by Calculated Risk on 10/04/2019 02:42:00 PM

By request, here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (32 months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 821,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 382,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,979,000 under President Clinton (light blue), by 14,714,000 under President Reagan (dark red), 9,039,000 under President Carter (dashed green), 1,511,000 under President G.H.W. Bush (light purple), and 11,890,000 under President Obama (dark blue).

During the first 32 months of Mr. Trump's term, the economy has added 5,696,000 private sector jobs.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However the public sector declined significantly while Mr. Obama was in office (down 269,000 jobs).

During the 32 months of Mr. Trump's term, the economy has added 331,000 public sector jobs.

The third graph shows the progress towards the Trump goal of adding 10 million jobs over his 4 year term.

After 32 months of Mr. Trump's presidency, the economy has added 6,027,000 jobs, about 640,000 behind the projection.

Note: Based on the preliminary Benchmark revision, there will be 501,000 fewer jobs in March 2019 after the Benchmark revision is released in February - so job growth is probably over 1.1 million behind the projection.

by Calculated Risk on 10/04/2019 12:05:00 PM

From Merrill Lynch:

These data edged down 3Q GDP tracking by a tenth to 1.7% qoq saar. [Oct 3 estimate]
emphasis added

From Goldman Sachs:

We also lowered our Q3 GDP tracking estimate by one tenth to +1.9% (qoq ar). [Oct 3 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.0% for 2019:Q3 and 1.3% for 2019:Q4. [Oct 4 estimate].

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.8 percent on October 4, unchanged from October 1. [Oct 4 estimate]

CR Note: These estimates suggest real GDP growth will be just under 2.0% annualized in Q3.

by Calculated Risk on 10/04/2019 10:50:00 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 $54.9 billion in August, up $0.9 billion from $54.0 billion in July, revised.

August exports were $207.9 billion, $0.5 billion more than July exports. August imports were $262.8 billion, $1.3 billion more than July imports.

Click on graph for larger image.

Both exports and imports increased in August.

Exports are 26% above the pre-recession peak and unchanged compared to August 2018; imports are 13% above the pre-recession peak, and unchanged compared to August 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 $54.13 per barrel in August, down from $56.48 in July, and down from $62.64 in August 2018.

The trade deficit with China decreased to $31.8 billion in August, from $38.6 billion in August 2018.

by Calculated Risk on 10/04/2019 09:07:00 AM

The headline jobs number at 135 thousand for September ex-Census (136K total including temp Census hires) was below consensus expectations of 145 thousand, however the previous two months were revised up 45 thousand, combined. The unemployment rate declined to 3.5%; the lowest rate since 1969.

Earlier: September Employment Report: 136,000 Jobs Added, 3.5% Unemployment Rate

In September, the year-over-year employment change was 2.147 million jobs including Census hires (note: this will be revised down significantly in February with the benchmark revision).

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In September, average hourly earnings for all employees on private nonfarm payrolls, at $28.09, were little changed (-1 cent), after rising by 11 cents in August. Over the past 12 months, average hourly earnings have increased by 2.9 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 2.9% YoY in September.

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 was unchanged in September at 82.6% from 82.6% in August, and the 25 to 54 employment population ratio was increased to 80.1% from 80.0%.

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 4.4 million in September. 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."

The number of persons working part time for economic reasons increased in September to 4.350 million from 4.381 million in August.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 6.9% in September.  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 1.314 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.243 million in August.

Summary:

The headline jobs number was below expectations, however the previous two months were revised up.  The headline unemployment rate declined to 3.5%; the lowest since 1969.  However, wage growth was below expectations.

This was mixed jobs report.  

The economy added 1.419 million jobs through September 2019 ex-Census, down from 1.979 million jobs during the same period of 2018 (although 2018 will be revised down with benchmark revision to be released in February 2020).   So job growth has slowed.

by Calculated Risk on 10/04/2019 08:44:00 AM

From the BLS:

The unemployment rate declined to 3.5 percent in September, and total nonfarm payroll employment rose by 136,000, the U.S. Bureau of Labor Statistics reported today. Employment in health care and in professional and business services continued to trend up.
...
Employment in government continued on an upward trend in September (+22,000). Federal hiring for the 2020 Census was negligible (+1,000).
...
The change in total nonfarm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported.
...
In September, average hourly earnings for all employees on private nonfarm payrolls, at $28.09, were little changed (-1 cent), after rising by 11 cents in August. Over the past 12 months, average hourly earnings have increased by 2.9 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 135 thousand in September ex-Census (private payrolls increased 114 thousand).

Payrolls for July and August were revised up 45 thousand combined.

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

In September, the year-over-year change was 2.147 million jobs.

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

The Labor Force Participation Rate was unchanged in September at 63.2%. 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 increased to 61.0% (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 declined in September to 3.5%.  This is the lowest unemployment rate since 1969.

This was below consensus expectations of 145,000 jobs added, however July and August were revised up by 45,000 combined.

I'll have much more later ...

by Calculated Risk on 10/03/2019 07:58:00 PM

My September Employment Preview.

Goldman's September Payrolls preview.

Friday:
• At 8:30 AM: Employment Report for September. The consensus is for 145,000 jobs added, up from 130,000 in August (including temporary Census hires). The consensus is the unemployment rate will be unchanged at 3.7%.

