by Calculated Risk on 7/03/2014 03:35:00 PM

Catching up ... the Department of Commerce reported this morning:

[T]otal May exports of $195.5 billion and imports of $239.8 billion resulted in a goods and services deficit of $44.4 billion, down from $47.0 billion in April, revised. May exports were $2.0 billion more than April exports of $193.5 billion. May imports were $0.7 billion less than April imports of $240.5 billion.

The trade deficit was smaller than the consensus forecast of $45.1 billion.

The first graph shows the monthly U.S. exports and imports in dollars through April 2014.

Click on graph for larger image.

Imports  decreased and exports increased in May.  

Exports are 18% above the pre-recession peak and up 4% compared to May 2013; imports are about 4% above the pre-recession peak, and up about 3% compared to May 2013. 

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

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 $96.12 in May, up from $95.48 in April, and down from $96.74 in May 2013.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China increased to $28.8 billion in May, from $27.9 billion in May 2013. 

by Calculated Risk on 7/03/2014 01:03:00 PM

Reis reported that the vacancy rate for regional malls was unchanged at 7.9% in Q2 2014. This is down from a cycle peak of 9.4% in Q3 2011.

For Neighborhood and Community malls (strip malls), the vacancy rate declined slightly to 10.3% from 10.4% in Q1. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011.

Comments from Reis Senior Economist Ryan Severino:

[Strip Malls] The national vacancy rate for neighborhood and community shopping centers declined by 10 basis points to 10.3% during the second quarter. This was a marginal improvement over the first quarter when the national vacancy rate did not change. The national vacancy is now down 80 basis points from its historical peak during the third quarter of 2011. However, that translates into a less than 10 basis points per quarter compression in the vacancy rate.
...
[Regional] Vacancy during the second quarter was 7.9%, unchanged from the first quarter and down 40 basis points from the second quarter of 2013. Vacancy is also down 150 basis points from the historical‐high level of 9.4% reached during the third quarter of 2011. Asking rents grew by 0.4% in the second quarter and 1.8% during the last twelve months. This is the thirteenth consecutive quarter of rent increases at the national level for regional malls. While the mood surrounding malls at industry events continues to brighten, the data in recent quarters has become a bit less optimistic. The vacancy rate for malls has been unchanged over the last three quarters, although rent growth continues to accelerate. Even though the economy is recovering, the mall sector is grappling with the fallout surrounding store closures and retailers going out of business. This is putting upward pressure on vacancy at a time when improvement in the economy and labor market is gradually translating into slow increases in demand and net absorption.

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.

Mall vacancy data courtesy of Reis.

by Calculated Risk on 7/03/2014 10:46:00 AM

Earlier: June Employment Report: 288,000 Jobs, 6.1% Unemployment Rate

Total employment increased 288,000 from May to June, and is now 415,000 above the previous peak. Private payroll employment increased 262,000 from May to June, and private employment is now 895,000 above the previous peak (the unprecedented large number of government layoffs has held back total employment).

Through the first half of 2014, the economy has added 1,385,000 payroll jobs - up from 1,221,000 added during the same period in 2013 - even with the severe weather early this year.   My expectation at the beginning of the year was the economy would add between 2.4 and 2.7 million payroll jobs this year, and that still looks about right.

Hopefully - now that the unemployment rate has fallen to 6.1% - wage growth will start to pick up.

Overall this was another solid employment report.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) 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 participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate has mostly moved sideways (with a downward drift started around '00) - and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in June to 80.9%, and the 25 to 54 employment population ratio increased to 76.7% from 76.4%.  As the recovery continues, I expect the participation rate for this group to increase. 

Year-over-year Change in Employment

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

In June, the year-over-year change was 2.495 million jobs, and it appears the pace of hiring is increasing.

Right now it looks possible that 2014 will be the best year since 1999 for both total nonfarm and private sector employment growth.

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) increased by 275,000 in June to 7.5 million. The number of involuntary part-time workers is down over the year but has shown no clear trend in recent months. 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 persons working part time for economic reasons increased in June to 7.544 million from 7.269 million in May.  This suggests significantly slack still in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 12.1% in June from 12.2% in May. This is the lowest level for U-6 since October 2008.

Unemployed over 26 Weeks

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

According to the BLS, there are 3.081 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 3.374 in May. This is trending down, but is still very high.  This is the lowest level for long term unemployed since February 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 jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In June 2014, state and local governments added 24,000 jobs.  State and local government employment is now up 138,000 from the bottom, but still 606,000 below the peak.

It is pretty clear that state and local employment is now increasing.  Federal government layoffs have slowed (actually added 2,000 in June), but Federal employment is still down 23,000 for the year.

by Calculated Risk on 7/03/2014 10:00:00 AM

The June ISM Non-manufacturing index was at 56.0%, down from 56.3% in May. The employment index increased in June to 54.4%, up from 52.4% in May. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: June 2014 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in June for the 53rd 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., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 56 percent in June, 0.3 percentage point lower than the May reading of 56.3 percent. This represents continued growth at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 57.5 percent, which is 4.6 percentage points lower than the May reading of 62.1 percent, reflecting growth for the 59th consecutive month at a slower rate. The New Orders Index registered 61.2 percent, 0.7 percentage point higher than the reading of 60.5 percent registered in May. The Employment Index increased 2 percentage points to 54.4 percent from the May reading of 52.4 percent and indicates growth for the fourth consecutive month and at a faster rate. The Prices Index decreased 0.2 percentage point from the May reading of 61.4 percent to 61.2 percent, indicating prices increased at a slightly slower rate in June when compared to May. According to the NMI®, 14 non-manufacturing industries reported growth in June. Respondents' comments vary by industry and company; however, the majority indicate that steady economic growth is continuing."
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 was below the consensus forecast of 56.2% and suggests slightly slower expansion in June than in May.

by Calculated Risk on 7/03/2014 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 288,000 in June, and the unemployment rate declined to 6.1 percent, the U.S. Bureau of Labor Statistics reported today.
...
The change in total nonfarm payroll employment for April was revised from +282,000 to +304,000, and the change for May was revised from +217,000 to +224,000. With these revisions, employment gains in April and May were 29,000 higher than previously reported.

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 to show the underlying payroll changes).

This was the fifth month in a row with more than 200 thousand jobs added, and employment is now up 2.495 million year-over-year.

Total employment is now 415 thousand above the pre-recession peak.

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

The Labor Force Participation Rate was unchanged in June at 62.8%. 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.

The Employment-Population ratio increased in June to 59.0% (black line).

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

The third graph shows the unemployment rate.

The unemployment rate declined in June to 6.1%.

This was another solid employment report, and 2014 is on pace to be the best year for employment gains since 1999.

I'll have much more later ...