March jobs report; February’s trade deficit, construction spending, & factory inventories

in addition to the Employment Situation Summary for March from the Bureau of Labor Statistics, this week’s economic releases included three reports that will input into 1st quarter GDP:  the BEA report on our International Trade for February, the February report on Construction Spending, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for February, all from the Census Bureau….in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $10.6 billion, or at a 3.3% annual rate, as non-revolving credit expanded at a 4.4% annual rate to $2,836.6 billion and revolving credit outstanding grew at a 0.2% rate to $1,030.9 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 17.40 annual rate in March, up from the 16.96 annual sales rate in February, and up from the 16.53 million rate a year earlier, and the Mortgage Monitor for February from Black Knight Financial Services….that report indicated that 4.30% of US mortgages were delinquent in February, down from 4.31% in January but up from 3.62% in February a year ago, and that 0.65% of all mortgages were in the foreclosure process at the end of the month, down from 0.66% of mortgages in January and down from the 0.93% of mortgages that were in foreclosure in February a year ago…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 59.3% in March, from 60.8% in February, which still suggests an ongoing expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 58.8% in March, down from 59.5% in February, indicating a slightly 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 103,000 Jobs in March, Labor Force Participation Rate Falls to 62.9%

the Employment Situation Summary for March showed the weakest payroll job growth in 7 months, while the labor force participation rate fell because a number of the unemployed stopped looking for work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 103,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 239,000 to 176,000 and the payroll jobs increase for February was revised up from 313,000 up to 326,000…including those revisions, this report thus represents a total of just 53,000 more seasonally adjusted payroll jobs than were reported last month, well below the past year’s average of 188,000 jobs per month…the unadjusted data shows that there were actually 665,000 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 construction and the retail sector showing job losses a seasonally adjusted basis, while both of those sectors actually added jobs on an unadjusted basis…adjusted construction employment was down 15,000 after increasing 65,000 in February, as it appears that those workers who would have been added in March were brought on early due to the mild February weather, meaning the March job additions were short of normal…meanwhile, the retail sector showed a seasonally adjusted 4,400 job decrease, as general merchandise stores cut 12,600 employees, probably due to store closings…meanwhile, the broad professional and business services sector added 33,000 jobs, as 9,600 more were employed by accounting and bookkeeping services….employment in health care rose by 22,400, with the addition of 9,900 jobs in hospitals…in addition, the manufacturing sectors saw the addition of 22,000 jobs, with metal fabrication factories adding 8,800….and there was also a 11,400 payroll job increase in social assistance sector, with the addition of 11,800 jobs in individual and family services….however, all the other major sectors, including resource extraction, wholesale trade, transportation and warehousing, utilities, information, financial services, education, leisure and hospitality, and government, all saw smaller increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $26.82 an hour in March, after it had increased by a revised 3 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $22.42 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in March, while hours for production and non-supervisory personnel slipped by 0.1 hour to 33.7 hours…in addition, the manufacturing workweek was down 0.1 hours at 40.9 hours, and average factory overtime decreased by 0.1 hours to 3.6 hours…

meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 37,000 to 155,178,000, while the similarly estimated number of those qualified as unemployed fell by 121,000 to 6,585,000; which thus meant a decrease of 158,000 in the total labor force…since the working age population had grown by 163,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 323,000 to 95,335,000….with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell by 0.1% to 62.9%….at the same time, the small decrease in number employed as a percentage of the increase in the population was not enough to change the employment to population ratio, as it remained at 60.4%…likewise, the decrease in the number unemployed was also not large enough to impact the unemployment rate, which remained at 4.1%….meanwhile, the number who reported they were involuntarily working part time fell by 141,000 to 5,019,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.2% in February to 8.0% in March, the lowest since November…

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 Rose 1.6% on Cost of Rights to Broadcast the Winter Olympics

