JOLTS: September job openings fell 3.9 percent but still exceeded new hires

The number of job openings decreased 3.9 percent to 7.0 million on the last business day of September. Over the month, hires fell 2.7 percent to 5.7 million, and separations fell 1.9 percent, also to 5.7 million.

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July open positions and job quitters both rose to record levels, layoffs declined slightly

More workers quit their jobs in July since January 2001, rising to 3.6 million, or 2.4 percent of the nonfarm workforce. The number of positions waiting to be filled rose to 6.94 million, or 4.4 percent of the workforce, both of which are the highest figures since this series launched in December 2000. Layoffs declined slightly to 1.65 million, or 1.1 percent of the workforce.

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Second Quarter 2018 Economic Update: The Strongest Growth since 2014, But Will it Last?

It was certainly good news to hear that the initial estimate for GDP growth of 4.1 percent in the second quarter of 2018 was the fastest since the third quarter of 2014. This recent rate of growth compares to 2.2 percent in the first quarter of 2018, 2.3 percent in 2017 and 1.5 percent in 2016. As of early August, GDPNow was also forecasting third quarter growth of 4.3 percent, although both these GDP estimates and forecasts are likely to change as more information comes in.

Most of the surge noted during the second quarter was due to a boost in consumer spending (along with the highest levels of consumer confidence in years), exports, nonresidential fixed investment (including commercial real estate, factories and machinery) and government spending. It would have been even higher were it not for declines in private inventory investment by businesses and residential fixed investment (including home building and remodeling).

One political factor weighing heavily on the boost in growth was the export of goods, with its rise quadrupling from the first quarter to 13.3 percent, as numerous countries stocked up in advance in order to avoid real and potential retaliatory tariffs.   This export surge itself was responsible for about one full point of the 4.1-percent GDP increase. At the same time, the rate of import growth fell sharply to just 0.5 percent, indicating that domestic suppliers either had adequate inventories or capacity to meet demand.

Another political factor was the tax cuts enacted at the beginning of 2018, which boosted consumer spending after a lag in the first quarter, and led to large corporations buying hundreds of billions of their own shares, thus helping to support the stock market. A healthy stock market, in turn, improves both 401k balances as well as consumer confidence.

What we don’t know yet is if the export surge or the boost in consumer spending is sustainable, but we’ll find that out through the rest of the year.

For now, the job market remains tight, with July unemployment dipping back to 3.9 percent along with 157,000 new positions. Looking at just the second quarter of 2018 alone, job growth rose by over 21 percent versus the same quarter of 2017. Moreover, for the first seven months of 2018, job growth increased by over 16 percent versus 2017.

Wages, which had remained stubbornly flat throughout much of the economic recovery, surged during the second quarter of 2018 by 2.8 percent over the previous year, for the sharpest increase since the third quarter of 2008.

Still, with inflation slowly on the rise, most of these wage gains are being eaten up by higher costs for energy, transportation and shelter. Annual core inflation readings from the CPI, PPI and PCE Price Index have recently ranged from 1.9 to 2.8 percent versus the Fed’s preferred increase of 2.0 percent. It’s for that reason that we’re likely to see a total of four interest rate increases by the Fed this year, and up to three more in 2019.

For the housing market, although home builders continue to push forward on meeting demand, they’re up against several headwinds including higher mortgage rates (up 18 percent annually through the first week of August), higher building costs (especially tariffs on Canadian timber) and ongoing difficulties locating suitable land and labor.

Although average monthly housing starts and building permits did fall by a small amount between the first and second quarters of 2018, they were still up moderately for the first half of the year versus 2017. New single-family home sales, which averaged an annual rate of 646,000 in the second quarter of 2018, were also up 6.4 percent for the first half of the 2018 versus 2017.

The pricing premium for new versus existing homes, which approached 40 percent as recently as the end of 2017, steadily fell to just nine percent by June of 2018, thus making a new home much more competitive. In fact, forecasters are pointing to the new home market to drive the housing market in the near term, as the existing home market remains penned in by low inventory, increasing affordability issues and higher interest rates.

Still, with the backlog of unsold new single-family homes rising to 5.7 months in June, some builders are also facing similar affordability challenges with their buyers. In the long run, however, given the huge pent-up demand for housing in the U.S., only the most serious shocks to the economy are likely to derail the long and slow recovery.

July planned job cuts fall to lowest level of 2018, but YTD cuts still up 6.7 percent from 2017

U.S.-based employers announced plans to cut 27,122 workers from payrolls during July, down both 27.1 percent from June and 4.2 percent year-on-year.  Although July's total was the lowest of the year, YTD job cuts are still up 6.7 percent from 2017. Still, nearly 90 percent of companies polled are in hiring or retention mode.

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ADP: Private Sector Employment Increased by 219,000 Jobs in July

Private-sector employment increased by 219,000 from June to July, on a seasonally adjusted basis. 
This compares to 181,000 in June and 203,000 in July of 2017.

