by Calculated Risk on 6/02/2017 10:00:00 AM

The headline jobs number was below expectations, and there were combined downward revisions to the previous two months.   Is this is slowdown in hiring a short term issue, part of the normal business cycle, or due to a Trump Slump? My view is this slowdown in hiring is mostly part of the normal business cycle (my expectation was job growth would slow further this year).

There was still some good news - especially with the unemployment rate falling to 4.3% (lowest since 2001), and U-6 falling to 8.4% (lowest since 2007).  But overall this was a disappointing report.

Earlier: May Employment Report: 138,000 Jobs, 4.3% Unemployment Rate

In May, the year-over-year change was 2.26 million jobs. Still decent job growth.

Average Hourly Earnings

Click on graph for larger image.

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 2.5% YoY in May.

Wage growth has generally been trending up.

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 little changed at 5.2 million in May. These individuals, who would have preferred full-time employment, 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 in May. The number working part time for economic reasons suggests a little slack still in the labor market. This is the lowest level since March 2008.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 8.4% in May. This is the lowest level for U-6 since November 2007.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.66 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.63 million in April.

This is generally trending down, but still a little elevated.

Although U-6, the number of persons employed part time for economic reasons, and the number of long term unemployed are still a little elevated, it appears the economy is nearing full employment. Overall this was a disappointing report.

by Calculated Risk on 6/02/2017 08:43:00 AM

From the BLS:

Total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care and mining.
...
The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported.
...
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. Over the year, average hourly earnings have risen by 63 cents, or 2.5 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 138 thousand in May (private payrolls increased 147 thousand).

Payrolls for March and April were revised down by a combined 66 thousand.

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

In May, the year-over-year change was 2.23 million jobs.  This is a decent year-over-year gain.


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

The Labor Force Participation Rate was decreased in May to 62.7%. 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 decreased to 60.0% (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 decreased in May to 4.3%.  This is the lowest unemployment rate since 2001.

This was below expectations of 185,000 jobs, and the previous two months were revised down.  A disappointing report.

I'll have much more later ...

by Calculated Risk on 6/01/2017 08:42:00 PM

Earlier:

My May Employment Preview

and Goldman: May Employment Preview

Friday:
• At 8:30 AM ET, Employment Report for May. The consensus is for an increase of 185,000 non-farm payroll jobs added in May, down from the 211,000 non-farm payroll jobs added in April. The consensus is for the unemployment rate to be unchanged at 4.4%.

• Also at 8:30 AM, Trade Balance report for April from the Census Bureau. The consensus is for the U.S. trade deficit to be at $46.1 billion in April from $43.7 billion in March.

by Calculated Risk on 6/01/2017 06:02:00 PM

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

We estimate nonfarm payrolls increased by 170k in May ... somewhat below consensus of +180k. Our forecast reflects some softening in service sector employment surveys, a return to normal weather, and a modestly slower pace of hiring in May, reflecting labor supply constraints in an economy near full employment.

We estimate the unemployment rate remained stable at 4.4%, based on our expectation that household employment will hold on to its sharp year-to-date gains. Finally, we expect average hourly earnings to increase 0.2% month over month and 2.5% year-over-year in tomorrow’s report, reflecting the interaction of firming wage growth with unfavorable calendar effects.

CR Note: My employment preview is here.

by Calculated Risk on 6/01/2017 04:00:00 PM

Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 16.60 million SAAR in May.

That is down 3% from May 2016, and up 1% from last month.


Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for May (red, light vehicle sales of 16.60 million SAAR mostly from WardsAuto).

This was below the consensus forecast of 16.9 million for May.

After two consecutive years of record sales, it looks like sales will be down in 2017.

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

Note: dashed line is current estimated sales rate.

by Calculated Risk on 6/01/2017 12:59:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for May. The consensus, according to Bloomberg, is for an increase of 185,000 non-farm payroll jobs in May (with a range of estimates between 140,000 to 231,000), and for the unemployment rate to be unchanged at 4.4%.

The BLS reported 211,000 jobs added in April.

Here is a summary of recent data:

• The ADP employment report showed an increase of 253,000 private sector payroll jobs in May. This was well above expectations of 170,000 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 above expectations.

