by Calculated Risk on 8/02/2013 11:21:00 AM

If we look at the year-over-year change in employment - to minimize the monthly volatility - total nonfarm employment is up 2.276 million from July 2012, and private employment is up 2.315 million. That is essentially the same year-over-year gain as in June (2.267 million total, 2.331 million private year-over-year in June). Steady, but not strong, job growth.

Hourly wages declined slightly in July, but are up 1.9% year-over-year. Hourly wages were up 2.1% year-over-year in June.

In July, average hourly earnings for all employees on private nonfarm payrolls edged down by 2 cents to $23.98, following a 10-cent increase in June. Over the year, average hourly earnings have risen by 44 cents, or 1.9 percent.

The decline in the unemployment rate to 7.4% from 7.6% in June was due to a larger increase in employment in the household survey (227,000 increase in jobs) combined with a decline in the participation rate (not good news). If the participation rate had held steady, the unemployment rate would have declined to 7.5% instead of 7.4%.

In general this report was more of the same - steady but slow improvement.

A few more graphs ...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

The ratio was unchanged at 75.9% in July.  This ratio should probably move close to 80% as the economy recovers.

The participation rate for this group was also unchanged at 81.1% in July.  The decline in the participation rate for this age group is probably mostly due to economic weakness (as opposed to demographics) and this suggests the labor market is still very weak.

Percent Job Losses During Recessions


This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.  At the recent pace of improvement, it appears employment will be back to pre-recession levels next year (Of course this doesn't include population growth).

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

This financial crisis recession was much deeper than other post WWII recessions, and the recovery has been slower (the recovery from the 2001 recession was slow too). However, if we compare to other financial crisis recoveries, this recovery has actually been better than most.

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) was essentially unchanged at 8.2 million in July. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of part time workers increased in July to 8.245 million.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 14.0% in July from 14.3% in June.

Unemployed over 26 Weeks

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

According to the BLS, there are 4.246 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 4.328 million in June and is at the lowest level since May 2009. This is trending down, but is still very high.  Long term unemployment remains one of the key labor problems in the US.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In July 2013, state and local governments added 3,000 jobs, and state and local employment is up 31 thousand so far in 2013.

I think most of the state and local government layoffs are over.  Of course Federal government layoffs are ongoing - and with many more layoffs expected.

Overall this was a tepid report - especially with the downward revisions to May and June employment and the slight decline in hourly wages.  The labor market is still weak and millions of people are unemployed or underemployed.

by Calculated Risk on 8/02/2013 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4 percent, the U.S. Bureau of Labor Statistics reported today. ...
...
The change in total nonfarm payroll employment for May was revised from +195,000 to +176,000, and the change for June was revised from +195,000 to +188,000. With these revisions, employment gains in May and June combined were 26,000 less than previously reported.

The headline number was below expectations of 175,000 payroll jobs added.  Employment for May and June were also revised lower.

Click on graph for larger image.

NOTE: This graph is ex-Census meaning the impact of the decennial Census temporary hires and layoffs is removed to show the underlying payroll changes.

The second graph shows the unemployment rate.

The unemployment rate declined in July to 7.4% from 7.6% in June.

This is the lowest level for the unemployment rate since November 2008.

The unemployment rate is from the household report and the household report showed a larger increase in employment than the establishment report, and that combined with a decline in the participation rate meant a lower unemployment rate.

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

The Labor Force Participation Rate decreased to 63.4% in July (blue line) from 63.5% in June. This is the percentage of the working age population in the labor force. 

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although a significant portion of the recent decline is due to demographics.


The Employment-Population ratio was unchanged in July at 58.7%  (black line). I'll post the 25 to 54 age group employment-population ratio graph later.


The fourth graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was below expectations.  I'll have much more later ...

by Calculated Risk on 8/01/2013 09:16:00 PM

From economist Sven Jari Stehn at Goldman Sachs on the employment report:

We expect a 200,000 gain in nonfarm payrolls in July (a bit above consensus), as well as a decline in the unemployment rate to 7.5% (in line with consensus). As far as payrolls are concerned, our forecast would be in line with the 3-, 6- and 12-month moving average.

The reason for expecting another strong report is that a number of labor market indicators released for July so far have been encouraging, including manufacturing survey employment indices, consumers' assessment of job availability and the ADP report. Other indicators are sending no clear directional signal relative to June, including jobless claims, online advertising and the effects of the sequester on payrolls.

