we got hit with a bunch of reports this week…in addition to the two employment reports covered by the Employment Situation Summary, this week also saw the release of the 1st estimate of 2nd quarter GDP by the BEA on Wednesday, the corresponding BEA report on personal Incomes and spending for June on Friday, and the Case Shiller home price index on Tuesday…manufacturing diffusion indexes released this week included the Texas Manufacturing Outlook Survey for July from the Dallas Fed, which saw it’s broadest index edge up from 11.4 to 12.7, the highest level in 10 months, indicating robust factory activity in the District; the Chicago Business Barometer from the Chicago Institute for Supply Management, which saw it’s index drop 10.0 points to 52.6 in July, indicating that manufacturing in that region was barely expanding, the July Purchasing Managers Index (PMI) from the National Institute for Supply Management, which rose to 57.1% in July, up from 55.3% in June, indicating a pickup in manufacturing nationally, and the Markit final July U.S. manufacturing PMI, which came in at 55.8 in July, down from 57.3 in June, indicating somewhat slower U.S. manufacturing growth in July…in another report from WardsAuto, light vehicle sales were estimated to be running at a 16.4 million annual rate in July, down 3.0% from the 16.9 million annual sales rate last month, but 4.9% higher than the annual pace of auto sales a year ago…in addition, we also saw the Census report on Construction Spending for June (pdf). which estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $950.2  billion in spending overall, 1.8 percent (±1.8%)* below the revised May estimate of $967.8 billion annualized and 5.5 percent (±2.3%) above last June’s level of construction spending….private construction spending was at a seasonally adjusted annual rate of $685.5 billion, 1.0 percent (±1.0%)* lower than the revised May estimate, with residential spending falling 0.3 percent (±1.3%)* and non-residential construction falling 1.6 percent (±1.0%), while public construction spending was estimated at $264.7 billion, 4.0 percent (±3.0%) below the revised May estimate…if this estimate holds, it would be the largest drop in construction spending in more than 3 years

Employers Add 209,000 Jobs in July

the establishment survey conducted for July by the BLS indicated that nonfarm payroll employment increased by a seasonally adjusted 209,000 jobs to 139,004,000 jobs, slightly less than expected, while May’s payroll jobs count addition was revised up from 224,000 to 229,000, as was June’s, up from 288,000 to 298,000…although July’s total job creation was the lowest since March, it caps the strongest 6 months of job growth since 2006, and the best start to any year since 2005….the unadjusted establishment data indicates that there were actually 1,110,000 less non-farm payroll jobs in June, as 1,232,800 jobs were lost in local government education before the seasonal adjustment, lowering the estimated total actually employed by business and government in July to 138,666,000…the FRED bar graph below incorporates the seasonal adjustments and the revisions to the May & June reports and shows the reported payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it…  

July 2014 payroll jobs

seasonally adjusted payroll jobs increased in most major sectors in July, led by an increase of 47,000 additional jobs in the  broad professional and business services category, with 13,700 of those in employment services and another 8,800 in architectural and engineering services….an additional 28,000 slots were added in manufacturing, with 14,600 of those in the manufacture of motor vehicles and parts, while food manufacturing companies shed 3,600 jobs in the weaker non-durable goods manfacturing sector….26,700 jobs were added in retail, with 7,600 added by food and beverage stores, 6,900 in clothing stores, and 6,500 more working in general merchandise outlets…another 25,400 jobs were added in health care and social assistance, with the addition of 21,300 in ambulatory health care services and 18,400 in social assistance offset by the loss of 7,200 jobs in nursing and residential care facilities and 7,100 in hospitals…employment also increased with the addition of 22,000 jobs in construction, 13,900 of which were working for specialty trade contractors, with those roughly evenly split between residential and non-residential contractors…there were also 21,000 more jobs in leisure and hospitality, with 18,600 of those working in bars and restaurants… governments added 11,000 jobs, with a gain of 12,000 jobs at the local level and a loss of 1,000 in state government….another 8,000 jobs were added in resource extraction, with 6,200 of those in support activities for mining, which includes gas and oil exploitation…in addition, 7,900 jobs were added in transportation and warehousing, 2,700 in wholesale trade, 7,000 in financial activities, 2,000 in information services, and 1,200 more were employed by utilities…

