Major economic reports released the past week were the Employment Situation Summary for December from the Bureau of Labor Statistics, the November report on our International Trade from agencies within the Commerce Dept, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November and the November report on Wholesale Trade, Sales and Inventories (pdf), both from the Census Bureau….in addition, this week the Fed released the Consumer Credit Report for November, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.5 billion, or at a 3.6% annual rate, as non-revolving credit expanded at a 5.8% rate to $3,089.7 billion in November while revolving credit outstanding shrank at a 2.7% rate to $1,086.3 billion…
Privately issued reports released this week included the ADP Employment Report for December and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 55.0%, up from 53.9% in November, indicating that a greater plurality of service industry purchasing managers reported expansion in various facets of their business in December than did in November….
Employers Add 145,000 Jobs in December, Unemployment Rate Steady at 50 Year Low
The Employment Situation Summary for December indicated that employers added the smallest number of jobs since May, but that the unemployment rate remained at a 50 year low and the U-6 unemployment rate fell to the lowest on record…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 145,000 jobs in December, after the previously estimated payroll job increase for November revised down by 10,000 from 266,000, to 256,000, and the payroll jobs increase for October was revised down by 4,000 from 156,000 to 152,000…that means that this report represents a net of just 131,000 more seasonally adjusted payroll jobs than were reported last month, and that brought the average monthly job increase for 2019 down to 176,000 jobs, down from the 2018 average increase of 223,000 jobs per month….the unadjusted data, meanwhile, shows that there were actually 278,000 fewer payroll jobs extent in December than in November, as the usual seasonal layoffs in areas such as construction and other outdoor services were normalized by the seasonal adjustments to show the job increases indicated..
Seasonally adjusted job increases in December were concentrated in the private service sector and in construction, as manufacturing employment fell by 12,000, resource exploitation employment fell by 9,000, and employment in transportation and warehousing fell by 10,500…however, even after a downward seasonal adjustment, retail sales still added 41,200 more workers, led by a 33,200 increase in those working in clothing and accessories stores and a 7,000 job increase in building material and garden supply stores….another 40,000 seasonally adjusted jobs were added in the leisure and hospitality sector, with the addition of 15,900 more jobs in bars and restaurants and 14,400 more in amusements, gambling, and recreation….meanwhile, employment in health care and social assistance increased by 33,900 jobs during the month, as 8,800 more employees were added by hospitals and 7,300 more were employed by outpatient care centers…after seasonal adjustment, construction work saw a relative job increase of 20,000, as non-residential specialty trade contractors employed 9,800 more workers than would have been expected for December…meanwhile, employment in the other major sectors including the broad professional and business services sector, wholesale trade, utilities, financial activities, information, and government, all saw somewhat smaller job gains over the month..
Depressed by the aforementioned increases in mostly lower paying jobs, the establishment survey also showed that average hourly pay for all employees rose by just 3 cents an hour to $28.32 an hour in December, after it had increased by a revised 9 cents an hour in November; that brought the average pay gain for the year to 79 cents, an increase of 2.9% since last December….meanwhile, the average hourly earnings of production and non-supervisory employees increased by 2 cents to $23.79 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.3 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.5 hours…at the same time, the manufacturing workweek held steady at 40.5 hours, while average factory overtime was unchanged at 3.2 hours…
Meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 267,000 to 158,803,000, while the estimated number of those unemployed fell by 58,000 to 5,753,000; which together meant there was a net 209,000 increase in the total labor force…since the working age population had grown by 161,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 48,000 to 95,625,000…with the increase of those in the labor force not much larger than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.2% in December….meanwhile, the increase in number employed as a percentage of the increase in the population was not significant enough to change the employment to population ratio, which we could think of as an employment rate, as it was also unchanged at 61.0%…at the same time, the relatively small decrease in the number considered unemployed was not enough to lower the unemployment rate, which remained at a 50 year low of 3.5% in December.. meanwhile, the number of those who reported they were forced to accept just part time work fell by 140,000, from 4,288,000 in November to 4,148,000 in December, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, by 0.2% to 6.7% of the labor force in December, which appears to be an all time low…
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..
