by Calculated Risk on 10/05/2012 02:35:00 PM

Once again rail traffic was "mixed". However all of the decline in rail carloads was due to fewer coal shipments.

From the Association of American Railroads (AAR): AAR Reports Mixed Weekly Rail Traffic for September

The Association of American Railroads (AAR) today reported U.S. rail carloads originated in September 2012 totaled 1,152,174 carloads, down 3.7 percent (43,746 carloads) compared with September 2011. Intermodal traffic in September totaled 973,715 containers and trailers, up 2.5 percent (24,126 units) compared with September 2011. September 2012 represents the 34th straight month of intermodal gains.
...
“September rail traffic is again a mix of good news and bad news,” said AAR Senior Vice President John T. Gray. “The primary bad news is that coal carloads continue to struggle, due to the various economic and regulatory constraints faced by coal-fired power plants. The good news is that many other key rail traffic categories are offsetting coal’s decline, including petroleum and petroleum products, motor vehicles, crushed stone and sand, and lumber. Intermodal volume has risen for 34 straight months and could very well set a new record this year.”

Click on graph for larger image.

This graph shows U.S. average weekly rail carloads (NSA).

On a non-seasonally adjusted basis, total U.S. rail carload traffic fell 3.7% (43,746 carloads) in September 2012 from September 2011 ... As has been the case for many months, coal was largely to blame for the decline in total carloads. Coal carloads were down 12.1% (65,867 carloads) in September 2012 from September 2011, more than accounting for the total carload decline for the month. Excluding coal, U.S. carloads were up 3.4% (22,121 carloads) in September 2012

Carloads of crushed stone, sand, and gravel were up 9,044 carloads, or 12.3%, in September 2012. Much, if not most, of the increase in this category is probably attributable to higher frac sand movements.

The second graph is for intermodal traffic (using intermodal or shipping containers):

Graphs reprinted with permission.

Intermodal traffic is near peak levels.

U.S. rail intermodal traffic rose in September for the 34th straight month too, rising 2.5% (24,126 containers and trailers) over September 2011. Intermodal volume averaged 243,429 units per week in September 2012, the third-highest monthly average so far this year. September is usually the second- or third-highest volume intermodal month of the year, but it will probably be no better than fourth in 2012, since October is usually the top intermodal month. In the last week of September 2012, volume was 257,225 containers and trailers, the best intermodal week of the year and the third highest of all time.

The top months for intermodal are usually in the fall, and it looks like intermodal traffic will be at or near record levels this year.

This is more evidence of sluggish growth.

Earlier on employment:
• September Employment Report: 114,000 Jobs, 7.8% Unemployment Rate
• Employment: Somewhat Better (also more graphs)
• All Employment Graphs

by Calculated Risk on 10/05/2012 11:15:00 AM

The payroll job growth was still weak, but there was some encouraging news in the employment report. This is just one report, but it was great to see the employment-population ratio increase for the key working age demographic of 25 to 54 years old (first graph below).

Also the unemployment rate is now at the lowest level since January 2009 (when the economy was collapsing), and it was encouraging to see the number of long term unemployed drop below 5 million for the first time since early 2009.

In a recent post, I highlighted Two Reasons to expect Economic Growth to Increase. The first reason was that we are nearing the end of the state and local government layoffs. This report suggests we may be near the bottom (last graph).

The second reason was a pickup in residential investment. This report showed an increase of just 5 thousand construction jobs, however I think the BLS is under counting construction jobs at the turn. The preliminary benchmark revision showed an upward revision of 386,000 payroll jobs as of March (this is an annual revision bench marked to state tax records). A fairly large portion of the upward revision was for construction workers (85,000 more jobs added), and I suspect that the BLS statistical model that estimates new company formation (the Birth/Death model) is currently underestimating the formation of small construction companies.

All that said, the economy has only added 1.3 million payroll jobs over the first nine months of the year. At this pace, the economy would only add around 1.8 million private sector jobs in 2012; less than the 2.1 million added in 2011.

Also U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, was unchanged at 14.7%. A key reason this didn't decline in September was because of an increase in part time workers (see 3rd graph below).

