by Calculated Risk on 8/02/2019 10:04:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $55.2 billion in June, down $0.2 billion from $55.3 billion in May, revised.

June exports were $206.3 billion, $4.4 billion less than May exports. June imports were $261.5 billion, $4.6 billion less than May imports.

Click on graph for larger image.

Exports and imports decreased in June.

Exports are 25% above the pre-recession peak and down 2% compared to June 2018; imports are 13% above the pre-recession peak, and up 1% compared to June 2018.

In general, trade had been picking up, but both imports and exports have moved more sideways recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $59.18 per barrel in June, down from $60.56 in May, and down from $62.46 in June 2018.

The trade deficit with China decreased to $30.0 billion in June, from $33.8 billion in June 2018.

by Calculated Risk on 8/02/2019 09:08:00 AM

The headline jobs number at 164 thousand for July was close to consensus expectations of 156 thousand, however the previous two months were revised down 41 thousand, combined. The unemployment rate increased to 3.7%. Overall this was a decent report. Note: Temporary Decennial Census hiring for July is not available yet (something to watch).

Earlier: July Employment Report: 164,000 Jobs Added, 3.7% Unemployment Rate

In July, the year-over-year employment change was 2.246 million jobs. That is decent year-over-year growth.

Average Hourly Earnings

Wage growth was at expectations. From the BLS:

"In July, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent."

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.2% YoY in July.

Wage growth had been generally trending up, but has weakened recently.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in July to 82.0% from 82.2% in June, and the 25 to 54 employment population ratio was decreased to 79.5% from 79.7%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 363,000 in July to 4.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full- time jobs. Over the past 12 months, the number of involuntary part-time workers has declined by 604,000."

The number of persons working part time for economic reasons decreased in July to 3.984 million from 4.347 million in June.   The number of persons working part time for economic reason has been generally trending down, and this is the lowest level since 2006.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.0% in July. This is the lowest level for U-6 since 2000.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.166 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.414 million in June.

This is the lowest level since 2007.

Summary:

The headline jobs number was at expectations, however the previous two months were revised down.  The headline unemployment rate was unchanged at 3.7%. Wage growth was at expectations.

Some good news is the number of people working part time for economic reasons is at the lowest level since 2006, and the number of unemployed over 26 weeks is at the lowest level since 2007.

Overall this was a somewhat disappointing jobs report.   The economy added 1.156 million jobs through July 2019, down from 1.589 million jobs during the same period of 2018.   So job growth has slowed.

by Calculated Risk on 8/02/2019 08:40:00 AM

From the BLS:

Total nonfarm payroll employment rose by 164,000 in July, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and technical services, health care, social assistance, and financial activities.
...
The change in total nonfarm payroll employment for May was revised down by 10,000 from +72,000 to +62,000, and the change for June was revised down by 31,000 from +224,000 to +193,000. With these revisions, employment gains in May and June combined were 41,000 less than previously reported.
...
In July, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 164 thousand in July (private payrolls increased 148 thousand).

Payrolls for May and June were revised down 41 thousand combined.

This graph shows the year-over-year change in total non-farm employment since 1968.

In July, the year-over-year change was 2.246 million jobs.

The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate was increased in July to 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics and long term trends.

The Employment-Population ratio was unchanged at 60.6% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate was unchanged in July at 3.7%.

This was close to consensus expectations of 156,000 jobs added, however April and May were revised down by 41,000 combined.

I'll have much more later ...

by Calculated Risk on 8/01/2019 07:59:00 PM

My July employment preview.

Goldman's July payroll preview.

Friday:
• At 8:30 AM ET, Employment Report for July.   The consensus is for 156,000 jobs added, and for the unemployment rate to decline to 3.6%.

• Also at 8:30 AM, Trade Balance report for June from the Census Bureau. The consensus is the trade deficit to be $54.7 billion.  The U.S. trade deficit was at $55.5 Billion the previous month.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for July). The consensus is for a reading of 98.4.

by Calculated Risk on 8/01/2019 05:20:00 PM

From Jan Freitag at HotelNewsNow.com: June data shows US hotels’ rocket is losing fuel

Well, it finally happened, 12-month-moving-average occupancy is no longer at record levels. June 12MMA occupancy at 66.2% was below the May result of 66.3%. Occupancy bottomed out in January 2010 (54.5%), and we had reported consecutively higher annualized occupancies ever since. Starting in May 2015 (64.9%), each month we reported the highest annualized occupancy ever—until now. Let’s raise a coffee in salute to the end of a good run, and the end of STR presenters saying on stage “the highest occupancy ever recorded.”

From HotelNewsNow.com: STR: US hotel results for week ending 27 July

The U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 21-27 July 2019, according to data from STR.

