v.19 n. 46 – Released November 12, 2015
This Week’s Headlines:
U.S. Labor Market Bounces Back in October
U.S. Trade Deficit Falls Back After August Jump
Fed Survey Reports Modest Changes to Lending Practices
U.S. Vehicle Sales Strong and Steady
Events of Interest
November 12: LAEDC 20th Annual Eddy Awards
November 13: Cal State LA’s 22nd Annual Policy Conference on the Ports of Los Angeles and Long Beach
U.S. Labor Market Bounces Back in October
The U.S. Labor Market Report covering the national employment situation in October showed a gain of 271,000 nonfarm jobs. The unemployment rate edged down to 5.0%. The average workweek was unchanged last month at 34.5 hours, but the average hourly wage increased by nine cents to $25.20. Over the year, average hourly earnings were up by 2.5%, the fastest pace of wage growth since mid-2009.
The employer payroll survey reported that total nonfarm employment in the United States increased by 271,000 jobs in October. The private sector contributed 268,000 jobs to the October increase, while the public sector added 3,000 jobs, all of which were in state government. Employment growth was broad based with nearly every major industry sector adding jobs last month. The exceptions were mining and logging (mainly energy-related activities), and information. The manufacturing sector was flat with a gain of 3,000 jobs in nondurable goods, which was offset by an equal loss in durable goods.
There was also a positive net revision to the August and September figures of 12,000 jobs. Over the past three months, job gains have averaged 187,000 per month. The 2015 year-to-date average monthly gain was 206,000 jobs, somewhat below the 236,000 figure for the same period in 2014.
On a year-to-year basis, U.S. employment expanded by 2.814 million jobs, an increase of 2.0%. In year-to-year terms (YTY), mining and logging was the only industry to record a decline. The largest YTY gain occurred in health care and social assistance with 606,000 jobs added over the year, an increase of 3.3%. Leisure and hospitality added 433,000 jobs (up 2.9%) and retail trade employment rose by 433,000 jobs (up 2.0%). Professional and technical services also posted a strong gain (313,400 jobs, 3.7%), as did administrative and waste services (295,200 jobs, 3.4%).
Turning to the household survey, in October the unemployment rate was 5.0%, the lowest in seven years. The year ago rate was 5.7%. The labor force participation rate held steady at 62.4%, a 38-year low. The more comprehensive U-6 unemployment rate was 9.8%, well below the 20-year average for this indicator of 10.7%. The U-6 unemployment rate counts part-time workers who would prefer full-time work and individuals who have given up looking for a job.
Other labor market indicators also continue to show improvement. The share of workers who have been jobless for 27 weeks or more currently stands at 26.8% of all unemployed persons, down from the year ago rate of 31.9%. Over the past 12 months the number of long-term unemployed persons has fallen by 762,000. The median duration of unemployment is also on the decline, falling from 13.5 weeks in October 2014 to 11.2 weeks last month.
Summary: The addition of 271,000 jobs last month far exceeded expectations and are an indication that underlying economic growth remains solid despite some recent soft readings in the manufacturing sector. Although the LAEDC expects job gains will moderate over the next year as the expansion matures, the unemployment rate will continue to trend down. (Kimberly Ritter-Martinez)
Source: U.S. Bureau of Labor Statistics
U.S. Trade Deficit Falls Back After August Jump
The U.S. Commerce Department reported that exports were up and imports declined in September, narrowing the U.S. trade deficit to $40.8 billion, down from a revised $48.0 billion in August. While this 15 percent decline is impressive, it is important to keep in mind that month-to-month trade volatility is common and the August trade deficit was relatively high; September’s level comes in slightly below the $41.8 billion trade deficit reported for July. Relative to this time last year, the trade deficit has narrowed 5.5%. but year-to-date numbers that even out volatility show the deficit’s moderate upward trend of recent years is still on track.
Looking at the trade deficit components, U.S. exports rose by $3.0 billion to $187.9 billion in September (up from $184.9 billion in August) due mainly to an increase in foreign demand for U.S. consumer goods (artwork, antiques, stamps, etc. and jewelry), capital goods (electric apparatus and industrial engines), soybeans and fuel oil. Relative to this time last year, U.S. exports decreased by 3.7%. The declines of the last year have been widespread, but were largest for fuel oil and petroleum products.
U.S. imports decreased by $4.2 billion to $228.7 billion in September (down from $233.0 billion in August). The decline mainly reflected the lower U.S. demand for industrial supplies and materials (mainly crude oil) and capital goods (civilian aircraft and telecommunications equipment). When compared to last year, U.S. imports declined by 4.0%.
The U.S. bilateral trade deficit with China, the largest trade deficit between the U.S. and any other country, rose in September, increasing to $36.3 billion from $35.0 billion in August. Imports were $45.7 billion, while exports were $9.4 billion. Trade with China accounted for approximately 55% of the total U.S. trade deficit in September, and both imports and exports were up from a year ago. Looking at other trading partners, U.S. trade deficits with South Korea, the European Union and Germany decreased in September, while trade deficits with Japan, Canada and Mexico increased.
Bottom Line: The monthly and annual declines in the trade deficit seen in September are within the range of normal historical volatility, while year-to date estimates show the U.S. trade deficit continuing its overall upward trend of the last several years. The strengthening of the U.S. economy in the face of weak global growth, together with the relative strength of the U.S. dollar, should serve to reinforce that long-term trend. (Bengte Evenson)
Source: U.S. Bureau of Economic Analysis
Fed Survey Reports Modest Changes to Lending Practices
The Federal Reserve recently released results for the October 2015 Senior Loan Officer Survey on Bank Lending Practices. This survey addresses changes in the supply of, and demand for, bank loans to businesses and households during the past three months. Changes in lending and borrowing practices are an indication of the relative strength of the economy.
