June 1, 2018

April 2018 Construction Spending: Up 1.8 Percent Over March; Raw April Figure 8.3 Percent Greater Than April 2017

Filed under: Economy,Taxes & Government — Tom @ 10:35 am

From the Census Bureau:

Construction spending during April 2018 was estimated at a seasonally adjusted annual rate of $1,310.4 billion, 1.8 percent (±1.0 percent) above the revised March estimate of $1,286.8 billion. The April figure is 7.6 percent (±1.5 percent) above the April 2017 estimate of $1,217.7 billion. During the first four months of this year, construction spending amounted to $387.0 billion, 6.6 percent (±1.2 percent) above the $363.1 billion for the same period in 2017

6 to 8 percent 12-month increases are very solid.

April’s raw (not seasonally adjusted) construction figure of $106.736 billion was 8.3 percent higher than April 2017′s $98.545 billion.

Two of this year’s first three months have sharp upward revisions to initial estimates:

  • January started out at an annualized $1,262.8 billion. Now it’s $1,294.0 billion, or 2.5 percent higher.
  • February started out at $1,273.1 billion. Now it’s $1,309.2 billion, or 2.8 percent higher.
  • March was $1,284.7. Today it came in at a slightly higher $1,286.8 billion.

Since the much of the revising of previous months’ figures has occurred in the second or later months following the initial estimates, the book is certainly not closed on March, and obviously not April.

May 2018 ISM Manufacturing: 58.7 Percent, Up from April’s 57.3 Percent (UPDATE: Markit PMI Is Also Strong)

Filed under: Economy — Tom @ 9:59 am

Predictions: FXStreet.com has a consensus prediction of 58.2 percent, up from April’s 57.3 percent.

The report will be here at 10 a.m.

HERE IT IS: A bit of a beat (bolds and most paragraph breaks are mine) —

Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 109th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The May PMI® registered 58.7 percent, an increase of 1.4 percentage points from the April reading of 57.3 percent.

The New Orders Index registered 63.7 percent, an increase of 2.5 percentage points from the April reading of 61.2 percent. The Production Index registered 61.5 percent, a 4.3 percentage point increase compared to the April reading of 57.2 percent.

The Employment Index registered 56.3 percent, an increase of 2.1 percentage points from the April reading of 54.2 percent. The Supplier Deliveries Index registered 62 percent, a 0.9 percentage point increase from the April reading of 61.1 percent.

The Inventories Index registered 50.2 percent, a decrease of 2.7 percentage points from the April reading of 52.9 percent. The Prices Index registered 79.5 percent in May, a 0.2 percentage point increase from the April reading of 79.3 percent, indicating higher raw materials prices for the 27th consecutive month.

“Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 or above for the 13th straight month, and the Customers’ Inventories Index remaining at very low levels.

The Backlog of Orders Index continued expanding, with its highest reading since April 2004, when it registered 66.5 percent. Consumption, described as production and employment, continues to expand in spite of labor and skill shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion declines, due primarily to inventory reductions likely caused by supplier performance issues. Lead-time extensions, steel and aluminum disruptions, supplier labor issues, and transportation difficulties continue. Export orders expanded at slower rates.

The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents say price pressure at their companies is causing price-increase discussions as we prepare to enter H2.

Of the 18 manufacturing industries, 16 reported growth in May, in the following order: Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Transportation Equipment; Paper Products; and Primary Metals. No industry reported a decrease in PMI® in May compared to April.

The increases in New Orders and Production well into the 60s are a bit on the hot side. If sustained, there will be inflation (as seen in the very high Prices Index), or at least inflationary fears, and the Fed will be tempted to raise interest rates faster. My take is that rates need to be raised, but not too quickly.

The Backlog of Orders figure of 63.5 percent is the highest I’ve seen in 13 years of blogging. A very positive backlog figure is good news, because it helps manufacturers plan better. But a figure as high as May’s, if sustained, may lead to concerns about responsiveness, extended lead times, and bottlenecks.

To be clear, these are all relatively nice problems to have, but they bear watching.


UPDATE, 4:45 p.m.: Markit’s index dipped a tiny bit (HT Zero Hedge), but was strong, as shown in the accompanying narrative —

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 56.4 in May, down fractionally from 56.5 in April. The reading marked the second strongest improvement in the health of the sector since September 2014. The upturn was largely driven by sharp increases in production and new business. The greatest lengthening in supplier delivery times since the series began in October 2009 also contributed to the headline figure.