In comparison with the week of 22-28 July 2018, the industry recorded the following:

• Occupancy: -1.0% to 77.5%
• Average daily rate (ADR): -0.5% to US$136.00
• Revenue per available room (RevPAR): -1.6% at US$105.43
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, close to-date compared to the previous 4 years.

Seasonally, the occupancy rate will now stay at a high level during the Summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/01/2019 03:04:00 PM

A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls increased 190k in July, 25k above consensus of +165k. While July employer surveys declined on net, jobless claims and job availability measures remain at very strong levels, and we also expect a boost from Census hiring worth 10-20k. …

We estimate the unemployment rate was unchanged at 3.7%. … We estimate average hourly earnings increased 0.2% month-over-month and 3.1% year-over-year rate.
emphasis added

CR Note: It will be important to adjust for decennial Census hiring.

by Calculated Risk on 8/01/2019 11:57:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for an increase of 156,000 non-farm payroll jobs in July, and for the unemployment rate to decline to 3.6%.

Last month, the BLS reported 224,000 jobs added in June.

Here is a summary of recent data:

• The ADP employment report showed an increase of 156,000 private sector payroll jobs in July. This was ate consensus expectations of 155,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth close to expectations.

• The ISM manufacturing employment index decreased in July to 51.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased 10,000 in July. The ADP report indicated manufacturing jobs increased 1,000 in July.

The ISM non-manufacturing index for July will be released next week.

• Initial weekly unemployment claims averaged 212,000 in July, down from 222,000 in June. For the BLS reference week (includes the 12th of the month), initial claims were at 216,000, down slightly from 217,000 during the reference week the previous month.

This suggest employment growth near expectations.

• The final July University of Michigan consumer sentiment index increased to 98.4 from the June reading of 98.2. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion:  Manufacturing was weak in July, however the ADP employment suggests a report close to the consensus.   Over the last several years, the BLS has reported about the consensus for July, so my guess is the report will be above the consensus.

by Calculated Risk on 8/01/2019 10:25:00 AM

The ISM manufacturing index indicated expansion in July. The PMI was at 51.2% in July, down from 51.7% in June. The employment index was at 51.7%, down from 54.5% last month, and the new orders index was at 50.8%, up from 50.0%.

From the Institute for Supply Management: July 2019 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in July, and the overall economy grew for the 123rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The July PMI® registered 51.2 percent, a decrease of 0.5 percentage point from the June reading of 51.7 percent. The New Orders Index registered 50.8 percent, an increase of 0.8 percentage point from the June reading of 50 percent. The Production Index registered 50.8 percent, a 3.3-percentage point decrease compared to the June reading of 54.1 percent. The Employment Index registered 51.7 percent, a decrease of 2.8 percentage points from the June reading of 54.5 percent. The Supplier Deliveries Index registered 53.3 percent, a 2.6-percentage point increase from the June reading of 50.7 percent. The Inventories Index registered 49.5 percent, an increase of 0.4 percentage point from the June reading of 49.1 percent. The Prices Index registered 45.1 percent, a 2.8-percentage point decrease from the June reading of 47.9 percent.
emphasis added

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 51.9%, and suggests manufacturing expanded at a slower pace in July than in June.

by Calculated Risk on 8/01/2019 10:16:00 AM

From the Census Bureau reported that overall construction spending declined in June:

Construction spending during June 2019 was estimated at a seasonally adjusted annual rate of $1,287.0 billion, 1.3 percent below the revised May estimate of $1,303.4 billion. The June figure is 2.1 percent below the June 2018 estimate of $1,314.8 billion.

Both private and public spending decreased:

Spending on private construction was at a seasonally adjusted annual rate of $962.9 billion, 0.4 percent below the revised May estimate of $967.0 billion. ...

In June, the estimated seasonally adjusted annual rate of public construction spending was $324.1 billion, 3.7 percent below the revised May estimate of $336.4 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending had been increasing - but turned down in the 2nd half of 2018 - and is now 25% below the bubble peak.

Non-residential spending is 10% above the previous peak in January 2008 (nominal dollars).

Public construction spending is at the previous peak in March 2009, and 24% above the austerity low in February 2014.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 8%. Non-residential spending is down slightly year-over-year. Public spending is up 6% year-over-year.

This was below consensus expectations, however spending for April and May was revised up. Another weak construction spending report.

by Calculated Risk on 8/01/2019 08:35:00 AM

The DOL reported:

In the week ending July 27, the advance figure for seasonally adjusted initial claims was 215,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 206,000 to 207,000. The 4-week moving average was 211,500, a decrease of 1,750 from the previous week's revised average. The previous week's average was revised up by 250 from 213,000 to 213,250.
emphasis added

The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 211,500.

This was higher than the consensus forecast.