September’s jobs report; August’s construction spending, factory inventories and JOLTS

Major agency reports released this past week included the Employment Situation Summary for September and the Job Openings and Labor Turnover Survey (JOLTS)​ for August, both from the Bureau of Labor Statistics, and the August report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for August, both from the Census Bureau…in addition, this week also saw the last regional Fed manufacturing survey for September: the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent western Louisiana and southeastern New Mexico, reported its general business activity index rose to –9.0 in September, up a bit from –-9.7 in August, and up from –17.5 in July, indicating a smaller majority of Texas businesses are experiencing a slowdown than in prior months..

This week’s major privately issued reports included the ADP Employment Report for September, the September report on light vehicle sales from Wards Automotive, (the source of the BEA’s data) which estimated that vehicles sold at a 15.77 million annual rate in September, up from the 15.13 million annual rate in August, and up from the 15.67 million annual sales rate in September of last year, and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) was unchanged at 47.2% in September, indicating that a small plurality of manufacturing purchasing managers continued to report a slowdown in various facets of their business in September, while the September Services Report On Business reported that their Services PMI rose to 54.9% in September, up from 51.5% in August and the highest reading since February 2023, indicating a larger plurality of service industry purchasing managers reported improvement in various facets of their business in September than in August…

Employers Added 254,000 Jobs in September; Unemployment Rate Fell, Employment Rate Rose

The Employment Situation Summary for September ​reported the largest increase in payroll jobs since March, nearly double what had been expected, and that the unemployment rate fell and the employment rate rose…estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 254,000 jobs in September, after the previously estimated payroll job increase for July was revised up from last month’s revised figure of 88,000 to 144,000, while the payroll jobs increase for August was revised from 142,000 up to 159,000, revisions which mean that this report thus shows 331,000 more payroll jobs than last month’s, more than double the 145,000 job increase that was expected…. the unadjusted data, meanwhile, shows that there were actually 460,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, and that the seasonal adjustment brought the headline jobs number down to a level where that normal September job increase was negated…

Seasonally adjusted job increases were mostly in the service sector and in branches of government, while modest job losses were seen in manufacturing and in transportation and warehousing...since the BLS summary of the job gains by sector is clear and as detailed as our usual synopsis, we’ll just quote from that summary here:

• Total nonfarm payroll employment increased by 254,000 in September, higher than the average monthly gain of 203,000 over the prior 12 months. In September, employment continued to trend up in food services and drinking places, health care, government, social assistance, and construction. (See table B-1.)
• Employment in food services and drinking places rose by 69,000 in September, well above the average monthly gain of 14,000 over the prior 12 months.
• Health care added 45,000 jobs in September, below the average monthly gain of 57,000 over the prior 12 months. Over the month, employment rose in home health care services (+13,000), hospitals (+12,000), and nursing and residential care facilities (+9,000).
• Employment in government continued its upward trend in September (+31,000). Government had an average monthly gain of 45,000 jobs over the prior 12 months. Over the month, employment continued to trend up in local government (+16,000) and state government (+13,000).
• Employment in social assistance increased by 27,000 in September, primarily in individual and family services (+21,000). Over the prior 12 months, social assistance had added an average of 21,000 jobs per month.
• Construction employment continued to trend up in September (+25,000), similar to the average monthly gain over the prior 12 months (+19,000). Over the month, nonresidential specialty trade contractors added 17,000 jobs.
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services.

The establishment survey also showed that average hourly pay for all employees rose by 13 cents an hour to $35.36 an hour, after it had increased by a revised 10 cents an hour in August; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 8 cents to $30.33 an hour….employers also reported that the average workweek for all private payroll employees decreased by 0.1 hour to 34.2 hours in September, while hours for production and non-supervisory personnel was unchanged at 33.7 hours…at the same time, the manufacturing workweek was unchanged at 40.0 hours, while average factory overtime decreased by 0.1 hour to 2.9 hours…

Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 430,000 to 161,864,000, while the similarly estimated number of those who would qualify as being unemployed fell by 281,000 to 6,834,000; and hence the civilian labor force increased by a rounded 150,000…since the working age population had grown by 224,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded net of 75,000 to 100,381,000, which combined with the modestly higher labor force, meant that the labor force participation ​rate was unchanged at 62.7%…however, the relatively larger increase in number employed was enough to boost the employment to population ratio, which we could think of as an employment rate, from 60.0% in August to 60.2% in September…likewise, with the big decrease in the number unemployed, the unemployment rate fell from 4.2% to 4.1%….meanwhile, the number of the employed who reported they were forced to accept just part time work fell by 219,000 to 4,518,000 in September, which meant that the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from a four year high of 7.9% of the labor force in August to 7.7% in September, but was still up from 7.0% in September of last year….

