in addition to the Employment Situation Summary for October from the Bureau of Labor Statistics, this week also saw the release of three September reports that could result in revisions to 3rd quarter GDP: the Census report on our International Trade for September, the Full Report on Manufacturers' Shipments, Inventories and Orders for September and the September report on Construction Spending, both also from the Census Bureau...in addition, this week brought us the Consumer Credit Report for September from the Fed, which showed that overall credit expanded by a seasonally adjusted $28.9 billion, or at a 10.0% annual rate, as non-revolving credit expanded at a 10.5% rate to $2,574.0 billion and revolving credit outstanding rose at a 8% rate to $925.2 billion...
privately issued reports this week included the release of the Mortgage Monitor for September (pdf) from Black Knight Financial Services, which we'll take a quick look at today, the report on light vehicle sales for October from Wards Automotive, which estimated that vehicles sold at a 18.12 million annual rate in October, up from the 18.07 million annual sales rate in September, and only the third time US auto sales have topped the 18 million rate two months in a row....in addition, the week also saw the release of the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the October Manufacturing Report On Business, which saw the manufacturing PMI (Purchasing Managers Index) slip from 50.2 in September to 50.1 in October, indicating a stagnation in manufacturing firms nationally, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise from 56.9% in September to 59.1% in October, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...both of those reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...
Employers Add 271,0000 Jobs in October; Employees Confirm That as Jobless Rate Falls to 5.0%
it appears that the October jobs report is the best we've seen all year, as the Employment Situation Summary for October saw the greatest job creation since December, a reduction in the unemployment rate that was not due to discouraged workers leaving the labor force, and a decent increase in hourly earnings...the establishment survey data indicated that employers added a seasonally adjusted 271,000 jobs in October, while the payroll job increase for September was revised down by 5,000 to 137,000, and while August's jobs creation number was revised up from 136,000 to 153,000, making the combined number of jobs going into October 12,000 more than previously reported ….October job increases were spread through the construction trades and the private service sector, with only the resource extraction sector seeing a loss as great as 4,000 jobs, with 2,700 of those job losses in the oil and gas patch...78,000 jobs were added in the broad professional and business services category, with 46,000 of those in administrative and waste services and 26,900 jobs spread through a variety of professional and technical service positions...the health care and social assistance sector added 56,700 jobs, with 26,900 of those in ambulatory services and another 17,800 jobs in hospitals, while another 43,800 seasonally adjusted jobs were added in retail, with 19,500 of those in clothing and accessories stores...(NB: actual retail jobs increased by 214,500 as seasonal hiring has begun)...in addition, the leisure and hospitality sector added 41,000 jobs, as jobs in restaurants and bars increased by 42,000...employers also reported that average hourly earnings for all employees rose by 9 cents to $25.20 after the September penny decrease was revised to a penny increase, boosting the wages gain over the last 12 months to 2.5%...meanwhile, the average workweek for all private employees was unchanged at 34.5% , although the factory workweek did rise by 0.1 hour to 40.7 hours, and factory overtime rose 0.1 hour to 3.3 hours..
the October household survey estimated that the seasonally adjusted count of those employed rose by 320,000 to 149,120,000, while the number of unemployed fell by 7,000 to 7,908,000, which was enough to cause the unemployment rate to tick down from 5.1% to 5.0%...with the increase in the number employed greater than the 216,000 increase in the civilian working age population, the count of those not in the labor force fell by 97,000 to 94,513,000, which was not enough to statistically change the labor force participation rate, which remained unchanged at 62.4% in October, still near a 38 year low ...with the large increase in the employed, the employment to population ratio, which we could think of as an employment rate, rose from 59.2% to 59.3%...there was also a drop in the number who reported they were involuntarily working part time, from 6,036,000 in September to 5,767,000 in October...as a result, the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.2% to 9.8%...
the BLS employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page...thus, when you encounter a line such as "The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 2.1 million in October and has shown little change since June.(See table A-12.)" you can quickly open Table A-12 where you will find a table with the count of the unemployed by duration and the distribution thereof, and where you'd see that 2,142,000 of us have been unemployed for more than 26 weeks, up from 2,104,000 in September, and now account for 26.8% of all those unemployed...
