Archive for December, 2013

November Employment Situation

Thursday, December 19th, 2013

Employment data continued to improve in November according to the Bureau of Labor Statistics. The economy created 203,000 jobs for the month. This is an improvement over October’s increase of 200,000, which was revised down slightly. The unemployment rate fell to the lowest level since November 2008 and is now 7.0 percent.

The majority of the newly employed found work in the private sector. The service sector added 152,000 new workers while the goods producing portion of the economy added 44,000. The governments added just 7,000 of the new hires to the total; state and local governments added 14,000 new employees while the federal government continued to shed workers. In the last year, federal government employment has declined by 92,000.

Hours worked and average hourly earnings improved. The average work week ticked up by 6 minutes, and the earnings per hour grew by 0.2 percent. The increased number of hours worked and the increased pay should find their way into consumption shortly.

The pace of job creation has been relatively healthy for an extended period of time while the percent of Americans in the labor force continues to trend lower even after a slight improvement in November. In each of the last 13 months, the economy’s six-month moving average of net new hires has exceeded 150,000; during the same period, the labor force participation has declined. Because of the directions of these two measures, America’s unemployment rate has fallen. This combination of trends seems likely to continue as the country’s demographics collide with the recovering labor market. It is not hard to imagine the unemployment rate continuing to decline even as the economic expansion continues to be tepid. (by C. Cox)

November Federal Deficit

Wednesday, December 18th, 2013

The Treasury Department reports our nation’s budget deficit showed improvement of a sort in November. While overspending by $135 billion in the month, this still is a 21% drop from the overage rung up this month last year. That makes November the second consecutive month in this fiscal year to show a decline. And since this fiscal year began just two months ago, it also represents a surprising improvement.

How did it happen? The government collected $182 billion in November, a total revenue increase of 13%, aided by a strong 14% jump in individual withholdings taxes, a reflection of higher rates taking hold combined with a gradually strengthening economy. On the other hand, spending fell 5% to $318 billion, driven primarily by a 12% decline in defense program spending.

According to a Treasury official, the U.S. typically runs a deficit in November, so the monthly shortfall is no surprise. While the fact that the combined deficit for the first two months of this fiscal year is a mere $227 billion might give one pause, it represents a 22% decline from this same time last year.

Are things getting better? Obviously it is too early to tell but there are some signs worth noting. The deficit has been improving, now hitting its lowest level in five years. It is trending below last year’s overage and last year’s deficit, at $680 billion total, was substantially below the trillion dollar mark for the first time in Mr. Obama’s presidency. Further, it appears there is finally a budget deal on the table. This could, in turn, reduce some of the uncertainty afflicting business decisions, leading to a more robust economic recovery in 2014. Let’s hope so. (by J R)

October New Home Sales

Tuesday, December 17th, 2013

Statistics on new home sales became a victim of the government shut down. The report, put out by the Census Bureau, delayed September’s information until the moment October’s data was released. September’s numbers were dismal, so the delay may have been for constructive since there was no time to dwell on the sour tally.

October’s pace jumped to 444,000 units on a seasonally adjusted annualized basis. This compares to September’s count of 354,000. The 90,000 unit increase makes October the best month since June. Year-over-year, the pace has improved by 21.6 percent. Year-to-date, the number of new homes sold is 15.8 percent higher than at the same time last year. Prices may have helped sales as the median home price fell in both months. The middle priced home was $257,400 and $245,800 in September and October respectively, falling from August’s revised tally of $258,600.

Supply changed dramatically over the two months. September had a supply of 6.4 months, following August’s inventory of 5.6 months. October dropped considerably to 4.9 months because of the increase in the pace of sales for the month. The estimate of actual homes for sale jumped 14,000 in September to 193,000 and fell to 187,000 in October.

Some of the movements in this report seem rather large. Atlas would like to see additional information in the months ahead before suggesting the number of transactions in this market are improving as rapidly as the latest tally might lead one to believe. The housing market is important for many reasons, jobs being one of them. If inventories are growing and the number of sales is doing the same, it should translate into job gains in one of the hardest hit portions of the labor market. Future reports from the Census Bureau should help shed some light on this matter. (by C. Cox)

November Institute for Supply Management

Monday, December 16th, 2013

The economy continued to grow in November according to the tallies released by the Institute for Supply Management (ISM). The rate of expansion for the manufacturing side appears to have picked up some in the month while the service portion of the economy seems to have grown at a slower pace. Overall, the data from the ISM suggests America’s expansion is firmly in place.

