April’s jobs report; March’s trade deficit, factory inventories and wholesale sales

Major economic reports released the past week include the Employment Situation Summary for April from the Bureau of Labor Statistics, and three March reports that include metrics which were estimated in last week’s advance estimate of 1st quarter GDP:  the Commerce Dept report on our international trade in goods and services for March,  the Full Report on Manufacturers’ Shipments, Inventories and Orders for March and the Wholesale Trade, Sales and Inventories report for March, both from the Census Bureau….in addition, the Consumer Credit Report for March was released by the Fed on Thursday of this week, and it showed that overall consumer credit, a measure of non-real estate debt, contracted by a seasonally adjusted $12.1 billion, or at a 3.4% annual rate, as non-revolving credit expanded at a 6.4% annual rate to $3,143.2 billion, while revolving credit outstanding shrunk at a 30.9% rate to $1,066.1 billion…

Privately issued reports released this week included the ADP Employment Report for April and the April Non-Manufacturing Report On Business from the Institute for Supply Management (ISM); which saw the NMI (non-manufacturing index) fall to 41.8% in April from 52.5% in March, indicating a significant plurality of service industry purchasing managers reported contraction in various facets of their business in April…we should note that the NMI is a an average of four equally weighted subindexes, and that their business activity, new orders and employment indices were all at record lows, while the supplier deliveries index was at a record high, which thus limited the decrease in the composite NMI…

Payroll jobs fall 20.5 million in April, Unemployment Rate at All-Time-High 

As was widely expected, the Employment Situation Summary for April indicated the largest number of payroll job cuts and the highest unemployment rate in the history of these surveys…seasonally adjusted estimates extrapolated from the establishment survey data projected that non-farm payroll employment fell by 20,500,000 in April, after the previously estimated payroll job decrease for March was revised down from -701,000 to -870,000, while the payroll jobs increase for February was revised down from 275,000 to 230,000…including those revisions, this report thus indicates a total of 20,714,000 fewer seasonally adjusted payroll jobs than were reported last month, wiping out more than nine years of job gains, and reducing payroll jobs to their smallest number since February 2011…the 20,500,000 jobs lost in April is an unparalleled record high, it tops the previous record of 800,000 jobs lost in March 2009 by twenty-five fold… it’s also likely that millions more were not actually working during all or part of the month, because the establishment survey counts workers who are paid by their employer for all or any part of the pay period including the 12th of the month as employed, even if they were not actually at their jobs….meanwhile, the unadjusted data shows that there were actually 19,512,000 fewer payroll jobs extant in April than in March, as the expected seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were first wiped out by the seasonal adjustments before the adjusted losses were reported…

Seasonally adjusted job losses in April were spread through throughout both the goods producing and the private service sectors, with only the federal government showing a statistically insignificant 1,000 job increase on a seasonally adjusted basis…the leisure and hospitality sector accounted for more than a third of the April decline, as it was down by 7,653,000 jobs, with the loss of 5,491,300 employees working in bars and restaurants and another 1,062,000 job losses in amusements, gambling, and recreation employment…the broad professional and business services sector saw 2,128,000 jobs cut, as temporary help services employed 841,900 fewer than in March, and 259,400 less than normal for this time of year were employed by services to buildings and dwellings…the retail sector shed 2,106,900 jobs, led by losses of 739,000 spots in clothing stores and 344,700 jobs at motor vehicle and parts dealers, even as employment in the warehouse clubs and supercenters component of general merchandise retailing added 93,400 jobs….employment in health care and social assistance dropped by 2,086,900, with the loss of 503,300 jobs in dentist’s offices, 336,200 jobs in child care services, and 241,300 more jobs in individual and family services…manufacturing employment fell by 1,330,000, led by job losses of 381,500 in motor vehicles and parts manufacturing and 109,000 in the manufacture of fabricated metal products…despite the increase at the federal level, government employment was down by 980,000 in April, with the loss of 468,800 jobs in local school districts and another 332,300 local government jobs outside of education…after seasonal adjustment, construction employment fell by 975,000 in April, with 393,100 of those construction jobs cut by nonresidential specialty trade contractors and another 297,400 cut by residential specialty trade contractors.…employment fell by 584,100 in the transportation and warehousing sector, led by the loss of 185,300 jobs in transit and ground passenger transportation….in addition, employment in “other services” fell by 1,267,000, employment in wholesale trade fell by 362,800, employment in the financial sector fell by by 262,000, employment in the information sector fell by 254,000, and employment in resource extraction fell by 50,000, with 6,000 of those in coal mining…