September Trade Deficit Falls by 15%, Revisions Should Add 0.11% Percentage Points to 3rd quarter GDP
our trade deficit fell by 15.0% in September, virtually reversing the 15.6% jump in August, as the value of our exports rose and the value of our imports fell...the Census report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit fell by $7.2 billion to $41.8 billion in September from an August deficit which was revised from $48.3 billion to $48.0 billion....the value of our September exports rose $3.0 billion to $187.9 billion on a $2.9 billion increase to $127.3 billion in our exports of goods and an increase of $0.1 billion to $60.1 billion in our exports of services, while our imports fell $4.2 billion to $228.7 billion as a $4.4 billion decrease to $187.6 billion in our imports of goods was partially offset by a $0.1 billion increase to $41.1 billion in our imports of services...export prices averaged 0.7% lower in September, so the real growth in exports was greater by that percentage, while import prices were 0.1% lower, similarly incrementally increasing growth in real imports...
referencing the Full Release and Tables for September (pdf), Exhibit 7, we find that a $1,278 million increase to $17,042 million in the value of our exports of consumer goods was a major driver of our September increase in our exports; included in that was a $536 million increase in our exports of art and antiques, a $336 million increase in our exports of jewelry, a $266 million increase in our exports of cell phones and similar goods, and a $222 million increase in our exports of pharmaceutical preparations...our exports of capital goods also increased by $892 million to $45,319 million as we exported $327 million more electric apparatuses, $307 million more industrial engines, and $260 million more civilian aircraft engines ...in addition, our exports of foods, feeds, and beverages rose by $388 to $10,809 on a $605 million increase in our exports of soybeans, which was partially offset by a $184 million decrease in our exports of corn, and our exports of vehicles, parts and engines rose $167 million to $12,946 million...a $33 million decrease to $35,155 million in our exports of industrial supplies and materials was the only end use category of exports to see a decrease, as a $469 million increase in our exports of fuel oil was offset by a $217 million decrease in our exports of other petroleum products and a $178 million decrease in our exports of crude oil, while our exports of goods not categorized by end use rose by $75 million to $5,281 million...
Exhibit 8 in the Full Release and Tables gives us details on our imports and shows us that our imports of every end use category except foods, feeds, and beverages, which were up by $52 million, decreased in September...our imports of industrial supplies and materials fell by $1,583 million to $38,454 million on a $1,283 million drop in our imports of crude oil and a $192 decrease in our imports of nuclear fuel materials; our imports of capital goods fell by $1041 million to $49,237 million on a $558 million decrease in our imports of civilian aircraft, a $386 million decrease in our imports of telecommunications equipment and decreases in our imports of medicinal equipment, semiconductors, electric apparatuses, computer accessories, and excavating machinery in excess of $100 million each, which were partially offset by a $693 million increase in our imports of computers...in addition, our imports of vehicles, parts and engines fell by $831 million to $28,780 million, our imports of goods not categorized by end use fell by $494 million to $7,142 million, and our imports of consumer goods fell by $442 million to $51,356 million on a $530 million decrease in our imports of cell phones, a $468 million decrease in our imports of gem diamonds, and a $433 million decrease in our imports of synthetic textiles and apparel, which were offset by an increase of $1,183 million in our imports of pharmaceutical preparations and an increase of $416 million in our imports of televisions and video equipment...
this international trade report, typically released about a week after the release of an advance estimate of GDP, formerly resulted in major revisions to GDP...however, as of the second quarter, the commerce department began releasing an advance report on our trade in goods, the most volatile part of our monthly trade, to give the BEA a fair clue as to what the monthly and hence quarterly trade would be...that advance report for September, released last week, indicated $126,868 million in exports of goods in September and $185,501 million in imports of goods...this report revised September exports up to $127,323 million and revised imports up to $187,616 million, a swing of $1,660 million in imports over exports from the figures used by the BEA when reporting 3rd quarter GDP...in addition, the August trade deficit was revised from $48,330 million to $48,017 million. which was a net $3,130 million improvement in the August balance....subtracting the error in the advance estimate for September from that August improvement reduces the net revision to $1,530 million on a monthly basis, or about $18.5 billion annualized...that improvement in our balance of trade should add 0.11 percentage points to 3rd quarter GDP when the 2nd estimate is released at the end of November...