Manufacturing has improved for 54 consecutive months. Recently, the pace of improvement has been gaining steam. Since June, each month’s reading has been better than the prior, indicating acceleration in the goods segment of our economy. The current reading of 57.3 (up 0.9 from October) is the highest count in 2 ½ years. New orders jumped to 63.3 from 60.3 and also put in the highest reading in 2 ½ years. Manufacturing firms have a healthy backlog, with a reading of 54.0. In order to work through the accumulation of orders, firms will likely need to add workers or capital. Of the 18 industries included in the manufacturing survey, 15 reported growth in November.

Nonmanufacturing continued to expand, but its rate of change slowed from the prior period. The downtick to 53.9 from 55.4 came from slowing business activity and employment. Both categories expanded but did so at a slower pace. Fortunately, new orders ticked higher which should translate to higher business activity in the weeks ahead.

Both sides of the economy are moving forward. The strength seen in these two indicators is very encouraging because there was a lot of uncertainty about the intermediate impact of the Federal Government’s shutdown. According to ISM measures, the impact may prove to be imperceptible. (by C. Cox)

November Consumer Sentiment

Friday, December 13th, 2013

The University of Michigan reported Consumer Sentiment experienced a respectable jump from October’s 73.2 level to 75.1 in November. While this appears to be good news on the surface, there are three major components that make up this report, and they had a mixed showing.

The first, current conditions, actually fell from 89.9 in the prior month to 88.0, seen generally as just slightly softer. The confusing situation in Washington D.C. likely continued to play at least a minor role in that weakness.

Expectations, the second component, showed strength, growing from 62.5 at October’s end to 66.8 as November closed. This may demonstrate to some extent how quickly attitudes can recover when our government actually does something, even if it is just a short-term patch.

Inflation expectations, the final ingredient, held a steady outlook at 2.9% for both a one and five year time frame.

What we take away from this report here at Atlas is that sentiment is a mild positive (at best) and that expectations for robust holiday sales and/or an improving employment picture are not deeply rooted. We can only hope that the current muddle-through economy maintains a slight upward bias in its struggle toward full recovery. (by J R)

October Leading Economic Indicators

Thursday, December 12th, 2013

According to the Conference Board, their Index of Leading Economic Indicators (LEI) rose 0.2% in October. We warned in last month’s piece on this report that the temporary government shutdown would likely cause the October figure trouble as its unemployment component suffered some instability and such proved to be the case. Perhaps hand in glove was weakness seen in consumer expectations which also tugged the total down a bit. Still, the monthly number remained positive and a 0.2 upward revision to September (now +0.9%) added some oomph as well.

This index has ten components. The two which ran negative in October are highlighted above. The remaining eight more than made up the difference, resulting in another positive month that brings the total up to 97.5, the highest level seen since April, 2008.

While the preponderance of sub-components suggesting continued improvement in our economy is encouraging, some red clouds hover in the morning sky. Unemployment remains surprisingly intractable. And importantly, fiscal uncertainty and the upcoming budget battle in Washington continue to place a bit of drag on corporate expansion. Unfortunately, how these issues will ultimately affect this specific indicator will not be known for another couple of months or so. (by J R)

October Chicago Fed National Activity Index

Wednesday, December 11th, 2013

The Federal Reserve Bank of Chicago’s National Activity Index (CFNAI) slipped in October. The reading dropped to -0.18 from an upwardly revised 0.18 in the prior period (the initial count was 0.14). While negative, a reading this close to zero only suggests the economy moved slower than its historical trend for the month.

Three of the four broad categories decreased from September’s tally. The lone positive offering came from the sales, orders and inventory portion of the economy, but even this contribution was less positive than a month earlier. Production was down in the month, but this was probably influenced largely by the industrial production figure, and Tropical Storm Karen in the Gulf of Mexico was mostly to blame for its poor performance in October. The consumption and housing category was less negative in the period. Finally, employment fell to -0.5 after being positive in September.

The one month tally in this indicator can be volatile, so Atlas pays attention to the three-month moving average as a gauge of the economy’s overall health relative to our nation’s historic trend. This improved and turned positive for the first month since February 2013. This reading of 0.06 does not suggest a red hot economy, but it points to growing output nonetheless.

Like many indicators, CNFAI illustrated growth in America but did not flash signs of price pressures. Inflation becomes a concern in this indicator when the three month average is above 0.7 after two years of economic expansion. The current cyclical upswing is now older than two years, but there appears to be room for acceleration without inflation becoming a problem. (by C. Cox)