our trade deficit grew by 1.6% February, as the value of our imports increased more than the value of our exports did….the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $926 million to $57.59 billion in February, from a January deficit that was revised from the originally reported $56.601 billion to $56.665 billion…in rounded figures, the value of our February exports rose by $3.5 billion to $204.4 billion on a $3.0 billion increase to $137.2 billion in our exports of goods and an increase of $0.5 billion to $67.3 billion in our exports of services, while our imports rose $4.4 billion to $262.0 billion on a $3.3 billion increase to $214.2 billion in our imports of goods and a $1.1 billion increase to $47.8 billion in our imports of services…the latter reflected a one-time $1.0 billion increase in charges for the use of intellectual property for the rights to broadcast the 2018 Winter Olympic Games…export prices averaged 0.2% higher in February, so the real growth in exports was less than the nominal dollar growth by that percentage, while import prices were 0.4% 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 industrial supplies, capital goods, and of automotive products, which was partially offset by a decrease in our exports of consumer goods…referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,022 million to $43,468 million on a $602 million increase in our exports of nonmonetary gold, a $293 million increase in our exports of crude oil, a $280 million increase in our exports of natural gas, and a $279 million increase in our exports of coal and other fuels, while our exports of automotive vehicles, parts, and engines rose by $925 million to $14,825 million on a $680 million increase in our exports of passenger cars…in addition, our exports of capital goods rose by $658 million to $45,549 million, led by a $227 million increase in our exports of civilian aircraft, while our exports of foods, feeds and beverages rose by $9 million to $10,746 million, and our exports of other goods not categorized by end use rose by $341 million to $5,009 million….partially offsetting those increases, our exports of consumer goods fell by $480 million to $17,077 million on a $562 million decrease in our exports of pharmaceuticals and a $453 decrease in our exports of jewelry….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of capital goods, industrial supplies and materials, and foods, feeds and beverages were largely responsible for the increase in our February imports…our imports of capital goods rose by $1,823 million to $57,782 million on a $450 million increase in our imports of civilian aircraft, a $282 million increase in our imports of materials handling equipment, a $252 million increase in our imports of computers, a $240 million increase in our imports of telecommunications equipment, and a $230 million increase in our imports of industrial machines other than those listed separately…in addition, our imports of industrial supplies and materials rose by $783 million to $48,091 million, as our imports of crude oil rose by $740 million and our imports of organic chemicals rose by $290 million, and our imports of foods, feeds, and beverages rose by $767 million to $12,643 million on a $306 million increase in foods other than those itemized separately…also, our imports of consumer goods rose by $555 million to $55,122 million on a $999 million increase in our imports of pharmaceuticals, a $423 million increase in our imports of furniture, and a $212 million increase in our imports of nonwool or cotton clothing and textiles, which were partially offset by a $1,007 million decrease in our imports of cellphones, and our imports of automotive vehicles, parts and engines rose by $146 million to $31,088 million…partially offsetting those increases, our imports of other goods not categorized by end use fell by $528 million to $7,822 million…

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 for inflation in chained 2009 dollars, the same inflation adjustment that’s 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 figure that 4th quarter real exports of goods averaged 128,106 million monthly in chained 2009 dollars, while inflation adjusted 1st quarter goods exports were at 126,884 million and 129,401 million for January and February respectively in that same 2009 dollar quantity index representation…averaging January and February goods exports and then computing the annualized 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 0.12% annual rate above those of the 4th quarter, or at a pace that would add a bit less than 0.01 percentage point to 1st quarter GDP…..in a similar manner, we find that our 4th quarter real imports of goods averaged 194.913.3 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 196,842 million and 198,507 million respectively, after that same 2009 chained dollars inflation adjustment…that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 5.79% 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 5.79% rate would thus subtract 0.66 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 subtract 0.65 percentage points from 1st quarter GDP…

note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that we can still approximate that the $1.0 billion increase in our imports of services relating to the broadcast rights for Winter Olympic Games would subtract another 0.10 percentage points from 1st quarter GDP at the same time…

Construction Spending Rose 0.1% in February after January & December Revised Much Higher

the Census Bureau’s report on February construction spending (pdf) reports that “Construction spending during February 2018 was estimated at a seasonally adjusted annual rate of $1,273.1 billion, 0.1 percent (±1.2 percent)* above the revised January estimate of $1,272.2 billion. The February figure is 3.0 percent (±1.5 percent) above the February 2017 estimate of $1,235.7 billion. During the first two months of this year, construction spending amounted to $176.3 billion, 4.4 percent (±1.3 percent) above the $168.9 billion for the same period in 2017.”…the January annualized spending estimate was revised 0.7% higher, from $1,262.8 billion to $1,272.2 billion, while December’s construction spending was revised from $1,262.7 billion to $1,272.65 billion annually, which would suggest a major upward revision to 4th quarter GDP when the annual revisions are released later this summer…

details on different subsets of construction spending are provided by the Census release summary: Spending on private construction was at a seasonally adjusted annual rate of $982.0 billion, 0.7 percent (±1.6 percent)* above the revised January estimate of $974.8 billion. Residential construction was at a seasonally adjusted annual rate of $533.4 billion in February, 0.1 percent (±1.3 percent)* above the revised January estimate of $532.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $448.6 billion in February, 1.5 percent (±1.6 percent)* above the revised January estimate of $441.9 billion. In February, the estimated seasonally adjusted annual rate of public construction spending was $291.1 billion, 2.1 percent (±1.6 percent) below the revised January estimate of $297.4 billion. Educational construction was at a seasonally adjusted annual rate of $74.6 billion, 0.5 percent (±2.6 percent)* below the revised January estimate of $75.0 billion. Highway construction was at a seasonally adjusted annual rate of $88.5 billion, 0.2 percent (±5.4 percent)* below the revised January estimate of $88.7 billion.