Banks have been slowly easing lending standards for several years and demand has mostly trended upward since the end of the recession. This quarter’s data mostly show that these trends were sustained on both the business and consumer sides, but tightening of some terms and standards may indicate cautiousness as we approach the end of 2015.
Banks reported little net change in their lending standards for commercial and industrial (C&I) loans for the third quarter of 2015. Banks that reported changes most frequently tightened either standards or terms on C&I loans, commonly citing a less-favorable or more-uncertain economic outlook as well as worsening industry-specific problems as their reasons for doing so. Fewer banks reported easing loan terms such as spreads and maturities, as well as increased premiums on riskier loans, especially for larger firms. The smaller number of banks that eased standards or terms on C&I loans predominantly did so in response to more aggressive competition. Demand for such loans also showed little net change.
With respect to business and commercial real estate (CRE), the majority of banks reported very little change in their lending standards during the third quarter of 2015, but said demand for such loans was stronger than in the previous quarter.
Asked about loans to households, banks reported a net easing of underwriting standards for GSE-eligible and “qualified” but not GSE-eligible mortgage loans. For government residential mortgages, on the other hand, banks reported a net tightening of lending standards, and the vast majority of banks still do not extend loans to subprime borrowers. Banks reported weaker net demand across most categories of home-purchase loans, but stronger third-quarter demand for home equity lines of credit. This latter was another area where lending standards changed little.
With respect to other types of consumer loans, some large banks reported easing standards and terms for some types of lending, including credit card and auto loans. Reported net demand for most of these types of consumer loans was up modestly, except for auto loans, for which the demand was basically unchanged.
Changes in borrowing by businesses and consumers to finance investment and consumption are an indication of confidence levels and the relative strength of the economy. While the most recent survey of Senior Loan Officers shows the demand for most categories of loans continues to rise modestly, the modest tightening of standards and terms reflected in several loan categories will have people asking whether the post-recession era of slowly easing credit standards is coming to an end. (Bengte Evenson)
Source: Federal Reserve
U.S. Light Vehicle Sales Strong and Steady
In October, U.S. light vehicle sales were up by 10.1% over the year to 18.1 million units (seasonally adjusted annualized rate). This marked only the second time on record auto sales have recorded two consecutive months with an SAAR north of 18 million units. On a per unit volume basis, 1.45 million light vehicles were sold last month, an impressive increase of 13.6% over the month, making it the highest October volume on record.
Demand is still solidly on the side of light trucks, especially crossover utility vehicles. Sales increased by 18.6% over the year in October to 10.4 million units and accounted for 57.2% of the light vehicle sales mix.
Sales of domestic trucks increased by 12.6% over the year to 8.3 million units
Foreign light truck sales, which currently account for slightly less than 20% of the light truck market, surged by 51.1% to 2.0 million units
Compared with September, however, sales of pick-ups, SUVs and crossovers edged down by 0.5%
Total passenger car sales, including foreign and domestic models, edged up by 0.5% over the year to 7.8 million units.
Sales of domestic autos were up by 1.3% over the year to 5.8 million units
Sales of foreign passenger cars declined by 1.7% to 1.9 million units
Compared with September, total passenger car sales moved higher by a modest 1.5%
Sales of medium-heavy trucks rose by 13.4% over the year in October to 483,000 vehicles. Since these heavier trucks are commonly used by business to haul freight and make deliveries, an increase in demand for these vehicles is an indication of stronger business activity.
Even though the pace of sales in September and October was exceptionally robust, there is little indication sales will slow dramatically during the final two months of 2015. Most automakers posted double-digit sales gains last month led by Subaru (up 20.0%) and GM (up 15.9%). Even VW, in the midst of an emission scandal and a stop-sale order on specific models posted a 5.6% gain for the month. At the risk of being repetitive, U.S. auto manufacturers have been riding high on a wave of credit availability, lower gasoline prices, increasing levels of leasing activity and positive (mostly) economic news. (Kimberly Ritter-Martinez)
Source: U.S. Bureau of Economic Analysis
Events of Interest
Save the Date!
Thursday, November 12, 2015: LAEDC 20th Annual Eddy Awards
Location: Beverly Hilton, Beverly Hills, CA
The Eddy Awards® is one of the most prestigious awards programs to recognize leadership in economic development in business and government throughout Los Angeles County. The Eddy Awards®, a cocktail, dinner, and awards gala, also supports fulfillment of the Los Angeles County Economic Development Corporation’s mission to attract, retain, and grow businesses and jobs for the regions of Los Angeles County.
Friday, November 13, 2015: Cal State LA’s 22nd Annual Policy Conference
Location: LA Hotel Downtown, Los Angeles, CA
The Pat Brown Institute for Public Affairs at Cal State LA, in partnership with the Los Angeles County Economic Development Corporation and the Los Angeles World Trade Center, invites you to the 22nd Annual Policy Conference on Friday, November 13th at The L.A. Hotel Downtown. An array of policymakers from Long Beach, Los Angeles and Sacramento, along with business, labor, environmental, and policy experts, are set to present and discuss critical policy decisions about the ports and the evolving supply chain by which goods move.
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