Author: peter.c.rupert

By Thomas Cooley and Peter Rupert

The BLS announced payroll employment increased 201,000 in August with no real surprises…except 50,000 in downward revisions (-40 for June and -10 for July) that temper the strong report. Total private employment rose 204,000 while the government sector sank by 3,000. The service sector added 178,000 jobs, with 40,700 coming from health care and social assistance.

Average weekly hours remained at 34.5 while average hourly earnings increased from $27.06 in July to $27.16 in August and have increased 2.9% year-over-year. However, the CPI increased nearly 2.9% as well leading to almost no gain in real average hourly earnings over the year. The more comprehensive employment cost index also showed steady growth.

The household survey reveals almost no change in the unemployment rate: from 3.87% in July to 3.85% in August. However, the number employed fell by -423,000, the number unemployed fell by -46,000, leading to a decline in the labor force of -469,000. With population increasing 223,000 means the labor force participation rate fell from 62.9 to 62.7 and the employment to population ratio fell from 60.5 to 60.3.

The labor market remains very tight in the sense that there are now more vacancies than unemployed persons in two regions, the midwest and the south, and about the same number of vacancies as unemployed in the northeast and west.

The Big Picture

While the 201,000 increase was in line with many predictions, the 50,000 downward revision should temper optimism. The decline in participation and the employment to population ratio also added a slight negative spin. It is still a robust labor market with many job openings available.  Importantly, there is nothing in this report that would temper the Fed’s signaled intention to raise interest rates at the next meeting.

By Thomas Cooley and Peter Rupert

Today’s GDP release saw a 0.1 percentage point increase in real gdp to 4.2% for Q2. The change was driven by upward revisions to fixed investment (from 5.4% to 6.2%), inventory investment and government spending (from 2.1% to 2.3%). Downward revisions were seen in PCE (from 4.0% to 3.8%), residential fixed investment (-1.1% to -1.6%), and exports. Imports were also revised down.

The Bigger Picture

Today’s revisions did little to change the course of future policy. Year over year GDP growth has seen a marked trend up since 2016Q2. Whether this robust path will continue is subject to some doubt.  A big contributor to the upward tick was net exports. While it is too early to tell it seems likely that a lot of this will be reversed in the third and fourth quarters given the current volatility of trade policy.

By Thomas Cooley and Peter Rupert

Friday the BEA announced that the advance estimate for Q2 has real GDP increasing 4.1% at an annual rate. This is the largest increase since Q3 of 2014. Personal consumption expenditures (PCE) grew 4.0% after a weak Q1 at 0.52%. Moreover, PCE was the largest contributor to the growth at 2.69 percentage points. Note that the annual GDP revisions included a rebasing of the “real” GDP figures to a reference year of 2012 instead of 2009.

Private fixed investment was up 5.4% after increasing 8.0% in Q1. Real non-residential investment in structures grew 13.3% and residential fell, -1.1%. Since 1999 the changes in non-residential investment are uncorrelated with residential investment.

Exports were up 9.3% and imports 0.5% leading to a change in net exports of $52.4 bln.

The quarterly PCE chain-type price index increased 1.8% at an annual rate and ex-food and energy at 2.0%.

The BEA released personal income this morning with a 0.3% increase over the month in real terms after a weak April (0.1%) and May (0.2%).

The Bigger Picture

Although there were some downward revisions to the last three quarters of 2017 the strength of this report, in both output and prices, along with the strong June employment report, should not change the course of expected Fed rate hikes in their September and December deliberations. However, will we see some momentum to raise rates this week given that many expect Q3 growth to come in over 3%? Many observers think the Fed is now a bit behind the curve with price increases beginning to have some bite throughout the economy.

By Thomas Cooley and Peter Rupert

The BLS announced that total nonfarm employment increased by 213,000 in June with 202,000 of that from the private sector. Early forecasts were in the 195k range. In addition, April employment was revised up 16,000 and May 21,000. The only large decline occurred in retail trade, shedding 21,600 jobs. Since January, 2008, employment is about 9% higher and services has increased about 12%. Construction employment losses after 2008 were large and is now nearly back to the 2008 level. 

Average hours of work remained at 34.5 and average hourly earnings increased from $26.93 in May to $26.98 in June and up 2.74% since June of last year. In real terms, using the CPI, wages have not risen over the previous year as the CPI also increased about 2.7% since June of 2017.

The household survey showed that the employment to population ratio remained at 60.4, the labor force participation rate increased from 62.7 to 62.9, and the unemployment rate rose slightly to 4.05%.

The BLS also announced the newest Job Opening and Labor Turnover Survey, showing the level of vacancies fell slightly, from a revised 6.8 million to 6.6 million. Moreover, in nearly all regions the number of vacancies is about the same as the number of unemployed persons…although in the Midwest there are 326,000 more vacancies than unemployed persons.

By Thomas Cooley and Peter Rupert

The BEA’s 2nd estimate of Q1 GDP shaved off 0.1 percentage points to a now revised growth rate of 2.2% at a seasonally adjusted annualized rate.  Personal consumption expenditures were quite weak, revised down from 1.1% to 1.0% , the lowest reading since 2013 Q2. The change also resulted from downward revisions to private inventory investment, residential fixed investment (revised from 0.0% to -2.0%), and exports, but partly offset by an upward revision to non-residential fixed investment (from 6.1% to 9.2%).

May Employment Report

Today’s employment report from the BLS revealed continued strength in the labor market with an increase of 223,000 jobs, of which 218,000  were in the private sector. The only significant declines were found in motor vehicles and parts, down 4,400 and temporary help services, down 7,800.

Average weekly hours remained at 34.5 for the fourth month in a row. Average hourly pay increased from $26.84 to $26.92.

The household survey also showed continued strength with the number of unemployed persons falling by 281,000 leading to a further decline in the unemployment rate from 3.93% to 3.75%…the lowest since 1969!

The week ended on a high note with both the GDP and employment reports showing continued strength. Have a nice weekend!