as you can see from that excerpt, construction spending would input 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 in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…adding to the problem, 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 price index showed that aggregate construction costs were up 0.1% in February, after they had increased by 0.8% in January, decreased by 0.1% in December and were unchanged in November…on that basis, we can estimate that February construction costs were roughly 0.9% more than those of December, 0.8% more than those of November, and 0.8% more than those of 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 $1,272,648 in December, $1,252,144 in November, and $1,237,649 in October, while annualized construction costs were at $1,273,085 in February and $1,272,178 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: ((1,273,085 +1,272,178 * 1.001) / 2 ) / ((1,272,648 * 1.009 + 1,252,144 * 1.008 + 1,237,649 * 1.008)/ 3) = 1.00685, which tells us that real construction spending over January and February was up by 0.685% from that of the 4th quarter period, or up at a 2.77% annual rate…then, 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 about 0.20 percentage points to 1st quarter GDP, assuming there is little change in real construction in March..

February Factory Shipments Up 0.2%, Factory Inventories 0.3% Higher

the Census Bureau’s summary of the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for February, which precedes the detailed spreadsheet of those metrics and which includes revisions to the February advance durable goods report which we reviewed two weeks ago, is quite complete, so we’ll just quote directly from that here:

  • New orders for manufactured goods in February, up six of the last seven months, increased $6.0 billion or 1.2 percent to $498.0 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent January decrease. Shipments, up fourteen of the last fifteen months, increased $1.0 billion or 0.2 percent to $500.5 billion. This followed a 0.7 percent January increase. Unfilled orders, up five of the last six months, increased $1.9 billion or 0.2 percent to $1,142.8 billion. This followed a 0.3 percent January decrease. The unfilled orders-to-shipments ratio was 6.49, down from 6.52 in January. Inventories, up fifteen of the last sixteen months, increased $2.3 billion or 0.3 percent to $675.2 billion. This followed a 0.4 percent January increase. The inventories-to-shipments ratio was 1.35, unchanged from January.
  • New orders for manufactured durable goods in February, up three of the last four months, increased $7.2 billion or 3.0 percent to $247.3 billion, down from the previously published 3.1 percent increase. This followed a 3.6 percent January decrease. Transportation equipment, also up three of the last four months, led the increase, $5.5 billion or 7.0 percent to $83.5 billion. New orders for manufactured nondurable goods decreased $1.2 billion or 0.5 percent to $250.7 billion.
  • Shipments of manufactured durable goods in February, up nine of the last ten months, increased $2.2 billion or 0.9 percent to $249.8 billion, unchanged from the previously published increase. This followed a 0.5 percent January increase. Machinery, up six of the last seven months, led the increase, $0.6 billion or 1.7 percent to $33.3 billion. Shipments of manufactured nondurable goods, down following eight consecutive monthly increases, decreased $1.2 billion or 0.5 percent to $250.7 billion. This followed a 1.0 percent January increase. Petroleum and coal products, down following seven consecutive monthly increases, drove the decrease, $2.0 billion or 3.7 percent to $50.5 billion.
  • Unfilled orders for manufactured durable goods in February, up five of the last six months, increased $1.9 billion or 0.2 percent to $1,142.8 billion, unchanged from the previously published increase. This followed a 0.3 percent January decrease. Transportation equipment, up two of the last three months, led the increase, $1.4 billion or 0.2 percent to $773.3 billion. 
  • Inventories of manufactured durable goods in February, up nineteen of the last twenty months, increased $1.8 billion or 0.4 percent to $410.8 billion, unchanged from the previously published increase. This followed a 0.4 percent January increase. Transportation equipment, up three consecutive months, led the increase, $0.7 billion or 0.5 percent to $132.7 billion. Inventories of manufactured nondurable goods, up nine consecutive months, increased $0.4 billion or 0.2 percent to $264.4 billion. This followed a 0.4 percent January increase. Petroleum and coal products, up eight consecutive months, led the increase, $0.2 billion or 0.5 percent to $42.8 billion.

to gauge the effect of February factory 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 increased 0.1% to $211,892 million; the value of work in process inventories was up 0.4% at $211,337 million, and materials and supplies inventories were valued 0.6% higher at $229,586 million…meanwhile, the producer price index for February indicated that prices for finished goods decreased 0.1%, that prices for intermediate processed goods were 0.7% higher, and that prices for unprocessed goods were on average 2.8% higher….assuming similar valuations for like inventories, that would suggest that February’s real finished goods inventories were 0.4% greater than January’s, that real inventories of intermediate processed goods were 0.3% smaller, and that real raw material inventory inventories were 2.2% smaller…since real factory inventories in the 4th quarter were a bit higher, any real inventory decreases over the 1st quarter will subtract from growth of 1st 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…)   

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s