The establishment survey also showed that average hourly pay for all employees rose by $1.34 an hour to $30.01 an hour in April, after it had increased by a revised 15 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by $1.04 to $25.12 an hour, averages which undoubtedly reflect the large loss of poorly-paid jobs in food services and retail….employers also reported that the average workweek for all private payroll employees rose by 0.1 hour to 34.2 hours in April, while hours for production and non-supervisory personnel rose by 0.1 hour to 33.5 hours…the manufacturing workweek, however, was down by 2.1 hours to 38.3 hours, while average factory overtime fell by 0.9 hour to 2.1 hours…

At the same time, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 22,369,000 to 133,403,000, while the similarly estimated number of those who qualified as unemployed rose by 15,938,000 to 23,078,000; which thus meant a net decrease of 6,432,000 in the total labor force…since the working age population had also grown by 138,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 646,000 to a record 103,415….with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell 2.5% to 60.2%….at the same time, since the decrease in the number employed was as large as it was, the employment to population ratio, which we could think of as an employment rate, fell from 60.0% in March to 51.3% in April…likewise, the increase in the number unemployed was large enough to raise the unemployment rate from 4.4% to 14.7%, the highest unemployment rate on record by a long shot….meanwhile, the number who reported they were involuntarily working part time rose by 5,122,000 to 10,887,000 in April, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.7% the labor force in March to 22.8% of the labor force In April, also the largest jump and highest on record by a long shot….

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..

March Trade Deficit Increases 11.6% on Falling Exports of Goods and Services

Our trade deficit was 11.6% higher in March, as both our imports and exports decreased, but our exports decreased by more….the Commerce Department report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit rose by $4.6 billion to $44.4 billion in March, from a February deficit that was revised from the originally reported $39.9 billion to $39.8 billion…in rounded totals, the value of our March exports fell by 20.0 billion to $187.7 billion on a $9.2 billion decrease to $128.1 billion in our exports of goods and a $10.8 billion decrease to $59.6 billion in our exports of services, while our imports fell by $15.4 billion to $232.2 billion on a $4.7 billion decrease to $193.7 billion in our imports of goods and a $10.7 billion decrease to $38.5 billion in our imports of services….export prices averaged 1.6% lower in March, so real exports were greater than their nominal value by that percentage, while import prices were 2.3% lower, meaning that our real imports were likewise greater than than their nominal value by that percentage…

Our March exports of goods fell mostly due to lower exports of industrial supplies and materials, automotive vehicles, parts, and engines, and capital goods…referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $2,888 million to $42,910 million on a $987 million decrease in our exports of crude oil, a $375 million decrease in our exports of fuel oil, a $880 million decrease in our exports of other petroleum products, and a $311 million decrease in our exports of nonmonetary gold, and that our exports of automotive vehicles, parts, and engines fell by $2,464 million to $11,303 million on a $876 million decrease in our exports of vehicle parts and accessories other than engines, chassis and tires, a $775 million decrease in our exports of passenger cars, a $389 million decrease in our exports of trucks, buses, and special purpose vehicles, and a $308 million decrease in our exports of automotive engines…in addition, our exports of capital goods fell by $2,015 million to $42,610 million, led by a $410 million decrease in our exports of industrial machines other than those itemized separately, a $399 million decrease in our exports parts for civilian aircraft and a $249 million decrease in our exports civilian aircraft, our exports of consumer goods fell by $821 million to $15,030 million on a $432 million decrease in our exports of gem diamonds and a $332 million decrease in our exports of jewelry even as our exports of pharmaceuticals rose by $813 million, and our exports of foods, feeds and beverages fell by a net of $7 million to $10,908 million even as our exports of soybeans rose by $249 million, while our exports of other goods not categorized by end use fell by $652 million to $5,253 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that falling imports of consumer goods and automotive vehicles, parts, and engines were mostly responsible for the decrease in March imports, even as an increase in imports of capital goods partly offset those decreases…our imports of consumer goods fell by $3,977 million to $47,351 million on a $2,457 million decrease in our imports of cellphones, a $437 million decrease in our imports of artwork, antiques and other collectibles, a $394 million decrease in our imports of toys, games and sporting goods, a $373 million decrease in our imports of TVs and video equipment, and a $327 million decrease in our imports of jewelry, even as our imports of pharmaceuticals rose by $1,998 million, while our imports of automotive vehicles, parts and engines fell by $2,729 million to $27,779 million on a $1,501 million decrease in our imports of vehicle parts and accessories other than engines, chassis and tires, a $547 million decrease in our imports of passenger cars, a $402 million decrease in our imports of automotive engines, and a $318 million decrease in our imports of trucks, buses, and special purpose vehicles….partially offsetting the decreases in those end-use categories, our imports of capital goods rose by $1,508 million to $53,215 million on a $803 million increase in our imports of computers, a $760 million increase in our imports of semiconductors, and a $319 million increase in our imports of civilian aircraft, even as our imports of electric apparatuses fell by $363 million…in addition, our imports of foods, feeds, and beverages rose by $441 million to $12,926 million led by a $209 million increase in our imports of ‘other foods”, our imports of industrial supplies and materials rose by $399 million to $41,152 million on a $2,309 million increase in our imports of nonmonetary gold and an $1,181 million increase in our imports of finished metal shapes, even as our imports of crude oil fell $2,709 and our imports of fuel oil fell $402, while our imports of other goods not categorized by end use rose by $155 million to $9,965 million…..