We expect another small effect of the sequester on employment. Our best guess is a sequester impact of around 5,000-10,000 in the federal government, which might bring the overall reduction in federal payrolls to 10,000-15,000.

Thursday:
• At 8:30 AM ET, the Employment Report for July. The consensus is for an increase of 175,000 non-farm payroll jobs in July; the economy added 195,000 non-farm payroll jobs in June. The consensus is for the unemployment rate to decrease to 7.5% in July from 7.6% in June.

• Also at 8:30 AM, Personal Income and Outlays for June. The consensus is for a 0.4% increase in personal income in June, and for a 0.4% increase in personal spending.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for June. The consensus is for a 2.3% increase in orders.

by Calculated Risk on 8/01/2013 05:49:00 PM

Tomorrow at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for an increase of 175,000 non-farm payroll jobs in July, and for the unemployment rate to decline to 7.5% from 7.6% in June.

Here is a summary of recent data:

• The ADP employment report showed an increase of 200,000 private sector payroll jobs in July. This was above expectations of 179,000 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 somewhat above expectations.

• The ISM manufacturing employment index increased in July to 54.4% from 48.7% in June. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing increased by close to 5,000 in July.  However the ADP report indicated a loss of 5,000 manufacturing jobs in July.

The ISM non-manufacturing (service) employment index will be released next Monday.

• Initial weekly unemployment claims averaged about 341,000 in July. This was down slightly from 345,000 in June, and near the low for the year.

For the BLS reference week (includes the 12th of the month), initial claims were at 336,000; down from 355,000 in June.

• The final July Reuters / University of Michigan consumer sentiment index increased to 85.1, up from the June reading of 84.1. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors.

• And on the unemployment rate from Gallup: More Americans working part-time vs. a year ago, but no growth in full-time jobs

Gallup's unadjusted unemployment rate for the U.S. workforce is 7.8% in July, unchanged from June (7.8%), but down from 8.2% in July 2012.

Gallup's seasonally adjusted U.S. unemployment rate for July is 7.4%, a slight decline from 7.6% in June.

Note: So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate.

• Conclusion: The employment related data was slightly better in July than in June when the BLS reported 195,000 jobs added.  Both the ADP employment and ISM manufacturing reports suggest an increase in hiring. Also weekly claims for the reference week were lower in July than in June, and consumer sentiment increased slightly.

There is always some randomness to the employment report, but my guess is the BLS will report above the consensus of 175,000 jobs added in July. A key will be the unemployment rate (and participation rate) to see if unemployment is tracking the Fed's forecast for QE3 tapering.

by Calculated Risk on 8/01/2013 03:03:00 PM

Based on an estimate from WardsAuto, light vehicle sales were at a 15.61 million SAAR in July. That is up 11% from July 2012, and down 2% from the sales rate last month.

This was below the consensus forecast of 15.8 million SAAR (seasonally adjusted annual rate).

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for July (red, light vehicle sales of 15.61 million SAAR from WardsAuto).


Click on graph for larger image.

This is highest level for July auto sales since 2006.

After three consecutive years of double digit auto sales growth, the growth rate will probably slow in 2013 - but this will still be another solid year for the auto industry.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and had been a key driver of the recovery.    Looking forward, growth will slow for auto sales.  If sales average the recent pace for the entire year, total sales will be up about 8% from 2012.

by Calculated Risk on 8/01/2013 11:54:00 AM

The Census Bureau reported that overall construction spending declined in June:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2013 was estimated at a seasonally adjusted annual rate of $883.9 billion, 0.6 percent below the revised May estimate of $889.4 billion. The June figure is 3.3 percent above the June 2012 estimate of $855.8 billion.
...
Spending on private construction was at a seasonally adjusted annual rate of $622.8 billion, 0.4 percent below the revised May estimate of $625.4 billion. ...

In June, the estimated seasonally adjusted annual rate of public construction spending was $261.1 billion, 1.1 percent below the revised May estimate of $264.0 billion.

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 is 51% below the peak in early 2006, and up 45% from the post-bubble low.

Non-residential spending is 30% below the peak in January 2008, and up about 29% from the recent low.

Public construction spending is now 20% below the peak in March 2009 and at the lowest level since 2006.

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

On a year-over-year basis, private residential construction spending is now up 23%. Non-residential spending is up slightly year-over-year. Public spending is down 9.3% year-over-year.