September Construction Spending Rises 0.6%; Should Boost 3rd Quarter GDP
in the report on September construction spending (pdf), the Census Bureau estimated that our seasonally adjusted September construction spending would work out to $1,094.2 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.8%)* above the revised estimate of $1,087.5 billion annual rate of construction spending in August and 14.1 percent (±2.1%) above the estimated annualized level of construction spending of September last year...the August spending estimate was revised up slightly from $1,086.2 to $1,087.5 billion, which when combined with the greater than expected spending in September, suggests an incremental upward revision to third quarter GDP.....private construction spending was at a seasonally adjusted annual rate of $794.2 billion, 0.6 percent (±0.8%) above the revised August estimate, with residential spending rising to an annual rate of $394.7 billion in September, 1.9 percent (±1.3%) above the revised August estimate, while private non-residential construction spending fell 0.7 percent (±0.8%) to $399.5 billion on a 1.4% decrease of private spending for energy and power construction...meanwhile, public construction spending was estimated to be at a rate of $300.0 billion annually, 0.7 percent (±3.0%) above the revised August estimate, with spending for education up 2.4% to $69,147 while spending for public power utilities was off 3.7% to an annualized $11,841 million for the month...
in reporting 3rd quarter GDP, the BEA assumed a decrease in nonresidential construction, and an increase in residential construction in September...however, gauging the actual impact of this September construction spending report on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP is adjusted for changes in price, using a multitude of privately published price indexes for the various components of non-residential investment...furthermore, the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling that are not captured by this report...for instance, if we look at the aggregate figures here for the residential construction portion of this report and compare them to the change shown for the nominal value of residential construction in the pdf for the 1st estimate of 3rd quarter GDP, we find the numbers barely correspond at all... taking the annualized numbers in millions of dollars from September, August and July in this report and comparing them to the annual construction rates of April, May and June, we find that the nominal value of residential construction grew by 7.2% in the 3rd quarter, from $362,076 million annually to $388,076 million annually, or at a 32.0% annual rate...the GDP report, on the other hand, shows 2.3% nominal growth in residential construction, from $600 billion annually in the 2nd quarter to $614 billion annually in the 3rd quarter, a 9.6% annual rate which is reduced to a 6.1% real rate after the inflation adjustment is applied...so while we believe this report will give a boost to the 2nd estimate of 3rd quarter GDP, quantifying that boost with the numbers we have here is next to impossible..
September Factory Inventories Down 0.4% in Third Consecutive Decrease
a month ago we learned that the Census Bureau does not collect data on new orders for non durable goods for their widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), aka "the factory orders report" because, due to the quick turnaround time on non-durable goods orders, they figured that shipments of those goods would be a fair proxy for orders...that, in effect, leaves the "new orders" and "unfilled orders" sections of this report useful as not much more than revised updates to the advance report on durable goods we covered last week...in the case of September new orders for durable goods, then, the September Full Report showed that new orders for manufactured durable goods fell by a seasonally adjusted $2.8 billion or 1.2% to $231.8 billion, following a August drop of 2.9% that was revised from the previously reported 3.0% drop; September durable goods orders were previously reported down $2.9 billion or 1.2% to $231.1 billion...
more importantly, then, this report also showed that the value of factory shipments fell by $1.8 billion or 0.4 percent to $477.3 billion, which followed a decrease of 0.9% in August...shipments of durable goods were up by 0.1%, revised from last week's reported 0.2% increase, as a 5.1% increase in shipments of light trucks and utility vehicles resulted in a 0.4% increase in shipments of transportation equipment, without which factory shipments would have fallen 0.5%....the value of shipments (and hence "new orders") of non-durable goods fell 0.8% on a 5.4% drop in shipments of petroleum and coal products, which were priced 5.9% lower, and which account for 20% of the value of non-durable shipments...with shipments of food products up 0.4% while producer prices for food, which account for another 28% of non-durables, were down 0.8%, it appears that real shipments of non-durable goods actually rose in September as well...