Trade Deficit Fell 8.2% in November on Lower Imports of Capital Goods & Consumer Goods
Our trade deficit fell by 8.2% in November 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 November indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $3.9 billion to $43.1 billion in November, from an October deficit of $46.9 billion, which was revised from the $47.2 billion trade deficit reported for October a month ago…the value of our November exports rose by $1.4 billion to $208.6 billion on a $1.0 billion increase to $137.2 billion in our exports of goods and a $0.4 billion increase to $71.5 billion in our exports of services, while the value of our imports fell $2.5 billion to $251.7 billion on a $2.9 billion decrease to $201.1 billion in our imports of goods, which was partly offset by an increase of $0.4 billion to $50.7 billion in our imports of services…export prices were on average 0.2% higher in November, which means the relative real increase in exports for the month was smaller than the nominal increase by that percentage, while import prices were also 0.2% higher, meaning the decrease in real imports was greater than the nominal dollar decrease reported here by that percentage…
The $1.4 billion increase in the value of our November exports of goods largely resulted from greater exports of capital goods and consumer goods, which was partially offset by lower exports of industrial supplies and materials and of “other” goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that the value of our exports of capital goods rose by $610 million to $45,325 million on a $377 million increase in our exports of drilling & oilfield equipment and a $278 million increase in our exports of civilian aircraft engines, and that our exports of consumer goods rose by $484 million to $17,105 million on a $305 million increase in our exports of gem diamonds and a $389 million increase in our exports of pharmaceuticals…in addition, our exports of automotive vehicles, parts, and engines rose by $434 million to $13,399 million on $105 million increases in our exports of automotive engines and of passenger cars and a $94 million increase in our exports of vehicle accessories other than bodies, engines and tires, while our exports of foods, feeds and beverages rose by $192 million to $10,705 million on a $250 million increase in our exports of soybeans…partially offsetting the increases in those export categories, our exports of industrial supplies and materials fell by $490 million to $44,381 million as a $796 million decrease in our exports crude oil and a $253 million decrease in our exports of precious metals other than gold was partly offset by a $248 million increase in our exports of petroleum products other than fuel oil and a $201 million increase in our exports of nonmonetary gold, while our exports of other goods not categorized by end use fell by $511 million to $5,656 million…
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports, and shows that lower imports of capital goods and consumer goods accounted for the lion’s share of the November decrease in our imports…our imports of capital goods fell by $1,156 million to $55,406 million on a $635 million decrease in our imports of civilian aircraft, a $599 million decrease in our imports of computers, and a $391 million increase in our imports of semiconductors, and our imports of consumer goods fell by $1,003 million to $51,309 million on a $458 million decrease in our imports of cellphones, a $349 million decrease in our imports of artwork, antiques and other collectibles, a $224 million decrease in our imports of pharmaceuticals, and a $206 million decrease in our imports of furniture and related household goods….at the same time, the value of our imports of industrial supplies and materials fell by $618 million to $40,773 million on a $410 million decrease in our imports of petroleum products other than fuel oil and a $211 million decrease in our imports of nuclear fuel materials, our imports of foods, feeds, and beverages fell by $164 million to $12,238 million, and our imports of other goods not categorized by end use fell by $811 million to $9,719 million….partly offsetting the decreases in those import categories, our imports of automotive vehicles, parts and engines rose by $1,065 million to $30,114 million on a $539 million increase in our imports of vehicle accessories other than bodies, engines and tires, a $257 million increase in our imports of, trucks, buses, and special purpose vehicles, and a $207 million increase in our imports of automotive engines and engine parts..
