The economy added 132k (consensus 125k) new jobs in June. May's figure was revised substantially higher to +190k from +157k originally reported. April payrolls were also revised higher to +122k from 80k. Net over the prior two months 75k more new jobs were created than originally thought. The unemployment rate held steady at 4.5% in June as the labor force participation rate rose slightly to 66.1%. The aggregate hours index rose +.5% MoM.
Average hourly earnings rose +.3% MoM, as expected. Over the past year, average hourly earnings have risen 3.9% YoY. This compares with a 4% gain in May, which was a revision higher from +3.8% YoY gain originally reported for May. Average weekly hours were as expected at 33.9 hours, but the figure for May was revised lower to 33.8 hours from the 33.9 hours originally reported.
Manufacturing payrolls fell more than expected in June (-18k, consensus -11k) but were offset by a revision in the May figures to only a 7k loss versus -19k. Manufacturing hours jumped by .2 hours to 41.3 hours per week, an increase of +.5%MoM. Overtime rose to 4.3 hours from 4.2 hours.
As expected, service jobs continue to be the main growth category, expanding at +135k in June following a gain of 199k in May. Retail jobs though fell by 24k in June, and temporary jobs declined by -8k. Despite weakness in the housing market, construction employment rose 12k, after falling 2k in May. Government jobs saw the largest increase since last September, rising +40k. Education/health/leisure/hospitality jobs all saw healthy gains in June, but remain near their three month trend growth levels.
Interest rates rose in reaction to the increase in jobs, higher wages, longer workweeks, and the unemployment rate hovering near a six year low. The yield on the 10y Treasury has risen 5bp since last night's close.
Friday, July 6, 2007
Thursday, July 5, 2007
Non-Manufacturing ISM Stronger Than Expected
In June, non-manufacturing ISM rose to 60.7 (consensus 58), an increase from the prior month's rebound to 59.7. This puts the non-manufacturing ISM at its highest level since April 2006. Non-manufacturing activity has now expanded for over 50 straight months.
All 14 business categories recorded growth in June, but the pace of growth is slower than in May, based on the fact that both new orders (56.9) decreased in May. Prices (65.5), though softer, are still at a high level, and suggests inflation remains a concern. Inventories fell a tremendous 8.5 points to 52.5. New export orders also showed a decline of -7 points to 59, indicating most of the strength was domestic.
Non-manufacturing ISM focuses on the service sector of the economy, which is the fastest growing area. This survey is based on responses to a survey of purchasing and supply executives about their businesses. Strength in services should support employment growth tomorrow as the service sector has been the major creator of new jobs recently. Employment held recent gains to remain relatively steady at 55.
Based on the comments, it appears that business is generally stable, and better than last month, but still depressed versus a year ago. The components don't seem to show the strength of the headline figure.
All 14 business categories recorded growth in June, but the pace of growth is slower than in May, based on the fact that both new orders (56.9) decreased in May. Prices (65.5), though softer, are still at a high level, and suggests inflation remains a concern. Inventories fell a tremendous 8.5 points to 52.5. New export orders also showed a decline of -7 points to 59, indicating most of the strength was domestic.
Non-manufacturing ISM focuses on the service sector of the economy, which is the fastest growing area. This survey is based on responses to a survey of purchasing and supply executives about their businesses. Strength in services should support employment growth tomorrow as the service sector has been the major creator of new jobs recently. Employment held recent gains to remain relatively steady at 55.
Based on the comments, it appears that business is generally stable, and better than last month, but still depressed versus a year ago. The components don't seem to show the strength of the headline figure.