The Full Release and Tables pdf for this report also gives us surplus and deficit details on our goods trade with selected countries:

The March figures show surpluses, in billions of dollars, with South and Central America ($5.0), Hong Kong ($1.9), OPEC ($1.5), Brazil ($1.4), Saudi Arabia ($0.3), and United Kingdom ($0.1). Deficits were recorded, in billions of dollars, with European Union ($16.9), China ($15.5), Mexico ($9.0), Germany ($6.0), Japan ($4.6), Italy ($2.8), Canada ($2.6), Taiwan ($2.0), South Korea ($1.9), India ($1.7), France ($0.7), and Singapore (less than $0.1).

  • The deficit with the European Union increased $4.3 billion to $16.9 billion in March. Exports decreased $0.6 billion to $21.8 billion and imports increased $3.7 billion to $38.7 billion.
  • The surplus with the United Kingdom decreased $1.2 billion to $0.1 billion in March. Exports decreased $1.3 billion to $4.9 billion and imports decreased less than $0.1 billion to $4.8 billion.
  • The deficit with China decreased $4.2 billion to $15.5 billion in March. Exports increased $0.3 billion to $7.8 billion and imports decreased $3.9 billion to $23.3 billion.

In the advance estimate of 1st quarter GDP published last week, our March trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release…that report estimated that our seasonally adjusted March goods trade deficit was at $64,219 million on a Census basis, on goods exports of $127,647 million and goods imports of $191,866 million…this report revises that and shows that our actual Census basis goods trade deficit in March was at $64,376 million, on adjusted goods imports of $128,013 million and adjusted goods exports of $192,389 million…at the same time, the February goods trade deficit was revised from the $59,887 million indicated in that advance report to $59,730 million…amazingly, those revisions from the previously published figures exactly cancel each other out, which would suggest that the net 1st quarter trade deficit in goods as reported by last week’s GDP report was accurate, and will not need to be be revised when the 2nd estimate is released at the end of this month….

Note, however, that we have not adjusted for changes in price, and that Exhibit 10 in the pdf for this March report indicates that the price adjusted trade in goods for each month going back to October has been revised….however, the 2nd estimate of GDP will not include any trade deficit revisions to October, November, and December, and will only use the revised inflation adjusted data for January, February & March, so it will not include and hence be less accurate than the data available here…that 4th quarter GDP data will not be corrected for price changes until the annual revisions to GDP are released at the end of July…

With the major drop in trade in services, more than 20% overall, we suspect that there also have been significant revisions in that data since the GDP report was published….however, the BEA’s Key source data and assumptions (xls) for the advance estimate of first quarter GDP only provides aggregate exports and imports of services at annual rates on an international-transactions-accounts basis, and there is no comparable metric or adjustable data in this report that we could check to see what the differences are…but with both nominal exports and imports down in excess of $10 billion each, it’s possible that even a modest revision to those figures could have an oversized impact on 1st quarter GDP…

