December’s jobs report; November’s 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….

privately issued reports released this week included the ADP Employment Report for December and the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 17.76 million annual rate in December, up 2.3% from the 17.35 million annual pace of vehicle sales in November but down 2.9% from the 18.29 million vehicle rate in December of 2016…in addition, 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 59.7% in December, up from 58.2% 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 55.9%, down from 57.4% in November, indicating that a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in December than 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 148,000 Jobs in December, Unemployment Rate Remains at 4.1%

the Employment Situation Summary for December indicated weak job creation by employers, which was confirmed by equally weak employment figures from the household survey…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 148,000 jobs in December, after the previously estimated payroll job increase for November was revised up from 228,000 to 252,000, while the payroll jobs increase for October was revised down from 244,000 to 211,000…that means that this report represents a total of 139,000 more seasonally adjusted payroll jobs than were reported last month, below the average addition of 171,000 jobs per month we saw over the last year…the unadjusted data, however, shows that there were actually 180,000 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..

the seasonally adjusted job changes table for December showed that retail sales was the only sector that saw relative job losses, as 20,300 fewer retail workers were added during the month than would be normal for December…on the other hand, employment in health care increased by 31,000 jobs for the month, as 12,400 more employees were added by hospitals…construction work also saw a relative job increase of 30,000, as specialty trade contractors added 23,800 more workers than normal in December, with 13,800 of those working on non-residential projects….another 29,000 seasonally adjusted jobs were added by the leisure and hospitality sector, with the addition of 25,100 jobs in bars and restaurants… 25,000 more jobs were added by manufacturers, with factories producing machinery accounting for 6,000 of those…however, the broad professional and business services sector, which usually leads in monthly job gains, only added 19,000 jobs, as there were 15,400 fewer accounting and bookkeeping jobs, while temporary help agencies only employed 7,000 more than in November… meanwhile, employment in other sectors including mining, wholesale trade, transportation and warehousing, financial activities, information, private education and government, all saw smaller job gains over the month..

with a number of the job increases in generally better paying sectors, the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.63 an hour in December, after it had increased by a revised 5 cents an hour in November; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $22.30 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.8 hours…at the same time, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime remained unchanged at 3.5 hours…

meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 104,000 to 154,021,000, while the estimated number of those unemployed fell by 40,000 to 6,576,000; which thus meant there was just a 64,000 increase in the total labor force…since the working age population had grown by 160,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 96,000 to a record high of 95,512,000…with the increase of those in the labor force proportionately smaller than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 62.7% 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 60.1%…at the same time, the decrease in the number unemployed was not large enough to lower the unemployment rate, which remained unchanged at 4.1%… meanwhile, the number of those who reported they were forced to accept just part time work rose by 64,000, from 4,851,000 in November to 4,915,000 in December, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.0% of the labor force in November to 8.1% in December…

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..

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

our trade deficit rose by 3.2% in November as the value of both our export and our imports increased, but our imports increased by more….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 $1.6 billion to $50.5 billion in November, from an upwardly revised October deficit of $48.9 billion…the value of our November exports rose by $4.4 billion to $200.2 billion on a $4.4 billion increase to $134.6 billion in our exports of goods and an increase of less than $0.1 billion to $65.7 billion in our exports of services, while the value of our imports rose $6.0 billion to $250.7 billion on a $6.0 billion increase to $205.5 billion in our imports of goods and a decrease of less than $0.1 billion to $45.3 billion in our imports of services…export prices were on average 0.5% higher in November, so our real November exports would be smaller than the nominal value of them by that percentage, while import prices were 0.7% higher, meaning real imports were less than the nominal dollar values reported here by that percentage….