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

Job Openings Rose in August, Hiring, Layoffs and Job Quitting were All Lower

The Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 329,000, from 7,711,000 in July to 8,040,000 openings in August, after July job openings were revised 38,000 higher, from the 7,673,000 reported last month to 7,711,000 now….August jobs openings were still 14.1% lower than the 9,358,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.6% in July to 4.8% in August, which was still down from 5.6% a year ago…the largest percentage increase was the 138,000 job opening increase to 380,000 job openings in construction, while job openings in finance and insurance decreased by 41,000 to 270,000 (see table 1 for more details)…like most BLS releases, the press release for this 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 August, seasonally adjusted new hires totaled 5,317,000, down by 99,000 from the revised 5,416,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.4% in July to 3.3% in August, and was also down from the 3.8% hiring rate in August a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 317,000, from 5,314,000 in July to 4,997,000 in August, while the separations rate as a percentage of the employed fell from 3.4% in July to 3.1% in August, which was also down from the separations rate of 3.6% in August a year ago (see table 3)…subtracting the 4,997,000 total separations from the total hires of 5,317,000 would imply an increase of 321,000 jobs in August, quite a bit more than the revised payroll job increase of 159,000 for August reported by the September establishment survey, and outside of the expected +/-110,000 margin of error in these incomplete survey extrapolations…..

Breaking down the seasonally adjusted job separations, the BLS finds that 3,084,000 of us voluntarily quit our jobs in August, down by 159,000 from the revised 3,243,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, fell ​from 2.0% to 1.9% of total employment, which was also down from the quits rate of 2.3​% a year earlier (see details in table 4)….in addition to those who quit, 1,608,000 employees were either laid off, fired or otherwise discharged in August, down by 105,000 from the revised 1,713,000 who were discharged in July, while the discharges rate fell from 1.1% in July to 1.0% of all those who were employed during the month, which was also down from the 1.1% discharges rate in August of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 304,000 in August, down from 359,000 in July, for an ‘other separations rate’ of 0.2%, same as in July and as in August 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…

Construction Spending Fell 0.1% in August, with July Implies 94 Basis Point Hit to 3rd Quarter GDP

The August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $2,131.9 billion, which was 0.1 percent (±1.2 percent)* below the revised annualized estimate of $2,133.9 billion in construction spending in July, but was 4.1 percent (±1.6 percent) above the estimated annualized level of construction spending of August of last year….for the first eight months of this year, construction spending amounted to $1,428.5 billion, which was 7.6 percent (±1.2 percent) above the $1,327.0 billion spent over the same period in 2023…

July’s construction spending was originally reported at a $2,162.7 billion annual rate, so it has been revised more than 1.3% lower, to a $2,133.9 billion annual rate, while June construction spending was revised nearly 1.2% lower, from the $2,169.0 billion annual rate reported last month to a $2,143.97 billion rate…that $25 billion downward June revision would mean that 2nd quarter GDP was overestimated by about 0.19 percentage points, give or take, depending on inflation adjustments for the components revised…..however, the 2nd quarter’s GDP will not be revised to reflect that underestimation until the annual revision of next summer…

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 $1,642.2 billion, 0.2 percent (±0.7 percent)* below the revised July estimate of $1,645.8 billion. Residential construction was at a seasonally adjusted annual rate of $899.9 billion in August, 0.3 percent (±1.3 percent)* below the revised July estimate of $903.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $742.2 billion in August, 0.1 percent (±0.7 percent)* below the revised July estimate of $742.8 billion.
• Public Construction In August, the estimated seasonally adjusted annual rate of public construction spending was $489.8 billion, 0.3 percent (±2.0 percent)* above the revised July estimate of $488.2 billion. Educational construction was at a seasonally adjusted annual rate of $102.4 billion, virtually unchanged from (±2.6 percent)* the revised July estimate of $102.3 billion. Highway construction was at a seasonally adjusted annual rate of $141.4 billion, 1.1 percent (±5.4 percent)* above the revised July estimate of $140.0 billion.

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and government investment outlays, for both state and local and Federal governments…. however, gauging the impact of revised July and August construction spending as reported here on 3rd quarter GDP is difficult because all figures given in this report are in nominal dollars​ at an annual rate, and as you know, data used to compute the change in GDP must be adjusted for changes in price…accurately adjusting construction for price changes is not easy either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities’ construction spending….so in lieu of trying to find and adjust for all of those obscure 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 in order to make a ballpark estimate.

That producer price index showed that aggregate construction costs were unchanged in August​, after rising 0.7% in July, rising 0.4% in June and being unchanged from April to May…on that basis, we can estimate that construction costs for August were roughly 0.7% more than those of June, roughly 1.1% more than those of May, and also roughly 1.1% more than those of April, while obviously unchanged from those of July…we then use those percentages to inflate the lower cost spending figures for each of the 2nd quarter months, which, for comparison purposes, is arithmetically the same as adjusting higher cost July & August construction spending downward…annualized construction spending in millions of dollars for the second quarter months is shown at $2,143,970 for June, $2,168,211 for May, and $2,163,179 for April in this report, while it was at $2,133,909 million for July and $2,131,936 million for August….thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((2,131,936 + 2,133,909 * 1.000 ) / 2 ) / (( 2,143,970 * 1.007 + 2,168,211 * 1.011 + 2,163,179 * 1.011 ) / 3) = 0.978702156, meaning real construction over July and August averaged 2.13% lower than that of the 2nd quarter….hence, that means that after crudely adjusting for inflation, ​we can estimate that real construction for the 3rd quarter fell at a 8.25% annual rate from that of the 2nd quarter….put another way​, that’s a decrease at a $46,415 billion annual rate, which means that if September should show no improvement, the increase in real construction would subtract a net of about 0.94 percentage points from 3rd quarter GDP in those components that it is source data for..