March Factory Shipments Down 5.2%, Factory Inventories Down 0.8%

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for March from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $51.0 billion or 10.3 percent to $445.8 billion in March, following a decrease of $0.7 billion or 0.1% to $496.8 billion in February, which was revised from the decrease of $0.1 billion to $497.4 billion that was reported for February 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 reliable as revised updates to the March advance report on durable goods which was released last week…on those durable goods orders 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 March, down four of the last five months, decreased $51.0 billion or 10.3 percent to $445.8 billion, the U.S. Census Bureau reported today. This followed a 0.1 percent February decrease. Shipments, down three consecutive months, decreased $26.2 billion or 5.2 percent to $473.6 billion. This followed a 0.3 percent February decrease. Unfilled orders, down following three consecutive monthly increases, decreased $23.6 billion or 2.0 percent to $1,134.9 billion. This followed a 0.1 percent February increase. The unfilled orders-to-shipments ratio was 6.57, down from 6.62 in February. Inventories, down three consecutive months, decreased $5.8 billion or 0.8 percent to $693.5 billion. This followed a 0.4 percent February decrease. The inventories-to-shipments ratio was 1.46, up from 1.40 in February. 
  • New Orders for manufactured durable goods in March, down following three consecutive monthly increases, decreased $36.6 billion or 14.7 percent to $212.6 billion, down from the previously published 14.4 percent decrease. This followed a 1.1 percent February increase. Transportation equipment, down two of the last three months, led the decrease, $35.9 billion or 41.3 percent to $50.9 billion. New orders for manufactured nondurable goods decreased $14.4 billion or 5.8 percent to $233.2 billion.
  • Shipments of manufactured durable goods in March, down eight of the last nine months, decreased $11.8 billion or 4.7 percent to $240.4 billion, down from the previously published 4.5 percent decrease. This followed a 0.8 percent February increase. Transportation equipment, also down eight of the last nine months, led the decrease, $11.1 billion or 13.0 percent to $74.0 billion. Shipments of manufactured nondurable goods, down three consecutive months, decreased $14.4 billion or 5.8 percent to $233.2 billion. This followed a 1.3 percent February decrease. Petroleum and coal products, also down three consecutive months, drove the decrease, $15.5 billion or 30.3 percent to $35.6 billion.
  • Orders Unfilled orders for manufactured durable goods in March, down following three consecutive monthly increases, decreased $23.6 billion or 2.0 percent to $1,134.9 billion, unchanged from the previously published decrease. This followed a 0.1 percent February increase. Transportation equipment, also down following three consecutive monthly increases, led the decrease, $23.0 billion or 2.9 percent to $768.1 billion.
  • Inventories of manufactured durable goods in March, up eighteen of the last nineteen months, increased $2.8 billion or 0.6 percent to $437.4 billion, unchanged from the previously published increase. This followed a virtually unchanged February increase. Transportation equipment, up twenty of the last twenty-one months, led the increase, $0.9 billion or 0.6 percent to $152.7 billion. Inventories of manufactured nondurable goods, down three consecutive months, decreased $8.6 billion or 3.2 percent to $256.1 billion. This followed a 1.0 percent February decrease. Petroleum and coal products, also down three consecutive months, led the decrease, $7.5 billion or 19.7 percent to $30.8 billion. By stage of fabrication, March materials and supplies increased 0.7 percent in durable goods and decreased 1.8 percent in nondurable goods. Work in process increased 1.1 percent in durable goods and decreased 6.6 percent in nondurable goods. Finished goods were virtually unchanged in durable goods and decreased 2.9 percent in nondurable goods.

The BEA’s Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates that they had estimated that the value of manufactured nondurable goods inventories would decrease by $1.5 billion on a Census basis (ie, before price adjustments) in March, while this report obviously shows total non-durable goods factory inventories decreased by $8.6 billion…the value of February’s non durable goods factory inventories was concurrently revised from $264.9 billion to $ 264,652 billion…that would mean that March’s inventory decrease was underestimated by $10.8 billion in the GDP report, while February’s GDP inventory figure was $0.25 billion too high, which combined would suggest a downward revision of around 0.16 percentage points to first quarter GDP … we should caution that since our estimate of the impact on GDP is based on the change in nominal spending, an imbalance of inflation adjustments among the revised components might also have a material impact on the final revision..

March Wholesale Sales Down 5.2%, Wholesale Inventories Down 0.8%

The March report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $475.0 billion, down 5.2 percent (±0.5 percent) from the revised February level, and also 5.2 percent (±0.5 percent) lower than wholesale sales of March 2018… the February preliminary estimate of wholesale sales was revised from the $500.7 billion reported last month to $500,955 billion, which the Census reports as “revised from the preliminary estimate of down 0.8 percent (±0.5 percent) to down 0.7 percent (±0.5 percent).” from January…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, since additional goods sitting in a warehouse represent goods that were produced but not sold, and this March report estimated that wholesale inventories were valued at $650.7 billion at month end, a decrease of 0.8 percent (+/-0.2%) from the revised February level and 2.0 percent (±0.9  percent) lower than March a year ago, with the February preliminary inventory estimate concurrently revised upward from the originally reported $655.8 billion to $655.7 billion, which meant the change in inventories from January to February was revised from the decrease of 0.7 percent (+/-0.4%) reported last month to one of 0.8 percent (±0.2 percent), even as the revision from the advance estimate was from down 1.0 percent (±0.2 percent) to down 0.8 percent (±0.2 percent)…

The BEA’s Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates that they had estimated that the value of March wholesale inventories would decrease by $6.4 billion from February before price adjustments, while this report shows that wholesale goods inventories decreased by $5.0 billion…however, the value of February’s wholesale inventories that was used in the GDP report came from the sketchy Advance Report on Wholesale and Retail Inventories that was released just before the GDP report…that report had February wholesale inventories at $656,325 million, so hence February inventories have now been revised down $0.6 billion from the figure used in the GDP report…that revision in turn means that the March inventory change figure used in the GDP was $0.8 billion too low…combining the final revisions to February and March, the change in 1st quarter wholesale inventories will therefore be an increase of $0.2 billion from previously published figures, which would have a negligible impact on first 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…)      

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