Friday, June 29, 2007
Economic Calendar - July 2 – 6, 2007
Consensus Prior
Monday, 7/2
June Manufacturing ISM 55 55
Prices Paid 69 71
May’s level highest in past year
New orders at 1.25 year high as inventory correction subsides
Regional reports have displayed strength (Empire, Philly, Richmond)
Durable goods orders were broadly weaker in May, falling -2.8% MoM
Tuesday, 7/3
May Pending Home Sales MoM +.6% -3.2%
Over the past two months, pending home sales have fallen -7.6%
Index at a four year low
Demand remains weak as interest rates rise, credit tightens, and home prices soften
May Factory Orders MoM -.8% +.3%
Expected to weaken less than durable goods
June Total Vehicle Sales 16.4M 16.2M
Domestic Vehicle Sales 12.4M 12.3M
Wednesday, 7/4
U.S. Markets Closed for Independence Day
Thursday, 7/5
June ADP Employment Change 103k 97k
Need to mentally add 15-20k government jobs to equal payrolls estimate
Initial Jobless Claims 315k 313k
Continuing Claims 2490k
June ISM Non-Manufacturing 57.7 59.7
Expected to ease back from May’s one year high
Real GDP has tended to grow around 3% when non-manu ISM at 57
Non-manufacturing ISM’s pricing index has correlated well with CPI
Friday, 7/6
June Change in Non-Farm Payrolls 120k 157k
Change Manufacturing Payrolls -13k -19k
Expected to soften below last month’s level and the 6m average of 148k
Though initial claims spiked the week of the survey, they have been relatively low, but up an average 9k versus May
Jobs plentiful survey at 2007 low, plus signs layoffs are rising
Growth should be dominated by service jobs again
June Unemployment Rate 4.5% 4.5%
Labor market remains tight
Labor supply growing around 140k a month
Unemployment rate has ranged between 4.4-4.6% for last nine months
June Average Hourly Earnings MoM +.3% +.3%
YoY +3.8%
Year-over-year rate expected to slow to +3.7% - peaked at 4.3% in Dec
Index of aggregate hours worked expected to be unchanged
June Average Weekly Hours 33.9 33.9
San Francisco Fed President Yellen speaks on “Capital Flows and Asset Prices: The International Dimension of Risk”
Monday, 7/2
June Manufacturing ISM 55 55
Prices Paid 69 71
May’s level highest in past year
New orders at 1.25 year high as inventory correction subsides
Regional reports have displayed strength (Empire, Philly, Richmond)
Durable goods orders were broadly weaker in May, falling -2.8% MoM
Tuesday, 7/3
May Pending Home Sales MoM +.6% -3.2%
Over the past two months, pending home sales have fallen -7.6%
Index at a four year low
Demand remains weak as interest rates rise, credit tightens, and home prices soften
May Factory Orders MoM -.8% +.3%
Expected to weaken less than durable goods
June Total Vehicle Sales 16.4M 16.2M
Domestic Vehicle Sales 12.4M 12.3M
Wednesday, 7/4
U.S. Markets Closed for Independence Day
Thursday, 7/5
June ADP Employment Change 103k 97k
Need to mentally add 15-20k government jobs to equal payrolls estimate
Initial Jobless Claims 315k 313k
Continuing Claims 2490k
June ISM Non-Manufacturing 57.7 59.7
Expected to ease back from May’s one year high
Real GDP has tended to grow around 3% when non-manu ISM at 57
Non-manufacturing ISM’s pricing index has correlated well with CPI
Friday, 7/6
June Change in Non-Farm Payrolls 120k 157k
Change Manufacturing Payrolls -13k -19k
Expected to soften below last month’s level and the 6m average of 148k
Though initial claims spiked the week of the survey, they have been relatively low, but up an average 9k versus May
Jobs plentiful survey at 2007 low, plus signs layoffs are rising
Growth should be dominated by service jobs again
June Unemployment Rate 4.5% 4.5%
Labor market remains tight
Labor supply growing around 140k a month
Unemployment rate has ranged between 4.4-4.6% for last nine months
June Average Hourly Earnings MoM +.3% +.3%
YoY +3.8%
Year-over-year rate expected to slow to +3.7% - peaked at 4.3% in Dec
Index of aggregate hours worked expected to be unchanged
June Average Weekly Hours 33.9 33.9
San Francisco Fed President Yellen speaks on “Capital Flows and Asset Prices: The International Dimension of Risk”
Michigan Confidence Survey
The final University of Michigan Confidence Survey for June strengthened from the preliminary estimate, but still sits at a ten month low of 85.3 (preliminary 83.7, May 88.3). It is believed that falling home prices and rising mortgage rates, combined with high gas prices are dampening optimism, and raises concerns that consumers will reduce spending further.
Current conditions rose to 101.9, down from 105.1 in May. Expectations for the next six month fell to 74.7 in June versus 77.6 in May.
Inflation expectations remain elevated. The one year outlook is at 3.4%, at the highest level for this year, and up from 2.9% in December. The five year inflation expectation is at 2.9% in June, versus 3.1% in May.
Current conditions rose to 101.9, down from 105.1 in May. Expectations for the next six month fell to 74.7 in June versus 77.6 in May.
Inflation expectations remain elevated. The one year outlook is at 3.4%, at the highest level for this year, and up from 2.9% in December. The five year inflation expectation is at 2.9% in June, versus 3.1% in May.
Chicago Purchasing Managers Survey Holds Near 2 Year High
June Chicago Purchasing Manager survey coming in at 60.2 (consensus 58) in June, down only marginally from the rise to 61.7 in May. Any reading greater than 50 indicates growth. The Chicago survey includes U.S. and international operations, so is more broad based than other surveys, and members do not have to be located in the Midwest.
Prices paid eased back to 68.1 from a high of 70.2 in May. Almost all of the subcomponents eased from their May levels, except for inventory levels, which rose to 55.9. Every category though is running above its six month average, as corporate spending re-emerges following the inventory reductions seen earlier this year.
Prices paid eased back to 68.1 from a high of 70.2 in May. Almost all of the subcomponents eased from their May levels, except for inventory levels, which rose to 55.9. Every category though is running above its six month average, as corporate spending re-emerges following the inventory reductions seen earlier this year.
