August jobs; July’s trade deficit, construction spending, factory inventories, and JOLTS, et al

Major reports released this past week included the Employment Situation Summary for August and the Job Openings and Labor Turnover Survey (JOLTS) report for July, both from the Bureau of Labor Statistics, and three July reports that provide us with preliminarty input data to 3rd quarter GDP, and also suggest revisions to 2nd quarter GDP: the July report on our International Trade from the Bureau of Economic Analysis, and the July report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for July, both from the Census Bureau…

The week’s major privately issued reports included the ADP Employment Report for August,  the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 15.13 million annual rate in August, down from the 15.82 million annual sales rate reported in July, but up from the 15.04 million annual rate reported for August a year ago, and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the August Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 47.2% in August, up from 46.8% in July, which means that a smaller plurality of manufacturing industry purchasing managers reported deteriorating conditions in various facets of their business in August than in July, and the August Services Report On Business; which saw their Services PMI tick up to 51.5% in August, up from 51.4% in July, indicating a slightly larger plurality of service industry purchasing managers reported improvement in various facets of their business in August than in July…

Employers Added 142,000 Jobs in August; the U-6 Unemployment Rate was Highest In Four Years

The Employment Situation Summary for August indicated a payroll jobs increase that was below expectations, an unemployment rate that was lower, but a big increase in those who only had part time work….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 142,000 jobs in August, after the payroll job increase for July was revised down from 114,000 to 89,000, and the payroll jobs increase for June was revised down from 179,000 to 118,000, revisions which combined means that this report indicates an increase of just 56,000 more jobs than were reported last month, less than half of the increase in the working age population, a well below the average 212,000 jobs per month created over the past 12 months… …the unadjusted data shows that there were actually 263,000 more payroll jobs in August, as downward adjustments to sectors that normally see an increase in August, such as construction and education, we more than offset by upward adjustments to sectors that normally see a decrease, such as retail and leisure and hospitality….

Seasonally adjusted job increases were spread through the private goods producing and service sectors and government, with the only notable seasonally adjusted decreases appearing in durable goods manufacturing, which lost 25,000 jobs, and retail, which shed 11,100…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:

• Total nonfarm payroll employment increased by 142,000 over the month. Employment growth in August was in line with average job growth in recent months but was below the average monthly gain of 202,000 over the prior 12 months. In August, job gains occurred in construction and health care. (See table B-1.)
• Construction employment rose by 34,000 in August, higher than the average monthly gain of 19,000 over the prior 12 months. Over the month, heavy and civil engineering construction added 14,000 jobs, and employment in nonresidential specialty trade contractors continued to trend up (+14,000).
• Health care added 31,000 jobs in August, about half the average monthly gain of 60,000 over the prior 12 months. In August, employment rose in ambulatory health care services (+24,000) and hospitals (+10,000).
• In August, employment in social assistance continued its upward trend (+13,000) but at a slower pace than the average monthly gain over the prior 12 months (+21,000). Individual and family services added 18,000 jobs over the month.
• Employment in manufacturing edged down in August (-24,000), reflecting a decline of 25,000 in durable goods industries. Manufacturing employment has shown little net change over the year.
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; leisure and hospitality; other services; and government.

The establishment survey also showed that average hourly pay for all employees rose by 14 cents an hour to $35.21 an hour, after it had increased by a revised 8 cents an hour in July; at the same time, the average hourly earnings of production and non-supervisory employees increased by 11 cents to $30.27 an hour, after July’s pay figure was revised two cents higher….employers also reported that the average workweek for all private payroll employees was up by 0.1 hour to 34.3 hours, while hours for production and non-supervisory personnel was unchanged at 33.7 hours…meanwhile, the manufacturing workweek increased by 0.1 hour to 40.0 hours, while average factory overtime was up 0.1 hour at 3.0 hours…

At the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who would self-report being employed rose by an estimated 168,000 to 161,434,000, while the similarly estimated number of those who would be counted as unemployed fell by 48,000 to 7,115,000; which together meant that August saw a net rounded increase of 120,000 to 168,549,000 in the total labor force…since the working age population had grown by 212,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded 91,000 to 100,306,000….…however, those changes were not enough to change the labor force participation rate, which held steady at 62.7%, same as in July and down from 62.8% in August of last year….similarly, the increase in number employed vis-a-vis the population was not great enough to increase the employment to population ratio, which we could think of as an employment rate, as it remained at 60.0%…however, the decrease in the number counted as unemployed was enough to lower the unemployment rate as a percentage of the labor force from 4.3% to 4.2%….meanwhile, the number who reported they were involuntarily working part time rose by 264,000 to 4,830,000 in August, which meant that the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, rose from 7.8% in July to 7.9% in August, the highest since the early pandemic impacted month of July 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 it alongside the press release to avoid the need to scroll up and down the page to access the tables..