More positive news: The change in payroll employment for July was revised up from +141,000 to +181,000, and the August was revised up from +96,000 to +142,000.

The average workweek and average hourly earnings both increased. "The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours in September. ... In September, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $23.58. Over the past 12 months, average hourly earnings have risen by 1.8 percent." This is sluggish earnings growth, but it appears to be picking up.

Even though payroll growth was sluggish, this employment report was an improvement over recent reports, especially with the upward revisions, the increase in hourly earnings, and the increase in the 25 to 54 employment-population ratio. Here are a few more graphs...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has 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.

This ratio should probably move back to or above 80% as the economy recovers. The ratio increased in September to 76.0%, the highest level since early 2009 - but there is still a long ways to go.

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.

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


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) rose from 8.0 million in August to 8.6 million in September. 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 September to 8.6 millon from 8.03 million in August.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged in September at 14.7%.

Unemployed over 26 Weeks

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

According to the BLS, there are 4.84 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.03 million in August. This is generally trending down and is at the lowest level since early 2009. 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 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011.

Note: The dashed line shows an estimate including the benchmark revision.

It appears most of the state and local government layoffs are over.

Overall this was a somewhat more encouraging report.
All Employment Graphs

by Calculated Risk on 10/05/2012 08:30:00 AM

From the BLS:

The unemployment rate decreased to 7.8 percent in September, and total nonfarm payroll employment rose by 114,000, the U.S. Bureau of Labor Statistics reported today.
...
[Household survey] Total employment rose by 873,000 in September, following 3 months of little change. The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1 million in September, while the labor force participation rate was little changed at 63.6 percent.
...
The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000.

Click on graph for larger image.

Even though payroll growth was weak, this was a much stronger report than the last few months, especially considering the upward revisions to the July and August reports. And that doesn't include the annual benchmark revision (that will also show more jobs).

This was slightly above expectations of 113,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 7.8% (red line). This is from the household report, and that report showed strong job growth.

The Labor Force Participation Rate increased slightly to 63.6% in September (blue line. 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 most of the recent decline is due to demographics.

The Employment-Population ratio increased to 58.7% in September (black line). This is still very low.

The third 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.

The fourth graph shows the job losses from the start of the employment recession, in percentage terms compared to other financial crisis (including the Great Depression).

This is an update to a graph by economist Josh Lehner (ht Josh for the data):

[I]n the context of the Big 5 financial crises, the current U.S. cycle suddenly does not look quite as dire. Notice how the x-axis, how long it takes to return to peak levels of employment, is measured in years(!) not months like the first graph.
...
[T]he U.S. labor market has performed better than 4 of the previous Big 5 crises, as identified by Reinhart and Rogoff, in terms of job loss and the return to peak time line.

Even though payroll growth was weak and close to expectations (expected was 113,000), overall this was a much stronger report than for recent months. I'll have much more later ...

by Calculated Risk on 10/04/2012 09:15:00 PM

Gasoline prices in California are up 21 cents from one week ago. From the O.C. Register: O.C. gas prices jump 9 cents overnight

A series of problems at some of the state's most important refineries has tightened supplies and driven up prices, the analysts said. In Orange County, that contributed to an overnight jump of 9 cents in the cost of an average gallon of regular unleaded, to $4.33 on Thursday.

That was 21 cents more than it cost one week earlier, according to the AAA auto club.
...
The trouble began in August, when fire broke out at one of the biggest refineries in the state, a Chevron facility in the bay area; its production still has not fully recovered. Then, earlier this week, a power outage slowed production at an Exxon Mobil refinery in Torrance that, though smaller, produces 10 percent of the state's gasoline.

A pipeline that carries oil through the Central Valley also shut down when contaminants were found in it, further crimping gasoline inventories, experts said.

We could see $5 per gallon. Ouch!

On Friday:
• At 8:30 AM ET, the BLS will release the Employment Report for September. The consensus is for an increase of 113,000 non-farm payroll jobs in September; there were 96,000 jobs added in August. The consensus is for the unemployment rate to be unchanged at 8.1% in September.