the average workweek for all payroll employees was unchanged at 34.5 hours for the 5th month in a row, with shorter workweeks in resource extraction and the information services sector offsetting slightly longer workweeks elsewhere, with the manufacturing workweek also falling 0.2 hours to 40.9 hours and factory overtime slipping 0.1 hour to 3.4 hours….the average workweek for production and nonsupervisory employees was also unchanged at 33.7 hours, with the average nonsupervisory manufacturing employees seeing their workweek fall 0.2 hour to 40.2 hours…the average hourly pay for all workers rose by a penny an hour to $24.45 an hour with their year over year increase at 47 cents, or less than 2%, while the average pay for nonsupervisory workers increased by 4 cents to $20.61, with their year over average hourly pay rising 46 cents, a 2.3% average annual pay increase…

Unemployment Rate Rises to 6.2% as More Look for Work

the employment numbers extrapolated from the July survey of 60,000 households improved slightly over June, when those left outside the labor force hit a record high…June saw the seasonally adjusted count of the employed rise by 131,000 to 146,352,000 while the count of the unemployed rose by 197,000 to 9,671,000, which increased the unemployment rate, or the percentage of the total of both, to 6.2% in July, up from 6.1% in June but down from 7.3% in July of 2013…with the labor force, or the total of those employed and those counted as unemployed, rising by 328,000 while the civilian noninstitutional population rose by 209,000, the count of those not in the labor force thus fell 119,000 to 92,001,000, or enough to nudge the labor force participation rate up from 62.8% in June to 62.9% in July….however, the increase in the employed vis-a-vis the population was not enough to raise the employed to population ratio for the month and it remained unchanged at 59.0%…our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to the turn of the century…

July 2014 household survey metrics

of those who were counted as employed in July, 118,489,000 reported they were working full time, 285,000 more than in June, while 28,070,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 52,000 part time workers over June’s count…of those, the count of those stuck working just part time for economic reasons who would rather work full time fell by 33,000 to 7,544,000, while the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, ticked up by 0.1% to 12.1%…meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work rose by 74,000 in July to 3,155,000, while the median duration of unemployment rose from 13.1 weeks to 13.3 weeks…among the 92,001,000 of us not officially in the labor force and hence not counted as unemployed, 6,624,000 reported that they still want a job, down from 6,694,000 in June; of those, 2,178,000 were categorized as “marginally attached to the labor force” because they had looked for work sometime during the last year, but not during the 30 day period covered by the July survey…741,000 of those were further characterized as “discouraged workers”, because they reported that they haven’t looked for work because they believe there are no jobs available to them…such discouraged workers rose 65,000 in July…

2nd Quarter GDP Up at 4.0% Rate on Investment Surge

the Advance Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that the output of goods and services produced in the US grew at a 4.0% annual rate this spring over the output of the 1st quarter of this year, while the previously reported first quarter contraction at a 2.9% rate was revised to a 2.1% slowdown, still resulting in the largest quarter to quarter improvement in GDP growth in 14 years….combined, that leaves our year to date growth for the first half of 2014 at a still very weak .88% annual rate…in addition to the estimates for the 2nd quarter, this report also included the results of an annual revision of the national income and product accounts over the last three years, with GDP and select components of it revised back to the first quarter of 1999…although the revisions resulted in stronger second half growth now reported for 2013, real GDP still increased at an average annual rate of 1.8% over the period from the fourth quarter of 2010 to the first quarter of 2014, the same rate for the overall period as in previously published estimates….

in current dollars, our 2nd quarter GDP would extrapolate to $17,294.7 billion of economic output annually, up from the $17,044.0 billion annualized figure extraolated by the BEA for the 1st quarter…however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based…the inflation adjustment used in the first quarter, aka the “GDP deflator” would suggest annual inflation at a 2.0% rate, up from 1.3% in the 1st quarter…remember all quarter over quarter percentage changes reported here are given at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period…as is always the case with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions which average +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate is released, which will be two months from now…note that June trade and inventory data have yet to be reported, and BEA assumed an decrease in both exports and imports, and that wholesale and retail inventories and nondurable manufacturing inventories had increased in June…also note that June construction spending, which was released two days after this report, was down 1.8% against expectations of a 0.5% increase, so figures reported here for investment in structures and by governments are likely to be revised lower in the second estimate…