… Reflective of stronger demand conditions, new orders increased sharply in May. Moreover, the rate of growth was the second-fastest since September 2014 (after April 2018). Alongside the acquisition of new clients, panellists also noted that customers were demonstrating a greater propensity to spend. In contrast, new export orders increased only marginally.

As the rate of new business growth continued to outstrip that of output, backlogs rose again in May, increasing at the fastest rate in over two-and-a-half years. As a result, firms added to their payrolls again, with the rate of job creation picking up slightly during the month though failing to match the highs seen earlier in the year.

Meanwhile, price pressures remained elevated.

May 2018 Employment Situation Summary (060118): 223K SA Payroll Jobs Added, Raw Results 75K Stronger; Unemployment Rate Drops to 3.8 Percent; Black Unemployment Plunges Below 6 Pct. For First Time in History; Asian Unemployment Hits Record Low 2.1 Pct.; Hourly Pay Up a Decent 8 Cents

Filed under: Economy,Taxes & Government — Tom @ 8:22 am


  • Associated Press — 190,000 payroll jobs added, unemployment rate remaining at 3.9 percent.
  • Bloomberg — Same (scroll down to after the article at link).
  • Zero Hedge says “It’s finally time for a solid beat.” We’ll see. Its posted expectation is 188,000 payroll job additions and a 3.9 percent unemployment rate.

Not seasonally adjusted figures: I’ll have to evaluate them after the report is released. May is a big month for actual job adds, so big raw numbers are needed.

What to hope for:

  • People coming in off the sidelines, which might even push the unemployment rate up a bit.
  • A long-overdue pickup in average hours worked (full-time jobs have accounted for more than 100 Household Survey job additions since the end of 2016 (that’s because part-time jobs have contracted slightly, so the average work week should be increasing, and hasn’t done so meaningfully).
  • An hourly wage pickup of 8 cents or more.

The report will be here at 8:30 (permanent link with all tables will be here).

HERE IT IS: A pretty decent beat on jobs, with pretty small upward prior-month revisions, and the unemployment rate dropped —

Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate edged down to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several industries, including retail trade, health care, and construction.

Household Survey Data

The unemployment rate edged down to 3.8 percent in May, and the number of unemployed persons declined to 6.1 million. Over the year, the unemployment rate was down by 0.5 percentage point, and the number of unemployed persons declined by 772,000.

Among the major worker groups, the unemployment rates for adult men (3.5 percent), Blacks (5.9 percent), and Asians (2.1 percent) decreased in May. The jobless rates for adult women (3.3 percent), teenagers (12.8 percent), Whites (3.5 percent), and Hispanics (4.9 percent) changed little over the month.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.2 million in May and accounted for 19.4 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has declined by 476,000.

Both the labor force participation rate, at 62.7 percent, and the employment-population ratio, at 60.4 percent, changed little in May.

Establishment Survey Data

Total nonfarm payroll employment increased by 223,000 in May, compared with an average monthly gain of 191,000 over the prior 12 months. Over the month, employment continued to trend up in several industries, including retail trade, health care, and construction.

In May, retail trade added 31,000 jobs, with gains occurring in general merchandise stores (+13,000) and in building material and garden supply stores (+6,000). Over the year, retail trade has added 125,000 jobs.

Employment in health care rose by 29,000 in May, about in line with the average monthly gain over the prior 12 months. Ambulatory health care services added 18,000 jobs over the month, and employment in hospitals continued to trend up (+6,000).

Employment in construction continued on an upward trend in May (+25,000) and has risen by 286,000 over the past 12 months. Within the industry, nonresidential specialty trade contractors added 15,000 jobs over the month.

Employment in professional and technical services continued to trend up in May (+23,000) and has risen by 206,000 over the year.

Transportation and warehousing added 19,000 jobs over the month and 156,000 over the year. In May, job gains occurred in warehousing and storage (+7,000) and in couriers and messengers (+5,000).

Manufacturing employment continued to expand over the month (+18,000). Durable goods accounted for most of the change, including an increase of 6,000 jobs in machinery. Manufacturing employment has risen by 259,000 over the year, with about three-fourths of the growth in durable goods industries.

Mining added 6,000 jobs in May. Since a recent low point in October 2016, employment in mining has grown by 91,000, with support activities for mining accounting for nearly all of the increase.