Job Openings Fell in July after June’s Openings were Revised Lower; Hiring, Job Quitting and Layoffs Rose

The Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 237,000, from 7,910,000 in June to 7,673,000 in July, after June’s job openings were revised 274,000 lower, from the 8,184,000 reported a month ago to 7,910,000 with this report…July’s jobs openings were also 12.9% lower than the 8,805,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.8% in June to 4.6% in July, and was down from 5.3% in July a year ago….an 88,000 job opening decrease to 304,000 job openings in the transportation, warehousing, and utilities sector appears to be the largest percentage decrease for this month, while an increase from 109,000 to 137,000 job openings with the Federal government looks to be the largest percentage increase… (see table 1 for more details)…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 July, seasonally adjusted new hires totaled 5,521,000, up by 273,000 from the revised 6,827,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed rose from 3.3% in June to 3.5% in July, while it was still down from the 3.7% hiring rate of July a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 336,000, from 5,084,000 in June to 5,420,000 in July, while the separations rate as a percentage of the employed rose from 3.2% to 3.4%, while it was still down from the 3.6% separations rate in July a year ago (see table 3)…subtracting the 5,420,000 total separations from the total hires of 5,521,000 would imply an increase of 101,000 jobs in July, a bit more than the revised payroll job increase of 89,000 for July reported by the August 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 3,277,000 of us voluntarily quit our jobs in July, up by 63,000 from the revised 3,214,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% to to 2.1% of total employment, while it was still down from 2.3% in July a year earlier (see details in table 4)….in addition to those who quit, another 1,762,000 were either laid off, fired or otherwise discharged in July, up by 202,000 from the revised 1,560,000 who were discharged in June, as the discharges rate rose from 1.0% in June to 1.1% of all those who were employed during the month, which was the same as the discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 381,000 in July, up from the revised 310,000 in June, for an ‘other separations rate’ of 0.2%, the same as in June and as in July 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 accessed using the links to tables at the bottom of the press release…

US Trade Deficit Rose 7.9% in July After 2nd Quarter Deficit Was Revised Higher

Our trade deficit rose 7.9% in July as both the value our exports and our imports increased, but the value of our imports rose by nearly six times as much….the Commerce Dept report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit increased by $5.8 billion to a rounded $78.8 billion in July, up from a revised June deficit of $73.0 billion, which had previously been reported at $73.1 billion…trade figures going back to January were revised with this report, which on net left the 2nd quarter trade deficit ~$0.65 billion higher than was previously reported, suggesting a downward revision to 2nd quarter GDP, the magnitude of which depends on the 1st quarter revisions, which will be included in the annual revision to GDP at the end of September…

after rounding, the value of our exports rose by $1.3 billion, or 0.5 percent, to $266.6 billion in July, on a $0.7 billion increase to $175.1 billion in our exports of goods, and a​ $0.6 billion increase to $91.5 billion in our exports of services, while our imports rose by $7.1 billion, or 2.1 percent, to $345.4 billion, on a $6.4 billion increase to $278.2 billion in our imports of goods, and a $0.8 billion increase to $67.2 billion in our imports of services…export prices were on average 0.7% higher in July, so this month’s increase in exports was due to higher prices and real exports were likely 0.2% lower, while import prices were 0.1% higher, meaning that our real imports were slightly smaller than their nominal value by that percentage, and likely rose around 2.0%..