meanwhile, the aggregate value of September factory inventories, which have been down 3 months in a row, fell by $2.4 billion or 0.4 percent to $645.1 billion, following a 0.4% decrease in August...inventories of both durable goods and non-durable goods fell 0.4% in value...the decrease in inventories of durable goods was revised from the 0.3% decrease reported in last week's advance report; inventories of transportation equipment were down 0.7% to $131,451 million on 3.1% lower inventories of automobiles and a 6.5% drop in inventories of defense aircraft...the value of non-durable inventories fell 0.4% on a 3.4% drop in inventories of petroleum and coal products, which again was due to lower prices...since inventories of food products were up 0.7% and prices for industrial commodities less fuel were down 0.5% in September, we figure new real inventories of non-durable goods were likely up at least 0.2% for the month...recall that when estimating 3rd quarter GDP last week, BEA assumed a decrease in nondurable manufacturing inventories in September, without specifying an inflation adjustment....while that certainly was true in nominal terms, real non-durable inventories were up, and the data within the GDP report does not isolate factory inventories from other private inventories...however, offsetting the real increase in non-durables, we had a 0.1% downward revision to September durable goods inventories, from the $399,369 million reported with the durable goods report last week, to $399,052 million, reported here, while August durable goods inventories were also revised down an additional $99 million more...so with the durables negative revision washing out the non-durables positive change, the net impact on 3rd quarter inventories for GDP from this report will likely be insignificant...
Mortgage Delinquencies and Foreclosures Rise Again in September; Mean Time in Foreclosure at 1056 Days
the Mortgage Monitor for September (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 737,254 home mortgages, or 1.46% of all mortgages outstanding, remaining in the foreclosure process at the end of September, which was down from 747,930, or 1.48% of all active loans that were in foreclosure at the end of August, and down from 1.89% of all mortgages that were in foreclosure in September of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the September "foreclosure inventory" remains the lowest percentage of homes that were in the foreclosure process since late 2007... new foreclosure starts, however, rose for the second month in a row, from 76,180 in August to 79,899 in September, up more than 10% from July, while they remain lower than the 95.400 new foreclosures started in September of 2014, they've been volatile from month to month, and they have remained in a range about 50% higher than number of new foreclosures we saw in the precrisis year of 2005...
in addition to homes in foreclosure, BKFS data showed that 2,456,739 mortgages, or 4.87% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in September, up from 4.79% of homeowners with a mortgage who were more than 30 days behind in August and the highest mortgage delinquency rate since May, while still down 11.4% from the mortgage delinquency rate of 5.66% in September a year earlier...of those who were delinquent in September, 816,725 home owners, or 1.62% of those with a mortgage, were considered seriously delinquent, meaning they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...combining these totals, we find a total of 6.33% of homeowners with a mortgage were either late in paying or in foreclosure at the end of September, and 3.08% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...
the Mortgage Monitor (pdf) is a mostly graphics presentation from what was once the Analytics division of Lender Processing Services that covers a variety of mortgage related issues each month...the graph below, from page 6 of the mortgage monitor, shows the percentage of mortgages that were 30 days, 60 days or more than 90 days delinquent for each quarter since the beginning of 2005...seriously delinquent mortgages, or those more than 90 days behind on payments but not yet in foreclosure, are shown in black; those mortgages more than 60 days but less than 90 days late are shown in red, while those mortgages that are just one month behind in payments are shown in blue....you can see that the seriously delinquent mortgages in black continue to fall steadily and as of the 3rd quarter amount to 1.62% of mortgage loans outstanding, down 4.3% from the 2nd quarter down 25.2% from a year ago, and down from nearly 5 1/2% of all mortgages in late 2009....60 day delinquency rates in red, however, have been up each of the past two quarters, but at 0.85% of all mortgages outstanding are still down 11.0% from a year ago...meanwhile, 30 days delinquencies in blue were up 4.7% in the quarter, but are down 5.5% from a year ago, and as BKFS tells us, still below the level of 2005 30 day late loans...
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in a statistical summary from page 14 of the pdf, the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month the past year and for each January shown going back to January 2005….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…this table has been revised from last month's data and now shows the average length of delinquency for those who have been more than 90 days delinquent without foreclosure is now at 510 days, down from 519 in August and down from the April record of 536 days, as some of those who have been delinquent the longest are now transitioning to foreclosure....meanwhile, the average time for those who’ve been in foreclosure without a resolution is also off its record high of 1061 days first reached in last October, but is still nearly three years at 1056 days…
(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)