• At 3:00 PM, Consumer Credit for August will be released by the Federal Reserve. The consensus is for credit to increase $7.8 billion in August.

Two more questions for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 10/04/2012 03:47:00 PM

On Friday, at 8:30 AM ET, the BLS will release the employment report for September. The consensus is for an increase of 113,000 non-farm payroll jobs in September, slightly more than the 96,000 payroll jobs added in August. The consensus is for the unemployment rate to be unchanged at 8.1%.

Note: Last week analysts at Nomura pointed a possible one time issue: "We expect the Chicago teacher strike to reduce local government payrolls by roughly 25k in September ...". If that is correct, those jobs will be added back in October.

Also, there is a strong possibility that the seasonal factors are still a little distorted by the deep recession and financial crisis - this is the third year in a row we've some late spring weakness. In 2010, payrolls picked up in October following a weak period (looking at the data ex-Census), in 2011, payrolls picked up in September. If there is a seasonal distortion, the next few months will probably see some increase too.

Here is a summary of recent data:

• The ADP employment report showed an increase of 162,000 private sector payroll jobs in September. Over the last four months, the ADP report has averaged 170,000 private sector payroll jobs added per month compared to only 109,000 private sector jobs added per month in the BLS report over the same period (September not released). This would seem to suggest that the consensus for the increase in total payroll employment is too low. However the ADP report hasn't been very useful in predicting the BLS report for any one month.

• The ISM manufacturing employment index increased in September to 54.7%, up from 51.6% in August. 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 about 6,000 in September.

The ISM non-manufacturing (service) employment index decreased in September to 51.1%, down from 53.8% in August. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for services, suggests that private sector BLS reported payroll jobs for services increased about 94,000 in September.

Added together, the ISM reports suggests about 100,000 jobs added in September.

• Initial weekly unemployment claims averaged about 373,000 in September, up slightly from the August average - but below the 382,000 average for April, May and June. This was about the same level as in the January, February and March period when the BLS reported an average of 226,000 payroll jobs added per month.

For the BLS reference week (includes the 12th of the month), initial claims were at 385,000; up from 374,000 during the reference week in August.

• The final September Reuters / University of Michigan consumer sentiment index increased to 79.2, up from the August reading of 74.3. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This might suggest some increase in employment, but the level still suggests a weak labor market.

• The small business index from Intuit showed 40,000 payroll jobs added, down from 50,000 in August.

• And on the unemployment rate from Gallup: U.S. Unadjusted Unemployment Rate at 7.9% in September

U.S. unemployment, as measured by Gallup without seasonal adjustment, was 7.9% for the month of September, unchanged from 7.9% measured in mid-September but down slightly from 8.1% for the month of August. Gallup's seasonally adjusted September unemployment rate was 8.1%, unchanged from August.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution (Gallup provides some caveats). Last September, the BLS reported the unemployment rate at 9.0%, and Gallup's seasonally adjusted rate was 8.9%. Note: So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate.

• Conclusion: The ISM manufacturing and service reports suggest a gain of around 100,000 payroll jobs, and the ADP report (private only) was at 162,000. The ISM is below the consensus, and the ADP is above. Initial weekly unemployment claims were near the low for the year during August, but the reference week was higher.

Another negative is the weak small business numbers from Intuit. Also the Chicago teacher strike probably reduced government employment.

As I mentioned above, there is some chance the seasonal factors have been distorted by the severe recession, and that might mean a higher than expected payroll number.

Merrill Lynch analysts are taking the under:

We expect yet another soft payroll report with job growth of only 90,000 in September and an increase in the unemployment rate to 8.2%.

Tim Duy is taking the over, see: Fed Watch: Data Update

I tend to think that attempting to forecast the monthly change in payrolls is a fool's game. Simply too much month-to-month noise. With that caveat in mind, my quick and dirty estimate (and quite wrong last month) for tomorrow is 139k; the consensus forecast is 113k.

I could make an argument for either the over or the under, but I think I'll take the under this month (under 113,000 payroll jobs added).