by Calculated Risk on 8/01/2014 02:19:00 PM

Earlier the Census Bureau reported that overall construction spending decreased in June:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2014 was estimated at a seasonally adjusted annual rate of $950.2 billion, 1.8 percent below the revised May estimate of $967.8 billion. The June figure is 5.5 percent above the June 2013 estimate of $900.3 billion.

Both private and public spending declined in June:

Spending on private construction was at a seasonally adjusted annual rate of $685.5 billion, 1.0 percent below the revised May estimate of $692.0 billion. Residential construction was at a seasonally adjusted annual rate of $355.9 billion in June, 0.3 percent below the revised May estimate of $357.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $329.5 billion in June, 1.6 percent below the revised May estimate of $335.0 billion. ...

In June, the estimated seasonally adjusted annual rate of public construction spending was $264.7 billion, 4.0 percent below the revised May estimate of $275.7 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 is 47% below the peak in early 2006, and up 56% from the post-bubble low.

Non-residential spending is 20% below the peak in January 2008, and up about 46% from the recent low.

Public construction spending is now 19% below the peak in March 2009 and about 1.6% above the post-recession low.

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 7%. Non-residential spending is up 11% year-over-year. Public spending is down 3% year-over-year.

Looking forward, all categories of construction spending should increase in 2014. Residential spending is still very low, non-residential is starting to pickup, and public spending has probably hit bottom.

by Calculated Risk on 8/01/2014 11:04:00 AM

Earlier: July Employment Report: 209,000 Jobs, 6.2% Unemployment Rate

A few key points:
• At the current pace (through July), the economy will add 2.75 million jobs this year (2.64 million private sector jobs). Right now 2014 is on pace to be the best year for both total and private job growth since 1999.

• Wage growth is still subdued, from the BLS: "In July, average hourly earnings for all employees on private nonfarm payrolls edged up by 1 cent to $24.45. Over the past 12 months, average hourly earnings have risen by 2.0 percent."

• Inflation is not a concern this year. The BEA reported this morning that the PCE price index is up 1.6% year-over-year, and core PCE prices are up 1.5%.

• With the unemployment rate at 6.2%, there is still little upward pressure on wages. Wages should pick up as the unemployment rate falls over the next couple of years, but currently with low inflation and little wage pressure, the Fed can and will be patient.

A few numbers:

Total employment increased 209,000 from June to July, and is now 639,000 above the previous peak.  Total employment is up 9.349 million from the employment recession low.

Private payroll employment increased 198,000 from June to July, and private employment is now 1,105,000 above the previous peak (the unprecedented large number of government layoffs has held back total employment). Private employment is up 9.895 million from the low.

Through the first seven months of 2014, the economy has added 1,609,000 payroll jobs - up from 1,370,000 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.  I might have been too low!

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 decreased in July to 80.8%, and the 25 to 54 employment population ratio decreased to 76.6% from 76.7%.  As the recovery continues, I expect the participation rate for this group to increase - although the participation rate has been trending down for this group since the '90s.

Year-over-year Change in Employment

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

In July, the year-over-year change was 2.570 million jobs, and it generally 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), at 7.5 million, was unchanged 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 persons working part time for economic reasons decreased slightly in July to 7.511 million from 7.544 million in June.  This suggests significantly slack still in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that increased to 12.2% in July from 12.1% 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 3.155 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 3.081 in June. This is generally 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 2014, state and local governments added 11,000 jobs.  State and local government employment is now up 151,000 from the bottom, but still 593,000 below the peak.

It is pretty clear that state and local employment is now increasing.  Federal government layoffs have slowed (unchanged in July), but Federal employment is still down 22,000 for the year.

by Calculated Risk on 8/01/2014 10:00:00 AM

The ISM manufacturing index suggests faster expansion in July than in June. The PMI was at 57.1% in July, up from 55.3% in June. The employment index was at 58.2%, up from 52.8% in June, and the new orders index was at 63.4%, up from 58.9% in June.

From the Institute for Supply Management: July 2014 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in July for the 14th consecutive month, and the overall economy grew for the 62nd 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® (ISM®) Manufacturing Business Survey Committee. "The July PMI® registered 57.1 percent, an increase of 1.8 percentage points from June's reading of 55.3 percent, indicating expansion in manufacturing for the 14th consecutive month. The New Orders Index registered 63.4 percent, an increase of 4.5 percentage points from the 58.9 percent reading in June, indicating growth in new orders for the 14th consecutive month. The Production Index registered 61.2 percent, 1.2 percentage points above the June reading of 60 percent. Employment grew for the 13th consecutive month, registering 58.2 percent, an increase of 5.4 percentage points over the June reading of 52.8 percent. Inventories of raw materials registered 48.5 percent, a decrease of 4.5 percentage points from the June reading of 53 percent, contracting after five months of consecutive growth. Comments from the panel are generally positive, while some indicate concern over global geopolitical situations."
emphasis added

Click on graph for larger image.

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

This was just solidly above expectations of 55.9%.  The employment and new orders indexes were strong.

by Calculated Risk on 8/01/2014 09:55:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for July was at 81.8, down from 82.5 in June, and up from the preliminary July reading of 81.3.

This was close to the consensus forecast of 81.5. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011.

by Calculated Risk on 8/01/2014 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 6.2 percent, the U.S. Bureau of Labor Statistics reported today.
...
The change in total nonfarm payroll employment for May was revised from +224,000 to +229,000, and the change for June was revised from +288,000 to +298,000. With these revisions, employment gains in May and June were 15,000 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 sixth month in a row with more than 200 thousand jobs added, and employment is now up 2.57 million year-over-year.

Total employment is now 639 thousand above the pre-recession peak.

The second 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.

The Employment-Population ratio was unchanged at 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 increased in July to 6.2%.

Although below expectations, this was another solid employment report - including the positive revisions to prior months.  2014 is on pace to be the best year for employment gains since 1999.

I'll have much more later ...