July’s jobs report; June’s construction spending, factory inventories, and JOLTS

The major economic releases of last week included the Employment Situation Summary for July and the Job Openings and Labor Turnover Survey (JOLTS) for June, both from the Bureau of Labor Statistics, and two June reports that included metrics which were only estimated in last week’s release of 2nd quarter GDP: the June report on Construction Spending (pdf) and the Full Report on Manufacturers’ Shipments, Inventories and Orders for June, both of which were from the Census Bureau…Last week also saw the release of the last regional Fed manufacturing survey for July: the Dallas Fed’s Texas Manufacturing Outlook Survey, which also covers adjacent western Louisiana and southeastern New Mexico, indicated its general business activity index fell to –17.5 in July, down from –15.1 in June but up from -19.1 in May, indicating a majority of Texas businesses continue to experience a slowdown, with the negative figures indicating the percentage of negative reports over those that were positive each month…

Privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which is the source data for the BEA report, and which reported that vehicles sold at a 15.82 million annual rate in July, up from the 15.29 million annual rate in June, and up from the 15.74 annual sales rate of July 2023, and the S&P CoreLogic Case-Shiller home price indexes for May from S&P Global, which is based on a 3-month average of March, April and May home closing prices, and which reported that their national home price index was 5.9% higher than their home price index over the same three months of a year ago…. this week also saw the first monthly purchasing manager’s survey from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 46.8% in July, down from 49.5% in June, which means that a larger plurality of manufacturing industry purchasing managers reported deteriorating conditions in various facets of their business in July than a month earlier…

Seasonally Adjusted Jobs Rose by 114,000 in July, Unemployment Rater Rose to 4.3%

The Employment Situation Summary for July from the Bureau of Labor Statistics reported the second smallest increase in payroll jobs since December 2020, and the highest the unemployment rate since October 2021, largely due to a big increase in those who began actively looking for work.…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 114,000 jobs in July, after the payroll job increase for May was revised down by 2,000, from 218,000 to 216,000, and the June jobs increase was revised down by 27,000, from 206,000 to 179,000 jobs….with those revisions, that means that this report indicates an increase of just 85,000 more jobs than were reported last month, and also means that increases in seasonally adjusted non-farm payrolls have averaged 202,400 per month over the first seven months of 2023, compared to the average job increase of 257,700 per month over the first seven months of 2023, and the average 417,700 per month increase over the first seven months of 2022…..the unadjusted data shows that there were actually 915,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments, leading public education jobs to show a 27,000 job increase…

Seasonally adjusted job increases were spread through the service sector and government, while goods producing job gains were limited to construction, and the information sector saw significant job losses, given its small size.…since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we’ll just quote from that summary here:

• In July, employment continued to trend up in health care, in construction, and in transportation and warehousing, while information lost jobs. (See table B-1.)
• Health care added 55,000 jobs in July, similar to the average monthly gain of 63,000 over the prior 12 months. In July, employment rose in home health care services (+22,000), hospitals (+20,000), and nursing and residential care facilities (+9,000).
• Employment continued to trend up in construction in July (+25,000), in line with the average monthly gain over the prior 12 months (+19,000). Employment in specialty trade contractors continued its upward trend in July (+19,000).
• In July, employment continued to trend up in transportation and warehousing (+14,000), with job gains in couriers and messengers (+11,000) and warehousing and storage (+11,000). These gains were partially offset by a job loss in transit and ground passenger transportation (-11,000). Transportation and warehousing has added 119,000 jobs since a recent low in January of this year.
• Employment in social assistance continued its upward trend in July (+9,000), but at a slower pace than the average monthly gain over the prior 12 months (+23,000).
• Information employment declined by 20,000 in July but has changed little over the year.
• Government employment was little changed in July (+17,000). Employment growth in government has slowed in recent months, following larger job gains in 2023 and the first quarter of 2024.
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; financial activities; professional and business services; leisure and hospitality; and other services.

The establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $15.07 an hour, after it had increased by a revised 9 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 9 cents to $30.14 an hour…employers also reported that the average workweek for all private payroll employees was down by 0.1 hour to 34.2 hours, while hours for production and non-supervisory personnel was down by 0.1 hour to 33.7 hours ….at the same time, the average manufacturing workweek fell by 0.2 hours to 39.9 hours, while average factory overtime was down by 0.1 hour to 2.8 hours..

Meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by 67,000 to 161,266,000, while the similarly estimated number of those counted as unemployed rose by 352,000 to 7,163,000, which therefore meant that July saw a rounded net increase of 420,000 in the total labor force…since the working age population had grown by 206,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 214,000 to 100,215,000….meanwhile, the 420,000 increase of those in the labor force was enough to raise the labor force participation rate, from 62.6% in June to 62.7% in July….however, the smallish increase in number employed vis-a-vis the larger increase in the population was enough to lower the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.0%….however, even with the big increase in the total labor force, the jump in those unemployed was enough to raise the unemployment rate from 4.1% to 4.3%, the highest since October 2021….at the same time, the number who reported they were involuntarily working part time rose by 346,000 to 4,566,000 in July, which was enough to raise the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 7.4% in June to 7.8% in July, the highest since the pandemic impacted in 2020….

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 alongside the press release to avoid the need to scroll up and down the page..

Job Openings, Hiring, Layoffs and Quitting were All Lower in June

The Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 46,000, from 8,230,000 in May to 8,184,000 in June, after May’s job openings were revised 90,000 higher, from 8,140,000 to 8,230,000…June jobs openings were also 10.3% lower than the 9,125,000 job openings reported for June of a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.9% in June, but was down from the 5.5% rate of June a year ago…the greatest percentage drop in June job openings was in the durable goods manufacturing sector, where openings fell by 88,000 to 323,000, while job openings with state and local governments excluding education rose by 94,000 to 698,000 (see table 1 for details on other categories of job openings)…like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in June, seasonally adjusted new hires totaled 5,341,000, down by 314,000 from the revised 5,655,000 who were hired or rehired in May, as the hiring rate as a percentage of all employed fell to 3.4% from 3.6% in May, and it was also lower than the 3.8% hiring rate in June a year earlier (details of hiring by industry since January are in table 2)….meanwhile, total separations decreased by 302,000, from 5,397,000 in May to 5,095,000 in June, as the separations rate as a percentage of the employed fell from 3.4% to 3.2%, which was also down from the 3.6% separations rate of June a year ago (see table 3)…subtracting the 5,095,000 total separations from the total hires of 5,341,000 would imply an increase of 246,000 jobs in June, somewhat more than the revised payroll job increase of 179,000 for June that was reported by the July establishment survey later in the week, but still with the expected +/-110,000 margin of error in these incomplete employment extrapolations…

Breaking down the seasonally adjusted job separations, the BLS finds that 3,282,000 of us voluntarily quit their jobs in June, down by 121,000 from the revised 3,403,000 who quit their jobs in May, while the ‘quits rate’, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, while it was still down from the 2.4% quits rate of a year earlier (see details in table 4)….in addition to those who quit, 1,498,000 were either laid off, fired or otherwise discharged in June, down by 180,000 from the revised 1,678,000 who were discharged in May, as the discharges rate fell from 1.1% to 0.9% of all those who were employed during the month, which was also down from the discharges rate of 1.0% a year earlier (see table 5)…meanwhile, other separations, which includes retirements and deaths, were at 314,000 in June, down from 316,000 in May, for an ‘other separations rate’ of 0.2%, the same as in May and as in June of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be easily accessed using the links to tables at the bottom of the press release…

Construction Spending Fell 0.3% in June, But Big Revisions Boost 2nd Quarter GDP 0.22%

The Census Bureau report on construction spending for June (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $2,148.4 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.0 percent)* below the revised annualized estimate of $2,154.8 billion of construction spending for May, but 6.2 percent (±1.6 percent) above the estimated annualized level of construction spending in June of last year….the May annualized construction spending estimate was revised 0.7% higher, from $2,139.8 billion to $2,154.8 billion, while the annual rate of construction spending for April was revised nearly 1.0% higher, from $2,142.1 billion to $2,163.2 billion…for the first half of 2024, actual construction spending amounted to $1,034.8 billion, 8.6 percent (±1.2 percent) above the $952.5 billion spent for construction in the first half of 2023..