• At 8:30 AM: Trade Balance report for August from the Census Bureau.  The consensus is for the deficit to be $54.5 billion in August, from $54.0 billion in July.

• At 2:00 PM: Speech, Fed Chair Jerome Powell, Opening Remarks, At Fed Listens: Perspectives on Maximum Employment and Price Stability, Federal Reserve Board, Washington, D.C.

by Calculated Risk on 10/03/2019 03:45:00 PM

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

We estimate nonfarm payrolls increased 150k in September, compared to consensus of +146k. While employment surveys weakened further on net, their levels are still consistent with above-potential job growth. …

We estimate a one tenth decline in the unemployment rate to 3.6%. …
emphasis added

CR Note: It will be important to adjust for decennial Census hiring. Ex-Census the Goldman forecast is for about 135K jobs.

by Calculated Risk on 10/03/2019 01:19:00 PM

Reis reported that the vacancy rate for regional malls was 9.4% in Q3 2019, up from 9.3% in Q2 2019, and up from 9.1% in Q3 2018. This is at the cycle peak of 9.4% in Q3 2011, and up from the cycle low of 7.8% in Q1 2016.

For Neighborhood and Community malls (strip malls), the vacancy rate was 10.1% in Q3, down from 10.2% in Q2, and down from 10.2% in Q3 2018. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011, and the low was 9.8% in Q2 2016.

Comments from Reis:

The Retail vacancy rate declined in the quarter to 10.1% from 10.2% in the second quarter. In the third quarter of 2018 it was also 10.2%. Overall vacancy has declined only 0.3% in last five years.

Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.3% in the third quarter. At $21.45 per square foot (asking) and $18.79 per square foot (effective), the average rents have increased 1.5% and 1.6%, respectively, from the third quarter of 2018.

The Mall vacancy rate increased to 9.4%, from 9.3% last quarter and a low of 7.8% in 2016. Rent growth was positive at 0.2% for the quarter and 0.6% for the year. Although retail store closures and bankruptcies still dominate the news, the overall retail property statistics have held steady as new users fill vacated space of large department stores.
...
Similar to its sibling property types, the retail sector continued to shrug off bad news in the broader sector. Just this week, the news media seemed to yawn when retailing power house Forever 21 declared bankruptcy. Reports said they would close 178 of their 600 stores. The retail sector has withstood numerous store closings, this latest one should not deliver a big blow. Retail spending remains healthy as consumer spending keeps climbing in step with job growth. In short, the retail sector is poised to continue to grow at the current slow but steady rate.
emphasis added

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Recently both the strip mall and regional mall vacancy rates have increased from an already elevated level.

Mall vacancy data courtesy of Reis

by Calculated Risk on 10/03/2019 10:50:00 AM

Special Note on Decennial Census: Temporary Decennial Census hiring will probably impact the September employment report with the Census hiring around 15,000 temporary workers. The headline number should be adjusted for these hires, see: How to Report the Monthly Employment Number excluding Temporary Census Hiring

On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus is for an increase of 145,000 non-farm payroll jobs in September, and for the unemployment rate to be unchanged at 3.7%.

Last month, the BLS reported 130,000 jobs added in August (including 25,000 temporary Census hires).

Here is a summary of recent data:

• The ADP employment report showed an increase of 135,000 private sector payroll jobs in September. This was below consensus expectations of 152,000 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 below expectations.

• The ISM manufacturing employment index decreased in September to 46.3%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased 40,000 in September. The ADP report indicated manufacturing jobs increased 2,000 in September.

The ISM non-manufacturing employment index decreased in September to 50.4%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll increased 84,000 in September.

Combined, the ISM surveys suggest employment gains at 44,000 suggesting gains well below consensus expectations.

• Initial weekly unemployment claims averaged 213,000 in September, down from 216,000 in August. For the BLS reference week (includes the 12th of the month), initial claims were at 210,000, down from 211,000 during the reference week the previous month.

This suggest employment growth close to expectations.

• The final September University of Michigan consumer sentiment index increased to 93.2 from the August reading of 89.8. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker was weak in August suggesting 123K jobs added in September.

• Conclusion: The ISM employment indexes were especially weak in September, as was the ADP employment report.  Also the BofA jobs tracker was weak in September, although consumer sentiment rebound slightly and unemployment claims during the reference week were low.

My guess is the jobs number (ex-Census hiring) will be below expectations.

by Calculated Risk on 10/03/2019 10:04:00 AM

The September ISM Non-manufacturing index was at 52.6%, down from 56.4% in August. The employment index decreased to 50.4%, from 53.1%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: September 2019 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in September for the 116th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 52.6 percent, which is 3.8 percentage points below the August reading of 56.4 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 55.2 percent, 6.3 percentage points lower than the August reading of 61.5 percent, reflecting growth for the 122nd consecutive month. The New Orders Index registered 53.7 percent; 6.6 percentage points lower than the reading of 60.3 percent in August. The Employment Index decreased 2.7 percentage points in September to 50.4 percent from the August reading of 53.1 percent. The Prices Index increased 1.8 percentage points from the August reading of 58.2 percent to 60 percent, indicating that prices increased in September for the 28th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector pulled back after reflecting strong growth in August. The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests slower expansion in September than in August.  This was a weak report.