Surprise Jump in Construction Spending - Highest Monthly Gain in a Year
Construction spending in May unexpectedly rose +.9% MoM (consensus +.1%). This was the largest monthly gain since March 2006. In addition, last month's figure was revised higher to +.2% MoM from +.1%. All of the gain was in non-residential construction. Every category gained except residential.
Non-residential construction grew 2.5% MoM in May, and is up +15% YoY. Construction of hospitals and highways pushed up public building by +2.2% MoM. Private non-residential rose +2.7%, driven by factory and utility demand.
Homebuilding remains sluggish, falling -.8% MoM (-17.3% YoY). Within the residential category, private growth fell -.8% MoM (-17.6% YoY), but public projects rose +4.2% MoM (+13.5% YoY).
Federal construction grew twice as fast at state and local in May at 4.1% versus 2.1%, but over the last year state and local has led the charge, growing by +11.5% YoY versus Federal growth of +8% YoY.
Non-residential construction grew 2.5% MoM in May, and is up +15% YoY. Construction of hospitals and highways pushed up public building by +2.2% MoM. Private non-residential rose +2.7%, driven by factory and utility demand.
Homebuilding remains sluggish, falling -.8% MoM (-17.3% YoY). Within the residential category, private growth fell -.8% MoM (-17.6% YoY), but public projects rose +4.2% MoM (+13.5% YoY).
Federal construction grew twice as fast at state and local in May at 4.1% versus 2.1%, but over the last year state and local has led the charge, growing by +11.5% YoY versus Federal growth of +8% YoY.
Core PCE falls to +1.9% YoY
Personal spending continues to rise fast than personal income, but both grew more slowly than expected in May. Inflation indicators came in right at expectations with core PCE falling to 1.9% YoY.
Personal income rose +.4% MoM (consensus +.6%), with last month's figure being revised lower to -.2% MoM from -.1%. Compensation, wages & salaries, and disposable incomes all rose +.4% MoM in May.
Personal spending rose +.5% MoM (consensus +.7%), consistent with the +.5% MoM gain in April. Spending rose only +.1% MoM when adjusted for inflation, a slowdown from the +.2% MoM gain the prior month. Demand for durable goods rebounded in May, rising +.6% MoM after falling -.4% MoM the prior month. Non-durable goods also saw a rebound with demand rising +.2% MoM after declining -.2% in April. Unfortunately the gains in goods were offset by a decline in service demand, which accounts for 60% of the economy. Spending on services fell -.1% MoM in May after rising +.6% in April. Consumer spending accounts for about 70% of GDP, and it has been hurt recently by rising gasoline prices and higher interest rates. The slowdown in consumer consumption will have a negative impact on GDP growth.
The savings rate continues to degenerate, to a negative -1.4%, as consumers continue to spend more than they earn to maintain their standard of living. The savings rate was only -.4% in March.
Core PCE, considered the Fed's preferred inflation measure, rose at the slowest pace in over three years, since March 2004. The 1.9% YoY pace of core PCE growth brings the measure back into the perceived Fed comfort range of 1-2%. On a monthly basis, core PCE, which excludes food and energy, rose a trend like +.1% MoM. Headline inflation though rose to +2.3% YoY from +2.2% the prior month. Yesterday the Fed indicated that they will need to see inflation stabilizing at lower levels before they declare success in containing inflation.
Ten year Treasury yields have declined following this report, falling almost 3bps.
Personal income rose +.4% MoM (consensus +.6%), with last month's figure being revised lower to -.2% MoM from -.1%. Compensation, wages & salaries, and disposable incomes all rose +.4% MoM in May.
Personal spending rose +.5% MoM (consensus +.7%), consistent with the +.5% MoM gain in April. Spending rose only +.1% MoM when adjusted for inflation, a slowdown from the +.2% MoM gain the prior month. Demand for durable goods rebounded in May, rising +.6% MoM after falling -.4% MoM the prior month. Non-durable goods also saw a rebound with demand rising +.2% MoM after declining -.2% in April. Unfortunately the gains in goods were offset by a decline in service demand, which accounts for 60% of the economy. Spending on services fell -.1% MoM in May after rising +.6% in April. Consumer spending accounts for about 70% of GDP, and it has been hurt recently by rising gasoline prices and higher interest rates. The slowdown in consumer consumption will have a negative impact on GDP growth.
The savings rate continues to degenerate, to a negative -1.4%, as consumers continue to spend more than they earn to maintain their standard of living. The savings rate was only -.4% in March.
Core PCE, considered the Fed's preferred inflation measure, rose at the slowest pace in over three years, since March 2004. The 1.9% YoY pace of core PCE growth brings the measure back into the perceived Fed comfort range of 1-2%. On a monthly basis, core PCE, which excludes food and energy, rose a trend like +.1% MoM. Headline inflation though rose to +2.3% YoY from +2.2% the prior month. Yesterday the Fed indicated that they will need to see inflation stabilizing at lower levels before they declare success in containing inflation.
Ten year Treasury yields have declined following this report, falling almost 3bps.
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