The $0.7 billion​ increase in July​'s exports of goods was due to greater exports of capital goods, which were mostly offset by lower exports of automotive and consumer goods…. referencing the Full Release and Tables for July(pdf), in Exhibit 7 we find that our exports of capital goods rose by $1,821 million to $56,089 million on a $1,676 million increase in our exports of semiconductors, a $638 million increase in our exports of civilian aircraft, a $517 million increase in our exports of computer accessories, and a $300 million increase in our exports of engines for civilian aircraft, which were partly partly offset by a $786 million decrease in our exports of computers and a $372 million decrease in our exports of industrial machines other than those itemized separately…in addition, our exports of industrial supplies and materials rose by $171 million to $60,372 million as a $495 million increase in our exports of crude oil were offset by a $​3​87 million decrease in our exports of fuel oil and a $​3​56 million decrease in our exports of petroleum products other than fuel oil, while our exports of foods, feeds and beverages rose by $180 million to $13,514 million and our exports of other goods not categorized by end use rose by $252 million to $7,750 million……partly offsetting the increases in those end-use categories, our exports of automotive vehicles, parts, and engines fell by $1,697 million to $13,420 million on a $1,273 million decrease in our exports of passenger cars and a $325 million decrease in our exports of parts and accessories of vehicles other than engines, chassis, and tires, and our exports of consumer goods fell by $812 million to $21,770 million on a $659 million decrease in our exports of gem diamonds…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that higher imports of capital goods and​ of industrial supplies and materials were responsible for most of July’s increased imports.…our imports of capital goods rose by $3,269 million to $83,447 million on a $2,359 million increase in our imports of computer accessories and a $621 million increase in our imports of civilian aircraft, while our imports of industrial supplies and materials rose by $2,819 million to $57,620 million on a $1,143 million increase in our imports of nonmonetary gold, a $912 million increase in our imports of finished metal shapes, and a $516 million increase in our imports of copper…in addition, our imports of consumer goods rose by $616 million to $66,609 million on a $440 million increase in our imports of cell phones, and our imports of foods, feeds, and beverages rose by $240 million to $17,485 million on a $332 million increase in our imports of fruits and frozen fruit juices….slightly offsetting the increases in those end-use categories, our imports of automotive vehicles, parts and engines fell by $193 million to $39,763 million on a $357 million decrease in our imports of new and used passenger car​s, while our imports of other goods not categorized by end use fell by $483 million to $10,829 million…

The press release for this month’s report summarizes Exhibit 19 in the full release pdf for June, which gives us trade surplus and trade deficit details on our goods trade with selected countries:

The July figures show surpluses, in billions of dollars, with Netherlands ($4.7), South and Central America ($4.2), Hong Kong ($1.8), Australia ($1.5), Belgium ($1.0), Brazil ($0.8), and United Kingdom ($0.8). Deficits were recorded, in billions of dollars, with China ($27.2), European Union ($18.4), Mexico ($13.6), Vietnam ($9.5), Taiwan ($8.3), Germany ($7.7), Canada ($7.6), Ireland ($6.6), South Korea ($5.7), Japan ($5.4), Italy ($3.6), India ($3.3), Switzerland ($3.2), Singapore ($1.6), Malaysia ($1.5), France ($1.2), Israel ($0.4), and Saudi Arabia (less than $0.1).

• The deficit with China increased $4.9 billion to $27.2 billion in July. Exports decreased $1.0 billion to $11.5 billion and imports increased $3.9 billion to $38.7 billion.
• The deficit with Canada increased $3.0 billion to $7.6 billion in July. Exports decreased $1.4 billion to $27.3 billion and imports increased $1.7 billion to $35.0 billion.
• The deficit with Vietnam decreased $1.4 billion to $9.5 billion in July. Exports increased $1.0 billion to $2.1 billion and imports decreased $0.3 billion to $11.6 billion.

To gauge the impact of July​'s international trade in goods on 3rd 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 2017 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except they are not annualized here….from that table, we can compute that 2nd quarter real exports of goods averaged 143,432.3 million monthly in 2017 dollars, while July’s inflation adjusted exports came in at 144,368 million in that same 201​7 dollar quantity index representation….figuring the annualized change between those two figures, we find that July’s real exports of goods are running at a 2.6% annual rate above those of the 2nd quarter, or at a pace that would add about 0.18 percentage points to 3rd quarter’s GDP if they were continued through August and September…..in a similar manner, we find that our 2nd quarter real imports of goods averaged 236,472.7 million monthly in chained 2017 dollars, while the similarly inflation adjusted July goods imports were at 241,992 million…that would indicate that so far in the 3rd quarter, our real imports of goods have grown at a 9.67% annual rate from those of the 2nd 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 9.67% rate would subtract about 1.05 percentage points from 3rd quarter GDP….hence, if the July trade deficit is maintained throughout the 3rd quarter, our deteriorating balance of trade in goods over that of the 2nd quarter would subtract a net of about 0.87 percentage points from the growth rate of 3rd quarter GDP….