• The ISM manufacturing employment index increased in May to 53.5%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll was unchanged in May. The ADP report indicated 8,000 manufacturing jobs added in May.

The ISM non-manufacturing employment index for May hasn't been released yet.

• Initial weekly unemployment claims averaged 238,000 in May, down from 243,000 in April. For the BLS reference week (includes the 12th of the month), initial claims were at 233,000, down from 243,000 during the reference week in April.

The decrease during the reference week suggests fewer layoffs during the reference week in May than in April. This suggests a somewhat stronger employment report in May than in April.

• The final May University of Michigan consumer sentiment index increased slightly to 97.1 from the April reading of 97.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: None of the indicators alone is very good at predicting the initial BLS employment report.  The ADP report and weekly unemployment claims suggest stronger job growth in May.

by Calculated Risk on 6/01/2017 11:59:00 AM

Earlier today, the Census Bureau reported that overall construction spending decreased in April:

Construction spending during April 2017 was estimated at a seasonally adjusted annual rate of $1,218.5 billion, 1.4 percent below the revised March estimate of $1,235.5 billion.

Both private and public spending decreased in April:

Spending on private construction was at a seasonally adjusted annual rate of $943.3 billion, 0.7 percent below the revised March estimate of $949.7 billion. ...

In April, the estimated seasonally adjusted annual rate of public construction spending was $275.3 billion, 3.7 percent below the revised March estimate of $285.9 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 has been generally increasing, and is still 24% below the bubble peak.

Non-residential spending is now 3% above the previous peak in January 2008 (nominal dollars).

Public construction spending is now 15% below the peak in March 2009, and only 4% above the austerity low in February 2014.

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

On a year-over-year basis, private residential construction spending is up 16%. Non-residential spending is up 4% year-over-year. Public spending is down 4% year-over-year.

Looking forward, all categories of construction spending should increase in 2017 (maybe not public spending).

This was below the consensus forecast of a 0.5% increase for April, however spending for March was revised up sharply.

by Calculated Risk on 6/01/2017 10:05:00 AM

The ISM manufacturing index indicated expansion in May. The PMI was at 54.9% in May, up from 54.8% in April. The employment index was at 53.5%, up from 52.0% last month, and the new orders index was at 59.5%, up from 57.5%.

From the Institute for Supply Management: May 2017 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 96th consecutive month, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: "The May PMI® registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent. The New Orders Index registered 59.5 percent, an increase of 2 percentage points from the April reading of 57.5 percent. The Production Index registered 57.1 percent, a 1.5 percentage points decrease compared to the April reading of 58.6 percent. The Employment Index registered 53.5 percent, an increase of 1.5 percentage points from the April reading of 52 percent. The Inventories Index registered 51.5 percent, an increase of 0.5 percentage point from the April reading of 51 percent. The Prices Index registered 60.5 percent in May, a decrease of 8 percentage points from the April reading of 68.5 percent, indicating higher raw materials prices for the 15th consecutive month, but at a noticeably slower rate of increase in May compared with April. Comments from the panel generally reflect stable to growing business conditions, with new orders, employment and inventories of raw materials all growing in May compared to April. The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain."
emphasis added

Click on graph for larger image.

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

This was above expectations of 54.6%, and suggests manufacturing expanded at a slightly faster pace in May than in April.

A solid report.

by Calculated Risk on 6/01/2017 08:33:00 AM

The DOL reported:

In the week ending May 27, the advance figure for seasonally adjusted initial claims was 248,000, an increase of 13,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 234,000 to 235,000. The 4-week moving average was 238,000, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 250 from 235,250 to 235,500.
emphasis added

The previous week was revised up by 1,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

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 increased to 238,000.

This was above the consensus forecast.

The low level of claims suggests relatively few layoffs.

by Calculated Risk on 6/01/2017 08:20:00 AM

From ADP:

Private sector employment increased by 253,000 jobs from April to May according to the May ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
“May proved to be a very strong month for job growth,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries.”

Mark Zandi, chief economist of Moody’s Analytics said, “Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses’ number one challenge will be a shortage of labor.”

This was well above the consensus forecast for 170,000 private sector jobs added in the ADP report. 

The BLS report for May will be released Friday, and the consensus is for 185,000 non-farm payroll jobs added in May.