real personal consumption expenditures, the largest component of GDP,  grew at a 2.5% seasonally adjusted annual rate in the 2nd quarter, compared with growth at a 1.2% rate in first quarter…real consumption of goods was up at a 6.2% rate, with inflation adjusted consumer purchases of durable goods units growing at a 14.0% rate and adding 0.99% to GDP on the strength of a 17.4% real growth rate in motor vehicle and parts consumption, while real consumption of furnishings and durable household equipment and recreational goods and vehicles also both grew at double digit rates….real consumption of non-durable goods, depressed by a 3.6% deflator in the second quarter, was up at a 2.5% rate and added 0.39% to the GDP growth rate, as reduced real outlays for food and beverages and gasoline partially offset real growth in consumption of clothing and footwear and other non-durable goods…meanwhile, real growth in consumption of services slowed to a 0.7% annual rate and added 0.31% to GDP as real outlays for housing and utilities contracted at a 3.3% rate and partially offset modest growth in real outlays for health care, financial services, transportation services, food services, recreation and other services..

seasonally adjusted gross private domestic investment, which had fallen at a 6.9% annual rate in the 1st quarter, completely turned around and grew at a 17.0% annual rate in the second quarter and added 2.57% to the the quarter’s GDP growth rate…real gross private fixed investment grew at a 5.9% rate as real nonresidential fixed investment grew at a 5.5% rate on a 7.0% increase in real outlays for equipment, with outlays for computers and industrial equipment leading the increase, while investment in non-residential structures grew at a 5.3% annual rate and investment in intellectual property products grew at a 3.5% rate on modest growth in software and R&D….for the quarter, non-residential fixed investment added to GDP at a 0.68% annual rate, with investment in equipment adding 0.40%, investment in structures adding 0.15%, and investment in intellectual property adding 0.14%, while real residential investment grew at a 7.5% annual rate and added .23% to the quarter’s growth rate…meanwhile, inflation adjusted private inventories grew by an inflation adjusted $93.4 billion and added 1.66% to the quarter’s growth rate, in contrast to the contraction in inventory growth that subtracted 1.16% in the 1st quarter…since higher inventories indicate more produced goods have not been shipped or sold, their increase by $93.4 billion means real final sales of GDP were reduced by that amount and hence rose at a 2.27% rate in the 2nd quarter…

exports, which had been down at a 9.2% rate in the first quarter, grew by nearly the same amount in the 2nd quarter, but imports grew even more, so our net exports subtracted from growth for the quarter…remember that exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here, and that it’s the quarter over quarter change in each that affects the quarterly change in GDP…. in the 2nd quarter, our real exports of goods and services rose at a 9.5% rate, resulting in addition of 1.23% to the second quarter’s growth rate…but our real imports of goods and services, which were larger than our exports to begin with, increased at a 11.7% rate, and because imports are a subtraction from GDP, the increase of imports from the 1st quarter to the 2nd subtracted 1.85% from the quarter over quarter growth rate…

finally, real consumption and investment by governments increased at a 1.6% annual rate, as federal government consumption and investment shrunk at a 0.8% rate over the 1st quarter, while state and local consumption and investment grew at a 3.1% rate….federal spending for defense grew at a 1.1% rate and added 0.05% to GDP, while non-defense federal consumption and investment fell at a 2.7% rate and subtracted 0.10% from GDP…note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in output…meanwhile, state and local government investment and consumption expenditures, which grew at a 3.1% annual rate, added 0.35% to the quarter’s growth rate, as state and local consumption spending rose at a 1.3% rate while state and local investment grew at a 11.1% rate…

in our FRED bar graph below, each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012…in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, while the real change in Federal government spending and investment is shown in grey…those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they’ll appear below the zero line…you can clearly see the complete turnaround in almost all GDP components from the first quarter, the second group of bars from the right, to the second quarter of 2014 on the far right….the exception was the large increase in imports shown in green, which as we’ve previously mentioned subtracted 1.85% from the quarterly growth rate….

