases, our exports of consumer goods fell by $325 million to $16,416 million on a $407 million decrease 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 lower imports of crude oil and consumer goods were the major reasons for the June decrease in our imports and trade deficit… our imports of industrial supplies and materials fell by $1,059 million to $41,182 million, as our imports of crude oil fell by $1,407 million, while our imports of consumer goods fell by $719 million to $48,753 million on a $925 million decrease in our imports of cellphones and a $217 million decrease in our imports of jewelry…partially offsetting the decreases in those two categories, our imports of automotive vehicles, parts and engines rose by $1013 million to $30,184 million on a $1,253 million increase in our imports of new and used passenger cars, our imports of capital goods rose by $84 million to $52,885 million, our imports of foods, feeds, and beverages rose by $72 million to $11,457 million, and our imports of other goods not categorized by end use rose by $281 million to $8,303 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 $63,864 million on a Census basis, down from the $66,325 million goods deficit in May…this report revises that and shows that our actual goods trade deficit in June was $65,245 million on a balance of payments basis, and $64,005 million on a Census basis…in addition, the May goods deficit was revised to $66,282 million on a Census basis…together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit was roughly $98 million more than was included in last week’s GDP report, or roughly $0.4 billion more annually, which would indicate a negligible downward revision of 0.01 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August…

Construction Spending Fell 1.3% 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 $1,205.8 billion annually if extrapolated over an entire year, which was 1.3 percent (±1.5 percent)* below the revised annualized estimate of $1,221.6 billion of construction spending in May but still 1.6 percent (±1.8 percent)* above the estimated annualized level of construction spending in June of last year…the May construction spending estimate was revised 0.7% lower, from $1,230.1 billion to $1,221.6 billion, while the annual rate of construction spending for April was revised more than 1.0% lower, from $1,230.4 billion to $1,217.66 billion….

the Census release gives us the following breakdown: “Spending on private construction was at a seasonally adjusted annual rate of $940.7 billion, 0.1 percent (± 1.2 percent)* below the revised May estimate of $941.3 billion. Residential construction was at a seasonally adjusted annual rate of $502.9 billion in June, 0.2 percent (±1.3 percent)* below the revised May estimate of $504.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $437.8 billion in June, 0.1 percent (± 1.2 percent)* above the revised May estimate of $437.3 billion.  In June, the estimated seasonally adjusted annual rate of public construction spending was $265.1 billion, 5.4 percent (±2.6 percent) below the revised May estimate of $280.3 billion. Educational construction was at a seasonally adjusted annual rate of $67.5 billion, 5.5 percent (±3.9 percent) below the revised May estimate of $71.4 billion. Highway construction was at a seasonally adjusted annual rate of $82.4 billion, 6.6 percent (±6.7 percent)* below the revised May estimate of $88.2 billion..”

construction spending for all three months of the 2nd quarter was lower than what was reported by the BEA in the advance report for 2nd quarter GDP last week…as we saw above, annualized construction spending for April was revised $12.7 billion lower, and annualized construction spending for May was revised $8.5 billion lower…in reporting 2nd quarter GDP, the Excel file with key source data and assumptions.accompanying the BEA’s 2nd quarter technical note indicated that they had estimated that the value of June residential construction would be $3.5 billion greater than that of the previously reported May figure, that June nonresidential construction would be $1.5 billion greater than that of the reported May figure, and that the value of June public construction would be $2.2 billion lower than the previously published May figure…hence, the figures used by the BEA for total June construction were $2.8 billion greater than the previously published May figure, meaning that they had overestimated June construction spending by $11.3 billion…thus, the revised annualized figure for 2nd quarter construction spending would thus be $10.8 billion less than the figure used by the BEA when computing 2nd quarter GDP, implying a .27 percentage point reduction to 2nd quarter GDP when the 2nd estimate is released at the end of August..

Factory Shipments Down 0.2% in June, Factory Inventories Up 0.2%

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 jumped by $14.0 billion or 3.0 percent to $481.1 billion in June, following an decrease of 0.3% to $467.05 billion in May, which was revised from the 0.8 percent decrease to $464.9 billion 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 $14.8 billion or 6.4 percent to $245.8 billion, revised from the previously published 6.5% increase to $245.6 billion…

this report also indicated that the seasonally adjusted value of June factory shipments fell for the first time in 3 months, decreasing by $0.9 billion or 0.2 percent to $471.5 billion, following a 0.3% increase in May…shipments of durable goods were down by an insignificant $0.1 billion to $236.2 billion, virtually unchanged from what was published last week…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods fell by $0.8 billion or 0.3 percent to $235.3 billion, as a $1.1 billion, 2.7% increase in the value of shipments of coal and petroleum products accounted for the decrease…

meanwhile, the aggregate value of June factory inventories rose for the 7th time in the past eight months, increasing by $1.0 billion or 0.2 percent to $649.1 billion, following a May decrease of 0.2% 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 last week….the value of non-durable goods’ inventories decreased by $0.8 billion or 0.3 percent to $251.7 billion, following a decrease of 0.7% in May, as a $1.2 billion, 3.4% decrease in the value ofcoal and petroleum products inventories accounted for the decrease…

 

(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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