In May, employment changed little in other major industries, including wholesale trade, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in May. In manufacturing, the workweek decreased by 0.2 hour to 40.8 hours, and overtime edged down by 0.2 hour to 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.59 in May.

The change in total nonfarm payroll employment for March was revised up from +135,000 to +155,000, and the change for April was revised down from +164,000 to +159,000. With these revisions, employment gains in March and April combined were 15,000 more than previously reported. … After revisions, job gains have averaged 179,000 over the last 3 months.

Not Seasonally Adjusted Analysis:

The seasonally adjusted results understate the relative strength of today’s result compared to the seasonal adjustments of the past four years by about 75,000:


If I’d have had the chance ahead of time, I would have benchmarked 975,000 total nonfarm jobs and 1.025 million private-sector jobs. The figures seen above fell short, but only by 30,000 or so.

Nonetheless, today’s beat is bigger than the seasonally adjusted numbers would indicate. A result genuinely reflecting the past four years’ seasonal conversions would have been at or close to 300,000.


UPDATE (references are to seasonally adjusted data unless otherwise indicated):

  • The civilian labor force barely budge (up 12K), and the participation rate didn’t change meaningfully. Household Survey employment increased by 294K. Not in Labor Force is just shy of 96 million.
  • Both the black and Asian unemployment rates dropped by 0.7 points to 5.9 percent and 2.1 percent, respectively. Black unemployment never fell below 7.0 percent (a figure seen only once, in April 2000) until December 2017. Now it’s below 6.0 percent. It has fallen two percentage points in just 13 months.
  • I know these particular figures swing wildly from month to month, but it’s hard to ignore how full-time employment jumped by 904K, while part-time workers fell by 625K. Looking at a longer period, the economy has added 4.356 million full-time jobs in the past 17 months, while part-timers have fallen by 1.007 million. Yet the average work week has increased by only 0.1 hours during that same period, despite that significant change in the FT/PT mix. My back-of-napkin estimates indicate that this doesn’t compute.
  • The fully-loaded U-6 unemployment rate dropped to 7.6 percent. That’s the lowest figure since May 2001.
  • Goods-producing job additions have averaged 50K per month for the past 12 months, including 259K in manufacturing. Not bad for jobs that Donald Trump’s predecessor Barack Obama said were never coming back. (UPDATE: Rush Limbaugh made this very point on his Friday afternoon program.)
  • The 8 cents per hour wage pickup is where it should be, but that’s what needs to be sustained on average for 12 months to generate a full-year increase of 3.5 percent, which (assuming inflation stays relatively low) is the benchmark to shoot for.

Overall, this was a very strong report, and is really a strong beat considering the raw numbers. We need more of this.

Unfortunately — though it wasn’t a presumptively positive message — President Trump tweeted that he was “Looking forward to seeing the employment numbers at 8:30 this morning.” He should have stuck with protocol and remained silent.

So the press will likely try to make the news about him supposedly telegraphing a strong report. A failure to exercise proper restraint in these and other matters could burn him badly some day. His presidency is a high-wire act like no other.

Friday Off-Topic (Moderated) Open Thread (060118)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

Positivity: Mom Battling Cancer Refuses Abortion to Give Birth to Healthy Baby

Filed under: Life-Based News,Positivity — Tom @ 5:55 am

From Leawood, Kansas:

MAY 25, 2018, 9:32AM

If Stacey Johnson had listened to her first doctor, her son William would not be alive today.

Diagnosed with breast cancer while she was pregnant, the Leawood, Kansas mother was told to consider aborting her unborn son, CNN reports. Instead, she got a second opinion.

Johnson, a nurse, said she found a lump in her breast not long after discovering she was pregnant. She was diagnosed with breast cancer and, at 11 weeks of pregnancy, was asked to consider having an abortion before beginning chemotherapy, according to the report.

Then, she went to a second doctor, breast oncologist Dr. Lauren Nye with the University of Kansas Health System, who renewed her hope for her and her unborn son.

“So then I met her and we talked about her options which none of them included terminating her pregnancy,” Nye said.

While pregnant, Johnson went through a mastectomy and chemotherapy. And in the late spring of 2017, she gave birth to her son William, who was born healthy, the report states. Next week, the family will celebrate William’s 1st birthday.

“Everyone I saw was so complimentary, like ‘How did you get through it?’ or ‘How did you do it?’” Johnson said. Her answer to them was “because I had someone else’s life to think about.” …

Go here for the rest of the story.