2nd quarter 2014 advance GDP

Personal Income and Spending Both Rise 0.4% in June

in conjunction with the 2nd quarter GDP report, the BEA also released the June report on Personal Income and Outlays, from which they derived June’s data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP…..like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts… however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts…also, like GDP, this data underwent an annual revision that changed current-dollar estimates beginning with the first quarter of 1999, so the data in this report is not directly comparable to amounts we’ve cited previously..

in June, total personal income increased at a seasonally adjusted and annualized $56.7 billion rate, an amount with would work out to $14,753.2 billion annually, and which was 0.4% higher than in May, when personal income also increased by 0.4%….disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $51.5 billion to $12,877.2 billion annually, which was also a 0.4% increase over May….increases in private wages and salaries of $28.9 billion accounted for roughly half of the personal income increase in June, with an $21.3 billion increase in service industry payrolls accounting for most of that…increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $5.0 billion of June’s annualized income increase, while employee contributions for government social insurance, which are subtracted from the personal income figure, increased at a $4.5 billion annual rate…other sources of the May income increase included personal interest and dividend income, which increased at a $11.9 billion rate, proprietors’ income, which increased at a $5.8 billion rate, with $0.2 billion of that increase going to farm owners and $5.4 billion to individual proprietors of other types of business, rental income of individuals, which increased at a $3.5 billion rate, and increases in personal transfer payments from government programs, which increased at a $4.4 billion rate in June…

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which are the basis for the change in real PCE in the GDP data we reviewed earlier, rose at a $57.4 billion annual rate in June to a level of $11,915.6 billion annually, 0.4% higher than  May, which was itself was revised to an increase of 0.3%…the current dollar increase in June spending included a $6.1 billion annualized increase to $1,310.1 billion in outlays for durable goods, a $27.4 billion increase to $2,688.4 billion in annualized spending for non-durable goods, and an annualized $18.4 billion increase to an annual rate of $7,917.2 billion in spending for services…total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $51.6 billion to $12,333.3 billion, which left personal savings, which is disposable personal income less total outlays, at $687.9 billion for the month, virtually unchanged from $688.0 billion in personal savings in May… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was unchanged at 5.3%..

while personal consumption expenditures accounted for 68.3% of our second quarter GDP, before they were included in measurement of the change in our output they were first adjusted for inflation…that’s done with the price index for personal consumption expenditures which is computed here, which is a chained price index based on 2009 prices = 100….that index rose to 109.029 in June from 108.793 in May, giving us a month over month inflation rate of 0.22% and a year over year PCE price index increase of 1.60%; as a result, inflation adjusted or real personal consumption expenditures rose by 0.2% in June after rising just 0.1% in May, when a greater deflator was applied to a fractionally lower increase…using the same PCE price index, disposable personal income is deflated to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.2% in June, the same increase as in May…

our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data box and on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right…the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI below is not adjusted for increases in the population; on a per capita basis, real DPI  per capita is up just 20.5% over the span of this graph… 

June 2014 income and outlays

Case-Shiller Home Prices Up 9.3% Year Over Year in May Report

the Case-Shiller Home Price Index for May, in comparing prices for repeat sales of homes sales closed over the three month period of March to May vis a vis the 3 month period from February to April, found the both the 10- and 20-city composite indexes to be up 1.1%. for the monthly comparison, while the 10 city index was up 9.4% year over year and the 20 city composite rose 9.3% from a year ago, both slipping somewhat from the 10.9% and 10.8% year over year increases reported last month…all 20 cities saw month over month prices increases with this report, led by home price increases of 1.8% in Tampa, 1.6% in San Francisco, 1.5% in Chicago and 1.4%.in Charlotte, while Phoenix and San Diego, with increases of 0.4% and 0.5% respectively, were the only cities to show increases of less than one percent in May….the largest year over year home price increases were seen in Las Vegas, where hom prices were up 16.9%, San Francisco, where they rose 15.4%, and Miami, where prices were up 13.2%, while Cleveland, where prices were up 2.4%, Charlotte, where they rose 4.7%, and New York, where they we up 4.8%, were the only cities showing annual home price increase of less than 5%..

included below are screenshots of the pair of interactive FRED graphs we created to show the historical track of home price indexes for each of the cities in the 20 city index, all based on 2000 home prices equal to 100.0… in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red… for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the index values for each of them for the April report in our screenshot… 

May 2014 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but we notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and  the index values for each  viewed over time with their interactive tool… 

May 2014 Case Shiller M-Z

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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 that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)