the $4.4 billion increase in our November exports of goods largely resulted from greater exports of capital goods, automotive vehicles and parts, and consumer goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods rose by $2,473 million to $46,325 million on a $1,172 million increase in our exports of civilian aircraft, a $440 million increase in our exports of telecommunications equipment, and a $285 million increase in our exports of industrial machines other than those listed, and that our exports of automotive vehicles, parts, and engines rose by $963 million to $13,533 million on a $561 million increase in our exports of new and used passenger cars and a $416 million increase in our exports of vehicle accessories other than bodies, engines and tires, and that our exports of consumer goods rose by $662 million to $16,993 million on a $327 million increase in our exports of cellphones and a $262 million increase in our exports of art, antiques and other collectibles…in addition, our exports of industrial supplies and materials rose by $240 million to $41,230 million as a $631 million increase in our exports of petroleum products other than fuel oil, a $281 million increase in our exports of nonferrous metals other than copper and aluminum, and a $225 million increase in our exports of organic chemicals was partially offset by a $333 million decrease in our exports of fuel oil and a $449 million decrease in our exports of nonmonetary gold…meanwhile, our exports of foods, feeds and beverages rose by $112 million to $10,668 million…slightly offsetting the increases in those export categories, our exports of other goods not categorized by end use fell by $157 million to $5,279 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods, industrial supplies and materials and capital goods accounted for the November increase in our imports…our imports of consumer goods rose by $2,394 million to $52,406 million on a $1069 million increase in our imports of cellphones, a $360 million increase in our imports of artwork, antiques and other collectibles, a $383 million increase in our imports of gem diamonds, a $252 million increase in our cotton apparel and household goods and a $246 million increase in our imports of household appliances…our imports of industrial supplies and materials rose by $2,176 million to $45,001 million as our imports of crude oil rose by $1,137 million, our imports of fuel oil rose by $258 million and our imports of organic chemicals rose by $240 million….our imports of capital goods rose by $1,584 million to $56,513 million on a $767 million increase in our imports of semiconductors, a $578 million increase in our imports of telecommunications equipment, and a $381 million increase in our imports of computer accessories…in addition, our imports of automotive vehicles, parts and engines rose by $357 million to $29,913 million as imports of passenger cars, engines, and other parts all saw modest increases….offsetting those import increases, our imports of foods, feeds, and beverages fell by $105 million to $11,694 million, and our imports of other goods not categorized by end use rose by $371 million to $8,495 million….

the press release gives us details on our balance of trade with selected countries:

The November figures show surpluses, in billions of dollars, with Hong Kong ($2.8), South and Central America ($2.6), Singapore ($1.0), United Kingdom ($0.4), and Brazil ($0.3). Deficits were recorded, in billions of dollars, with China ($33.5), European Union ($13.5), Mexico ($5.8), Japan ($5.8), Germany ($5.3), Italy ($2.8), India ($2.4), South Korea ($1.7), OPEC ($1.3), France ($1.3), Canada ($1.1), Taiwan ($0.9), and Saudi Arabia ($0.2). 
* The deficit with the European Union increased $1.5 billion to $13.5 billion in November. Exports decreased $1.0 billion to $24.0 billion and imports increased $0.5 billion to $37.5 billion. 
* The deficit with South Korea decreased $1.0 billion to $1.7 billion in November. Exports increased $0.3 billion to $4.0 billion and imports decreased $0.7 billion to $5.7 billion.
* The deficit with China increased $1.5 billion to $33.5 billion in November. Exports increased $0.2 billion to $10.8 billion and imports increased $1.8 billion to $44.2 billion.

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 for inflation in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here…..from that table, we can estimate that 3rd quarter real exports of goods averaged 125,674.3 million monthly in 2009 dollars, while similarly inflation adjusted October and November exports were at 125,453 million and 128,580 million respectively, in that same 2009 dollar quantity index representation…. annualizing the change between the average real exports of the two quarters, we find that the 4th quarter’s real exports of goods are rising at a 4.3% annual rate from those of the 3rd quarter, or at a pace that would add about 0.36 percentage points to 4th quarter GDP if continued at the same pace through December…..in a similar manner, we find that our 3rd quarter real imports averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 191,065 million and 195,257 million in 2009 dollars respectively…that would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 12.1% from those of the 3rd quarter…since imports subtract from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their increase at a 12.1% rate would in turn subtract about 1.49 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 1.13  percentage points from the growth of 4th quarter GDP….(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..)

Construction Spending Rose 0.8% in November After Prior Months Were Revised Higher

the Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,257.0 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.8%)* above the revised October annualized estimate of $1,247.1 billion and also 2.4 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year…the annualized October construction spending estimate was revised 0.5% higher, from $1,241.5 billion to $1,247.1 billion, while the annual rate of construction spending for September was revised nearly 1.0% higher, from $1,224.6 billion to $1,236.3 billion…the $11.7 billion upward revision to September construction spending would imply that the 3rd estimate of 4th quarter GDP was understated by as much as 0.29 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer…

a brief summary on the November changes for different types of construction spending is included with the Census release: Spending on private construction was at a seasonally adjusted annual rate of $964.3 billion, 1.0 percent (± 1.0 percent)* above the revised October estimate of $955.1 billion. Residential construction was at a seasonally adjusted annual rate of $530.8 billion in November, 1.0 percent (±1.3 percent)* above the revised October estimate of $525.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.5 billion in November, 0.9 percent (± 1.0 percent)* above the revised October estimate of $429.7 billion.  In November, the estimated seasonally adjusted annual rate of public construction spending was $292.7 billion, 0.2 percent (±2.0 percent)* above the revised October estimate of $292.0 billion. Educational construction was at a seasonally adjusted annual rate of $78.8 billion, 3.8 percent (±2.5 percent) above the revised October estimate of $75.9 billion. Highway construction was at a seasonally adjusted annual rate of $88.0 billion, 0.8 percent (±4.6 percent)* below the revised October estimate of $88.7 billion.