The Full Release and Tables pdf for this month’s report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected countries:
The November figures show surpluses, in billions of dollars, with South and Central America ($4.9), Hong Kong ($1.8), Brazil ($1.7), United Kingdom ($1.3), OPEC ($0.7), Singapore ($0.6), and Saudi Arabia ($0.1). Deficits were recorded, in billions of dollars, with China ($25.6), European Union ($13.5), Mexico ($8.5), Japan ($5.7), Germany ($5.2), India ($2.4), Italy ($2.3), Taiwan ($1.7), Canada ($1.7), South Korea ($1.2), and France ($1.2).
- • The deficit with China decreased $2.2 billion to $25.6 billion in November. Exports increased $1.4 billion to $8.9 billion and imports decreased $0.8 billion to $34.5 billion.
- • The deficit with Canada decreased $1.6 billion to $1.7 billion in November. Exports increased $0.1 billion to $24.0 billion and imports decreased $1.5 billion to $25.7 billion.
- • The deficit with Japan increased $1.3 billion to $5.7 billion in November. Exports decreased $0.6 billion to $5.8 billion and imports increased $0.7 billion to $11.6 billion.
To estimate the impact of October’s and November’s trade in goods on the eventual 4th 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 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here….from that table, we can figure that 3rd quarter real exports of goods averaged 149,243.3 million monthly in 2012 dollars, while similarly inflation adjusted October and November exports were at 147,973 million and 148,707 million respectively in that same 2012 dollar quantity index representation…annualizing the change between the average monthly real exports of the two quarters, we find that the 4th quarter’s real exports of goods are falling at a 2.399% annual rate from those of the 3rd quarter, or at a pace that would subtract about 0.19 percentage points from 4th quarter GDP if it were to continue at the same pace through December….in a similar manner, we find that our 3rd quarter real imports of goods averaged 233,955.7 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 226,925 million and 223,960 million in 2012 dollars respectively…those chained dollar representations of real goods would indicate that so far in the 4th quarter, real imports have been shrinking at annual rate of 13.78% from those of the 3rd quarter…since imports are subtracted 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 decrease at a 13.78% rate would conversely add about 1.62 percentage points to 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our improving balance of trade in goods would add about 1.43 percentage points to the growth of 4th quarter GDP….(note, however, that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the BEA does not provide inflation adjusted data on those, and we don’t have an easy way to adjust for all their price changes)…
Factory Shipments Up 0.3% in November, Factory Inventories Up 0.3%, Both on Higher Prices
The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for November from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $3.6 billion or 0.7 percent to $493.0 billion in November, following an increase of 0.2% to $496.6 billion in October, which was revised from the 0.3% increase to $497.0 billion that was reported for October a month ago….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 accurate as revised updates to the October advance report on durable goods we reported on two weeks ago…on those durable goods revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:
- Summary: New orders for manufactured goods in November, down three of the last four months, decreased $3.6 billion or 0.7 percent to $493.0 billion, the U.S. Census Bureau reported today. This followed a 0.2 percent October increase. Shipments, up two consecutive months, increased $1.7 billion or 0.3 percent to $502.2 billion. This followed a 0.1 percent October increase. Unfilled orders, down two of the last three months, decreased $4.9 billion or 0.4 percent to $1,158.7 billion. This followed a virtually unchanged October increase. The unfilled orders‐to‐shipments ratio was 6.67, down from 6.68 in October. Inventories, up eleven of the last twelve months, increased $2.0 billion or 0.3 percent to $701.0 billion. This followed a 0.2 percent October increase. The inventories‐to‐shipments ratio was 1.40, unchanged from October.
- New orders for manufactured durable goods in November, down two of the last three months, decreased $5.2 billion or 2.1 percent to $242.2 billion, down from the previously published 2.0 percent decrease. This followed a 0.2 percent October increase. Transportation equipment, down three consecutive months, led the decrease, $5.0 billion or 5.9 percent to $79.0 billion. New orders for manufactured nondurable goods increased $1.6 billion or 0.6 percent to $250.8 billion.