Factory Shipments Fell 0.5% in August, Factory Inventories Rose 0.1%

The August 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 $1.3 billion or 0.2 percent to $590.4 billion in August, following an increase of 4.9% to $591.6 billion in July, which was revised from the 5.0% increase to $592.1 billion in new orders​ for July 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 revised updates to the August advance report on durable goods that 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 summary here:

• Summary: New orders for manufactured goods in August, down three of the last four months, decreased $1.3 billion or 0.2 percent to $590.4 billion, the U.S. Census Bureau reported today. This followed a 4.9 percent July increase. Shipments, down following two consecutive monthly increases, decreased $3.1 billion or 0.5 percent to $590.1 billion. This followed a 0.8 percent July increase. Unfilled orders, up forty-eight of the last forty-nine months, increased $5.0 billion or 0.4 percent to $1,391.4 billion. This followed a 0.2 percent July increase. The unfilled orders-to-shipments ratio was 6.87, up from 6.76 in July. Inventories, up six of the last seven months, increased $1.2 billion or 0.1 percent to $860.2 billion. This followed a virtually unchanged July increase. The inventories-to-shipments ratio was 1.46, up from 1.45 in July.
• New Orders for manufactured durable goods in August, up six of the last seven months, increased $0.1 billion or virtually unchanged to $289.6 billion, unchanged from the previously published increase. This followed a 9.8 percent July increase. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, $0.3 billion or 2.4 percent to $14.5 billion. New orders for manufactured nondurable goods decreased $1.4 billion or 0.5 percent to $300.8 billion.
• Shipments of manufactured durable goods in August, down following two consecutive monthly increases, decreased $1.7 billion or 0.6 percent to $289.3 billion, down from the previously published 0.5 percent decrease. This followed a 1.0 percent July increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $2.0 billion or 2.0 percent to $97.0 billion. Shipments of manufactured nondurable goods, down following two consecutive monthly increases, decreased $1.4 billion or 0.5 percent to $300.8 billion. This followed a 0.6 percent July increase. Petroleum and coal products, down three of the last four months, drove the decrease, $1.4 billion or 2.3 percent to $62.8 billion.
• Unfilled Orders for manufactured durable goods in August, up forty-eight of the last forty-nine months, increased $5.0 billion or 0.4 percent to $1,391.4 billion, unchanged from the previously published increase. This followed a 0.2 percent July increase. Transportation equipment, up forty-three of the last forty-four months, led the increase, $4.2 billion or 0.5 percent to $896.5 billion.
• Inventories of manufactured durable goods in August, up four of the last five months, increased $0.4 billion or 0.1 percent to $529.7 billion, unchanged from the previously published increase. This followed a virtually unchanged July increase. Transportation equipment, up twelve of the last thirteen months, led the increase, $0.2 billion or 0.1 percent to $172.3 billion. Inventories of manufactured nondurable goods, up following two consecutive monthly decreases, increased $0.8 billion or 0.2 percent to $330.5 billion. This followed a virtually unchanged July decrease. Petroleum and coal products, also up following two consecutive monthly decreases, led the increase, $0.4 billion or 0.8 percent to $47.9 billion. By stage of fabrication, August materials and supplies increased 0.3 percent in durable goods and 0.5 percent in nondurable goods. Work in process increased 0.1 percent in durable goods and decreased 0.7 percent in nondurable goods. Finished goods decreased 0.1 percent in durable goods and increased 0.4 percent in nondurable goods.

To gauge the effect of August 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 was 0.1% higher at $295,844 million; the value of work in process inventories was 0.1% lower at $250,990 million, and the value of materials and supplies inventories was 0.4% higher at $313,400 million.…​meanwhile, the producer price index for August indicated that prices for finished goods were on average unchanged, that prices for intermediate processed goods were 0.1% lower, and that prices for unprocessed goods were 3.7% lower….assuming average valuations will be similar for like inventories, we could thus estimate that August’s real finished goods inventories increased by 0.1%, that real inventories of intermediate processed goods were unchanged, but that real raw material inventory inventories were about 4.1% greater…while on net it appears that August’s real inventories were somewhat higher, they follow July’s factory inventory change, when real inventories were lower by a bit more…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 this report appears to indicate a small real decrease in aggregate 3rd quarter factory inventories over two months would therefore mean that both the 2nd quarter increase and the the small 3rd quarter decrease would be subtracted from the 3rd quarter’s real growth in GDP, with the caveat that it wouldn’t take much of a change in September to reverse that prognosis…

 

 

(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…)