as you can tell from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in 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 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… there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for the prices changes of all of those types of construction separately, we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and thereby get a rough estimate of the real change…

that index showed that aggregate construction costs were down 0.2% in November after being up 0.5% in October, up 0.2% in September and up 0.1% in August…on that basis, we can estimate that construction costs for November were up 0.3% from September, up 0.5% from August, and up 0.6% from July, while they were obviously down 0.2% from October…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 $1,236,278 for September, $1,220,897 for August, and $1,215,351 for July, while it was at 1,247,077 annually in October and 1,256,993 annually in November…thus to compare the inflation adjusted construction spending of the two recent 4th quarter months to those of the third quarter, our calculation would be ((1,256,993 + 0.998 * 1,247,077 ) / 2)/ ((1,236,278 * 1.003 + 1,220,897 * 1.006 + 1,215,351 * 1.006) /3) = 1.0166659, meaning real construction over the months of October and November was up 1.6666% vis a vis the 3rd quarter…in GDP terms, that means real construction for the 4th quarter increased at an annual rate 6.835% over that of the 3rd quarter, or at a pace that would add about 0.50 percentage points to 4th quarter GDP, should real December construction continue at the same pace as that of October and November…

November Factory Shipments Up 1.2%, Inventories 0.4% Higher

the Census Bureau’s summary of the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for November, which precedes the detailed spreadsheet, is quite complete, so we’ll just quote directly from it here:

  • New orders for manufactured goods in November, up five of the last six months, increased $6.5 billion or 1.3 percent to $488.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent October increase. Shipments, up eleven of the last twelve months, increased $5.7 billion or 1.2 percent to $491.2 billion. This followed a 0.8 percent October increase. Unfilled orders, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion. This followed a 0.1 percent October increase. The unfilled orders-to-shipments ratio was 6.60, down from 6.68 in October. Inventories, up twelve of the last thirteen months, increased $2.5 billion or 0.4 percent to $665.1 billion. This followed a 0.3 percent October increase. The inventories-to-shipments ratio was 1.35, down from 1.36 in October. 
  • New orders for manufactured durable goods in November, up three of the last four months, increased $3.0 billion or 1.3 percent to $241.4 billion, unchanged from the previously published increase. This followed a 0.4 percent October decrease. Transportation equipment, also up three of the last four months, drove the increase, $3.2 billion or 4.1 percent to $80.8 billion. New orders for manufactured nondurable goods increased $3.4 billion or 1.4 percent to $246.7 billion.
  • Shipments of manufactured durable goods in November, up six of the last seven months, increased $2.3 billion or 0.9 percent to $244.4 billion, down from the previously published 1.0 percent increase. This followed a 0.5 percent October increase. Transportation equipment, up two of the last three months, led the increase, $2.0 billion or 2.6 percent to $81.3 billion. Shipments of manufactured nondurable goods, up seven of the last eight months, increased $3.4 billion or 1.4 percent to $246.7 billion. This followed a 1.1 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $2.8 billion or 6.0 percent to $49.6 billion. 
  • Unfilled orders for manufactured durable goods in November, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion, unchanged from the previously published increase. This followed a 0.1 percent October increase. Fabricated metal products, up ten of the last eleven months, led the increase, $0.5 billion or 0.6 percent to $81.3 billion. Inventories Inventories of manufactured durable goods in November, up sixteen of the last seventeen months, increased $0.9 billion or 0.2 percent to $405.3 billion, unchanged from the previously published increase. This followed a 0.2 percent October increase. Primary metals, also up sixteen of the last seventeen months, led the increase, $0.3 billion or 0.8 percent to $34.4 billion.
  • Inventories of manufactured nondurable goods, up six consecutive months, increased $1.6 billion or 0.6 percent to $259.8 billion. This followed a 0.6 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $1.1 billion or 2.7 percent to $40.0 billion.

to gauge the impact 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 statistically unchanged at $229,475 million; the value of work in process inventories was 0.8% higher at $208,501 million, and materials and supplies inventories were valued 0.5% higher at $227,145 million…the producer price index for November indicated that prices for finished goods increased 1.0%, prices for intermediate processed goods were 0.5% higher, and that prices for unprocessed goods were on average 3.2% higher….assuming similar valuations for like inventories, that would suggest that November’s real finished goods inventories were down 1.0%, while real inventories of intermediate processed goods were 0.3% greater, and while real raw material inventories were 2.7% smaller…those changes follow an October report that indicated finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and real raw material inventory inventories were 0.4% smaller…since real factory inventories in the 3rd quarter were somewhat higher, any real inventory decreases in the 4th quarter will subtract from the growth of 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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