However, you’ll note that we have not even computed the impact of the usually less volatile change in services here, because the BEA does not provide inflation adjusted data on those, and we don’t have a straightforward way to adjust the various services for all their price changes, but that our exports in services grew $0.6 billion in July, whereas our imports in services grew $0.8 billion, which would suggest another small hit to GDP on the services side of the trade ledger…

Construction Spending Fell 0.3% in July after 2nd Quarter Spending was Revised Higher

The Census Bureau report on construction spending for July (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $2,162.7 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.0 percent)* below the revised annualized estimate of $2,169.0 billion of construction spending in June and 6.7 percent (±1.8 percent) above the estimated annualized level of construction spending in July of last year….the June construction spending estimate was revised nearly 1.0% higher, from $2,148.4 billion to $2,169.0 billion, while the annual rate of construction spending for May was revised more than 0.6% higher, from $2,154.8 billion to $2,168.2 billion….on net, those revisions mean that construction during the 2nd quarter was about $34 billion, or more than 0.5% higher than the figures used in last week’s GDP estimate, which would result in an annual rate​ increase ​of greater than 2.1%, and which would suggest an upward revision of about 0.24 percentage points to 2nd quarter GDP when the third estimate is released at the end of September, assuming the net impacts from the inflation adjustments on the revisions are similar to those we saw in the 2nd GDP estimate… 

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 $1,678.7 billion, 0.4 percent (±0.7 percent)* below the revised June estimate of $1,685.5 billion. Residential construction was at a seasonally adjusted annual rate of $941.6 billion in July, 0.4 percent (±1.3 percent)* below the revised June estimate of $945.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $737.2 billion in July, 0.4 percent (±0.7 percent)* below the revised June estimate of $740.2 billion.
• Public Construction: In July, the estimated seasonally adjusted annual rate of public construction spending was $484.0 billion, 0.1 percent (±1.8 percent)* above the revised June estimate of $483.5 billion. Educational construction was at a seasonally adjusted annual rate of $100.8 billion, 0.9 percent (±2.6 percent)* below the revised June estimate of $101.8 billion. Highway construction was at a seasonally adjusted annual rate of $140.9 billion, 0.8 percent (±4.6 percent)* below the revised June estimate of $142.0 billion.

Construction spending inputs 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, getting an accurate read on the impact of July spending reported in this release on 3rd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…the National Income and Product Accounts Handbook, Chapter 6​ (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment, so in lieu of trying to adjust for all of those different price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an approximate estimate…

That price index showed that aggregate construction costs were up 0.8% in July, after rising 0.4% in June, but after being unchanged from April to May…on that basis, we can estimate that July construction costs were roughly 1.2% more than those of April and May, and obviously 0.8% more than those of June…we then use those percentages to inflate the lower priced spending figures for each of those months, which is arithmetically the same as deflating higher priced July construction spending, for comparison purposes…annualized construction spending in millions of dollars for the months of the second quarter is given as 2,168,990 for June, 2,168,211 for May, and 2,163,179 for April, while it was at 2,162,683 million in July …thus to compare July’s inflation adjusted construction spending to that of the second quarter, our arithmetic formula becomes: 2,162,683 / (((2,168,990 * 1.008) + (2,168,211 *1.012) + 2,163,179 * 1.012) / 3) = 0.98757, meaning real construction spending in July was down 1.24% vis a vis the 2nd quarter, or down at a 4.9% annual rate…to figure the effect of that change on GDP, we take the difference between the inflation adjusted second quarter spending average and that of July, and then take that result as a fraction of 2nd quarter GDP, and estimate that aggregate July construction spending is falling at a rate that would subtract approximately 0.52 percentage points from 3rd quarter GDP, should we see no improvement from July’s adjusted figures in August or September…