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

• Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,664.6 billion, 0.3 percent (±0.8 percent)* below the revised May estimate of $1,668.8 billion. Residential construction was at a seasonally adjusted annual rate of $928.0 billion in June, 0.3 percent (±1.3 percent)* below the revised May estimate of $931.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $736.6 billion in June, 0.1 percent (±0.8 percent)* below the revised May estimate of $737.7 billion.
• Public Construction: In June, the estimated seasonally adjusted annual rate of public construction spending was $483.9 billion, 0.4 percent (±1.8 percent)* below the revised May estimate of $486.0 billion. Educational construction was at a seasonally adjusted annual rate of $101.9 billion, 0.9 percent (±3.3 percent)* below the revised May estimate of $102.8 billion. Highway construction was at a seasonally adjusted annual rate of $143.5 billion, 0.4 percent (±4.6 percent)* below the revised May estimate of $144.1 billion

Construction spending for all three months of the second quarter was higher than what was reported by the BEA in the advance report for 2nd quarter GDP last week.…as we saw above, the annual rate of construction spending for April was revised roughly $21.1 billion higher, and annualized construction spending for May was revised $15.0 billion higher….in reporting 2nd quarter GDP, the Excel file with key source data and assumptions accompanying the report indicated on line 86 that they had estimated that the value of June’s nonresidential construction would be $2.2 billion less than that of the previously reported May figure, that June’s residential construction on line 117 would be $6.7 billion less than that of the previously reported May figure, and that the value of June’s public construction shown on line 201 would be $0.5 billion less than the previously published May figure…hence, the total of the figures used by the BEA for total June construction in the 2nd quarter GDP report were $9.4 billion less than the previously published May figure…with June construction now reported down $6.4 billion from a May figure that was revised $15.0 billion higher, that means that the BEA had underestimated annualized June construction spending by $18.0 billion when reporting 2nd quarter GDP…thus, after averaging the revisions to construction spending for the three months of the 2nd quarter, we find the total revised annualized figure for 2nd quarter construction spending would thus be $18.03 billion more in current dollars than the figures used by the BEA when computing 2nd quarter GDP, implying we’ll see an upward revision of about 0.22 percentage points, to the construction components of 2nd quarter GDP when the 2nd estimate is released on the 29th of August, give or take depending on the mix of inflation adjustments to the revised figures…

Factory Shipments Rose 0.1% in June, Factory Inventories Little Changed

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $19.1 billion or 3.3 percent to $564.2 billion in June, following a decrease of 0.5% to $583.3 billion in May, which was revised from the 0.5% decrease to $583.1 billion reported for May last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that here:

• Summary: New orders for manufactured goods in June, up six of the last seven months, increased $13.4 billion or 2.3 percent to $592.0 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent May increase. Shipments, up two consecutive months, increased $0.7 billion or 0.1 percent to $573.9 billion. This followed a 0.4 percent May increase. Unfilled orders, up six of the last seven months, increased $23.1 billion or 1.8 percent to $1,325.1 billion. This followed a 0.8 percent May increase. The unfilled orders-to-shipments ratio was 6.74, up from 6.64 in May. Inventories, down four of the last five months, decreased $0.3 billion or virtually unchanged to $853.1 billion. This followed a 0.2 percent May decrease. The inventories-to-shipments ratio was 1.49, unchanged from May.
• Summary: New orders for manufactured goods in June, down two consecutive months, decreased $19.1 billion or 3.3 percent to $564.2 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent May decrease. Shipments, up four of the last five months, increased $3.1 billion or 0.5 percent to $588.0 billion. This followed a 0.7 percent May decrease. Unfilled orders, down following forty-six consecutive monthly increases, decreased $19.0 billion or 1.4 percent to $1,383.9 billion. This followed a 0.2 percent May increase. The unfilled orders-to-shipments ratio was 6.94, down from 7.17 in May. Inventories, down following four consecutive monthly increases, decreased $0.2 billion or virtually unchanged to $859.2 billion. This followed a 0.1 percent May increase. The inventories-to-shipments ratio was 1.46, down from 1.47 in May.
• New Orders for manufactured durable goods in June, down following four consecutive monthly increases, decreased $18.8 billion or 6.7 percent to $264.1 billion, down from the previously published 6.6 percent decrease. This followed a 0.1 percent May increase. Transportation equipment, down two of the last three months, drove the decrease, $19.6 billion or 20.6 percent to $75.8 billion. New orders for manufactured nondurable goods decreased $0.3 billion or 0.1 percent to $300.0 billion.
• Shipments of manufactured durable goods in June, up four of the last five months, increased $3.4 billion or 1.2 percent to $287.9 billion, unchanged from the previously published increase. This followed a 0.4 percent May decrease. Transportation equipment, also up four of the last five months, drove the increase, $3.4 billion or 3.7 percent to $95.3 billion. Shipments of manufactured nondurable goods, down two consecutive months, decreased $0.3 billion or 0.1 percent to $300.0 billion. This followed a 1.0 percent May decrease. Petroleum and coal products, also down two consecutive months, drove the decrease, $1.5 billion or 2.2 percent to $63.6 billion.
• Unfilled Orders for manufactured durable goods in June, down following forty-six consecutive monthly increases, decreased $19.0 billion or 1.4 percent to $1,383.9 billion, down from the previously published 1.3 percent decrease. This followed a 0.2 percent May increase. Transportation equipment, down following forty-one consecutive monthly increases, drove the decrease, $19.5 billion or 2.1 percent to $889.7 billion.
• Inventories of manufactured durable goods in June, down following two consecutive monthly increases, decreased $0.2 billion or virtually unchanged to $529.3 billion, unchanged from the previously published decrease. This followed a 0.2 percent May increase. Transportation equipment, down following ten consecutive monthly increases, drove the decrease, $0.3 billion or 0.1 percent to $172.0 billion. Inventories of manufactured nondurable goods, down following four consecutive monthly increases, decreased $0.1 billion or virtually unchanged to $329.9 billion. This followed a 0.1 percent May increase. Food products, down two consecutive months, drove the decrease, $0.2 billion or 0.2 percent to $69.7 billion. By stage of fabrication, June materials and supplies decreased 0.4 percent in durable goods and were virtually unchanged in nondurable goods. Work in process increased 0.2 percent in durable goods and decreased 0.9 percent in nondurable goods. Finished goods increased 0.1 percent in durable goods and 0.4 percent in nondurable goods.

The BEA’s key source data and assumptions (xls) for the advance estimate of second quarter GDP indicated on line 143 that they had estimated that the value of durable goods inventories would fall $0.1 billion before any inflation adjustment in June, and this report indicates that total durable goods inventories actually decreased in value by $0.2 billion; in addition, on line 144 of the BEA’s GDP source data, they estimated that nondurable goods inventories rose by $0.1 billion in June, while this report indicates that nondurable goods inventories fell by $0.1 billion…hence, this report thus shows that the BEA had overestimated the change in the 2nd quarter GDP inventory component by around $0.3 billion before an inflation adjustment, or by around $1.2 billion on an annualized basis, which would suggest that 2nd quarter GDP would have to be revised downwards by about 0.02 percentage points to account for what this report shows…

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)