A few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.  I expect private non-residential to start to increase later this year.

3) Public construction spending decreased in June.  Public spending has declined to 2006 levels (not adjusted for inflation) and has been a drag on the economy for 4 years. In real terms, public construction spending has declined to 2001 levels.

The good news going forward is 1) private residential construction spending is still very low and will probably continue to increase over the next few years, 2) Private non-residential spending appears about to increase (see forecast from American Institute of Architects, and 3) public construction spending is probably close to a bottom.

by Calculated Risk on 8/01/2013 10:00:00 AM

The ISM manufacturing index indicated faster expansion in July. The PMI was at 55.4% in July, up from 50.9% in June. The employment index was at 54.4%, up from 48.7%, and the new orders index was at 58.3%, up from 51.9% in June.

From the Institute for Supply Management: July 2013 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in July for the second consecutive month, and the overall economy grew for the 50th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 55.4 percent, an increase of 4.5 percentage points from June's reading of 50.9 percent. June's PMI™ reading, the highest of the year, indicates expansion in the manufacturing sector for the second consecutive month. The New Orders Index increased in July by 6.4 percentage points to 58.3 percent, and the Production Index increased by 11.6 percentage points to 65 percent. The Employment Index registered 54.4 percent, an increase of 5.7 percentage points compared to June's reading of 48.7 percent. The Prices Index registered 49 percent, decreasing 3.5 percentage points from June, indicating that overall raw materials prices decreased from last month. Comments from the panel generally indicate stable demand and slowly improving business conditions."
emphasis added

Click on graph for larger image.

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

This was above expectations of 53.1% and suggests manufacturing expanded at a faster pace in July.

by Calculated Risk on 8/01/2013 08:30:00 AM

The DOL reports:

In the week ending July 27, the advance figure for seasonally adjusted initial claims was 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The 4-week moving average was 341,250, a decrease of 4,500 from the previous week's revised average of 345,750.

The previous week was revised up from 343,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 341,250.

The 4-week average has mostly moved sideways over the last few months, and is near the low for the year.  Claims were below to the 345,000 consensus forecast.

by Calculated Risk on 7/31/2013 08:29:00 PM

Restaurant spending is discretionary, so even though this is "D-list" data, I like to check it every month.

From the National Restaurant Association: Despite June Decline, Restaurant Performance Index Remains Steadily Positive

As a result of positive sales and traffic and an optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) remained in expansion territory in June. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.3 in June, down 0.5 percent from May’s level of 101.8. Despite the decline, June represented the fourth consecutive month that the RPI exceeded the 100 level, which signifies expansion in the index of key industry indicators.

“Although the overall RPI dipped somewhat in June, it remained in positive territory as restaurant operators continued to report gains in both sales and customer traffic,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Looking forward, restaurant operators remain generally optimistic about the business environment in the months ahead, with the Expectations Index holding steady at a 12-month high.”

Click on graph for larger image.

The index decreased to 101.3 in June from 101.8 in May. (above 100 indicates expansion).

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for an increase to 345 thousand from 343 thousand last week.

• All day: Light vehicle sales for July. The consensus is for light vehicle sales to decrease to 15.8 million SAAR in July (Seasonally Adjusted Annual Rate) from 15.9 million SAAR in June.

• At 9:00 AM, The Markit US PMI Manufacturing Index for July. The consensus is for the index to increase to 53.1 from 51.9 in June.

• At 10:00 AM, the ISM Manufacturing Index for July. The consensus is for an increase to 53.1 from 50.9 in June. Based on the regional surveys, an increase in July seems likely. The ISM manufacturing index indicated expansion in June at 50.9%. The employment index was at 48.7%, and the new orders index was at 51.9%.

• Also at 10:00 AM, Construction Spending for June. The consensus is for a 0.4% increase in construction spending.

by Calculated Risk on 7/31/2013 04:11:00 PM

Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in June to 2.77% from 2.83% in May. The serious delinquency rate is down from 3.53% in June 2012, and this is the lowest level since December 2008.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier Freddie Mac reported that the Single-Family serious delinquency rate declined in June to 2.79% from 2.85% in May. Freddie's rate is down from 3.45% in June 2012, and is at the lowest level since May 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%.

At the recent rate of improvement, the serious delinquency rate will not be under 1% until 2016 or so.