- Shipments of manufactured durable goods in November, up following four consecutive monthly decreases, increased $0.1 billion or virtually unchanged to $251.4 billion, down from the previously published 0.1 percent increase. This followed a 0.1 percent October decrease. Electrical equipment, up two of the last three months, drove the increase, $0.3 billion or 2.2 percent to $11.8 billion. Shipments of manufactured nondurable goods, up two consecutive months, increased $1.6 billion or 0.6 percent to $250.8 billion. This followed a 0.3 percent October increase. Petroleum and coal products, up four of the last five months, led the increase, $1.4 billion or 2.7 percent to $53.5 billion.
- Unfilled orders for manufactured durable goods in November, down two of the last three months, decreased $4.9 billion or 0.4 percent to $1,158.7 billion, unchanged from the previously published decrease. This followed a virtually unchanged October increase. Transportation equipment, down following four consecutive monthly increases, led the decrease, $4.8 billion or 0.6 percent to $790.1 billion.
- Inventories of manufactured durable goods in November, up sixteen of the last seventeen months, increased $1.6 billion or 0.4 percent to $433.7 billion, unchanged from the previously published increase. This followed a 0.3 percent October increase. Transportation equipment, also up sixteen of the last seventeen months, drove the increase, $1.8 billion or 1.2 percent to $149.2 billion. Inventories of manufactured nondurable goods, up following seven consecutive monthly decreases, increased $0.3 billion or 0.1 percent to $267.3 billion. This followed a 0.1 percent October decrease. Petroleum and coal products, up two consecutive months, drove the increase, $0.7 billion or 1.7 percent to $39.6 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 November’s finished goods inventories was 0.1% higher at $243,579 million; the value of work in process inventories was 0.7% higher at $219,930 million, and materials and supplies inventories were valued 0.1% higher at $237,480 million…the producer price index for November indicated that prices for finished goods increased 0.3%, that prices for intermediate processed goods were 0.2% higher, and that prices for unprocessed goods were on average 3.9% higher….assuming similar valuations for like types of inventories, those price changes would suggest that November’s real finished goods inventories were down about 0.1%, that real inventories of intermediate processed goods were around 0.5% greater, and real raw material inventories were 3.8% smaller…those inventory changes follow an October report that indicated real finished goods inventories were about 0.7% lower, that real inventories of intermediate processed goods were 0.1% lower, and that real raw material inventory inventories were about 0.9% lower…since real factory inventories in the 3rd quarter were substantial higher, any inventory decreases in the 4th quarter such as we see indicated here will not only subtract from GDP in and of themselves, but also reverse the inventory gains of the 3rd quarter…
November Wholesale Sales Up 1.5%, Wholesale Inventories Down 0.1%
The November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at “$500.7 billion, up 1.5 percent (±0.5 percent) from the revised October level and .. up 0.8 percent (±1.1 percent)* from the November 2018 level. The September 2019 to October 2019 percent change was revised from the preliminary estimate of down 0.7 percent (±0.5 percent) to down 0.9 percent (±0.5 percent).*“…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 produced or finally sold…
On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this November report estimated that wholesale inventories were valued at a seasonally adjusted “$674.9 billion at the end of November, down 0.1 percent (±0.2 percent)* from the revised October level. Total inventories were up 3.3 percent (±1.2 percent) from the revised November 2018 level. ..the value of inventories at the end of October was revised to $675.4 billion from the $675.6 billion indicated by last month’s report, still up 0.1% from September..
To estimate the impact of November wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index…although details are not broken out in this report, we’ve previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories…as we noted earlier, the producer price index for November indicated that prices for finished goods rose 0.3%, that prices for intermediate processed goods rose 0.2%, and that prices for unprocessed goods were on average 3.9% higher; thus the 0.1% decrease in the nominal value of wholesale inventories was despite rising prices, and hence real wholesale inventories were at least 0.4% lower for the month, and that follows an October when real whole inventories were roughly 0.6% lower….since real wholesale inventories in the 3rd quarter were mostly higher, any decrease in 4th quarter inventories such as we see indicated here will subtract both the 4th quarter decrease and the inventory gains of the 3rd quarter from 4th quarter GDP…
(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)