Factory Shipments Rose 0.9% in July, Factory Inventories Rose 0.1%

The July Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $28.2 billion or 5.0 percent to $592.1 billion in July, following a decrease of 3.3% to $564.0 billion in June, which was revised from the 3.3% decrease to $564.2 billion reported 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 accurate as a revised update to the July 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 July, up following two consecutive monthly decreases, increased $28.2 billion or 5.0 percent to $592.1 billion, the U.S. Census Bureau reported today. This followed a 3.3 percent June decrease. Shipments, up five of the last six months, increased $5.4 billion or 0.9 percent to $593.8 billion. This followed a 0.6 percent June increase. Unfilled orders, up forty-seven of the last forty-eight months, increased $3.1 billion or 0.2 percent to $1,386.3 billion. This followed a 1.4 percent June decrease. The unfilled orders-to-shipments ratio was 6.76, down from 6.91 in June. Inventories, up five of the last six months, increased $0.6 billion or 0.1 percent to $859.4 billion. This followed a 0.1 percent June decrease. The inventories-to-shipments ratio was 1.45, down from 1.46 in June.
• New Orders for manufactured durable goods in July, up five of the last six months, increased $25.9 billion or 9.8 percent to $289.5 billion, down from the previously published 9.9 percent increase. This followed a 6.9 percent June decrease. Transportation equipment, up two of the last three months, drove the increase, $26.3 billion or 34.7 percent to $102.1 billion. New orders for manufactured nondurable goods increased $2.3 billion or 0.8 percent to $302.7 billion.
• Shipments of manufactured durable goods in July, up five of the last six months, increased $3.1 billion or 1.1 percent to $291.1 billion, unchanged from the previously published increase. This followed a 1.2 percent June increase. Transportation equipment, also up five of the last six months, drove the increase, $3.4 billion or 3.5 percent to $99.1 billion. Shipments of manufactured nondurable goods, up five of the last six months, increased $2.3 billion or 0.8 percent to $302.7 billion. This followed a virtually unchanged June increase. Petroleum and coal products, up following two consecutive monthly decreases, led the increase, $0.7 billion or 1.1 percent to $64.6 billion.
• Unfilled Orders for manufactured durable goods in July, up forty-seven of the last forty-eight months, increased $3.1 billion or 0.2 percent to $1,386.3 billion, unchanged from the previously published increase. This followed a 1.4 percent June decrease. Transportation equipment, up forty-two of the last forty-three months, led the increase, $3.0 billion or 0.3 percent to $892.3 billion.
• Inventories of manufactured durable goods in July, up three of the last four months, increased $0.7 billion or 0.1 percent to $529.7 billion, unchanged from the previously published increase. This followed a 0.1 percent June decrease. Transportation equipment, up eleven of the last twelve months, led the increase, $0.4 billion or 0.2 percent to $172.3 billion. Inventories of manufactured nondurable goods, down two consecutive months, decreased $0.1 billion or virtually unchanged to $329.7 billion. This followed a virtually unchanged June decrease. Food products, down three consecutive months, drove the decrease, $0.3 billion or 0.4 percent to $69.4 billion.

To estimate the effect of those July factory inventories on 3rd 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 decreased by 0.2% to $295,327 million; the value of work in process inventories rose 0.3% to $251,719 million, and materials and supplies inventories were valued 0.2% higher at $312,376 million.…meanwhile, the July producer price index reported that prices for finished goods were on average 0.6% higher, that prices for intermediate processed goods were on average 0.7% higher, while prices for unprocessed goods were 3.6% higher….assuming similar valuations for like types of inventories, that would suggest that July’s real finished goods inventories were about 0.8% lower, that real inventories of intermediate processed goods were about 0.4% lower, and real raw material inventory inventories were about 3.4% lower…however, since real NIPA factory inventories were a bit higher in the 2nd quarter, accounting for around 4% of the quarter’s inventory increase, the fact that this report appears to indicate a modest real decrease in aggregate July factory inventories would therefore mean that both the 2nd quarter increase and the July decrease would be subtracted from the 3rd quarter’s real growth in GDP…

 

 

(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…)