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May planned job cuts down 12.6 percent from April, but YTD cuts still up 6.2 percent year-on-year

Job cuts announced by U.S.-based employers in May fell 12.6 percent from April, and were also down 4.8 percent year-on-year. So far this year, however, announced job cuts are up 6.2 percent year-on-year, with those in the retail sector rising by 24 percent.

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Gallup: Optimism about finding quality jobs hits 17-year high

Sixty-seven percent of Americans believe that now is a good time to find a quality job in the U.S., the highest percentage in 17 years of Gallup polling. Optimism about the availability of good jobs has grown by 25 percentage points since Donald Trump was elected president.

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Initial unemployment claims flat from previous week

In the week ending May 5, initial unemployment claims were 211,000, unchanged from the previous week's unrevised level of 211,000. The 4-week moving average was 216,000, a decrease of 5,500 from the previous week's unrevised average of 221,500. This is the lowest level for this average since December 20, 1969 when it was 214,500.

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March job openings rose 7.8 percent to 6.55 million, highest level since December 2000

The March update on job openings saw a 7.8 percent rise to 6.55 million.  This is the highest level since the BLS initiated its JOLTS (Job Openings and Labor Turnover Summary) report in December of 2000. At the same time, hires fell 1.6 percent while separations rose 2.3 percent.

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April planned job cuts plummeted 40.2 percent from March, down 1.4 percent year-on-year

Job cuts announced by U.S.-based employers fell 40.2 percent in April, and were also down 1.4 percent year-on-year.  So far this year, employers have announced 176,460 job cuts, 8.38 percent more than those announced through the first four months of 2017, with 36.5 percent of those in retail.

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February job openings fell 2.8 percent from January, hires and separations fell by a lesser amount

The number of job openings fell by 2.8 percent between the last days of January and February.  Over the month, hires and separations fell by 1.2 and 2.4 percent, respectively.

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2018 YTD job cuts at lowest level since 1995

The nation's employers announced plans to cut 35,369 jobs in February, down 20 percent from the 44,653 cuts announced the previous month and 4.3 percent lower year-on-year. So far this year, employers have announced 80,022 cuts, 3.5 percent lower than through February last year. This is the lowest number of announced job cuts between January and February since 1995.

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Online Helped Wanted Ads declined 3.8 percent in February

Online advertised vacancies decreased 185,700, or 3.8 percent, to 4,717,600 in February, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series released today. The January Supply/Demand rate stands at 1.36 unemployed for each advertised vacancy, with a total of 1.8 million more unemployed workers than the number of advertised vacancies.

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ADP: Private sector jobs rose by 235,000 in February

According to ADP, private sector employment increased by 235,000 jobs from January to February. This compares to 244,000 the previous month and 280,000 in February 2017.

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November job openings fell 0.8 percent while hires fell by 1.9 percent

The number of job openings fell 0.8 percent to 5.9 million on the last business day of November. Over the month, hires fell 1.9 percent, while separations fell 0.9 percent.

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December's planned job cuts dip 7.4 percent from November; annual total lowest since 1990

U.S.-based employers announced 32,423 job cuts in the last month of the year, bringing the year-end total to 418,770, or the lowest annual total since 1990.  Last month saw a 7.4 percent decrease from November's total of 35,038, and a 3.6 percent decrease from the 33,627 cuts announced in the same month last year.

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ADP: Private Sector Employment Increased by 250,000 Jobs in December

Private-sector employment increased by 250,000 from November to December, on a seasonally adjusted basis.

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Online job vacancies jumped 4.9 percent in December

Online advertised vacancies increased 229,700, or 4.9 percent,  to 4,930,700 in December, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series,released today. The November Supply/Demand rate stands at 1.41 unemployed for each advertised vacancy, with a total of 1.9 million more unemployed workers than the number of advertised vacancies.

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ADP: November job growth of 190,000 dips slightly from October

According to ADP, private-sector employment increased by 190,000 from October to November on a seasonally adjusted basis.  This compares with 235,000 jobs the previous month and 226,000 jobs in the  same month of 2016.

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2017 in Review: A Gradually Strengthening Economy Meets Higher Construction Costs

At this same time a year ago, I wrote about an economy that was improving enough that the Federal Reserve was about to raise interest rates for the second time since 2006, followed by up to three more hikes in 2017.  However, there has also been a consequence of this growth in the form of higher costs for land, labor and materials, making it challenging for builders to build the types of affordable housing at a time when new home starts are predicted to jump sharply in 2018.

U.S. GDP growth – which averaged about two percent in both 2015 and 2016 and was just 1.2 percent in 1Q 2017 ---- surged to three percent in the second and third quarters, due mostly to increased consumer spending, inventory investments, exports and federal government outlays.  Current forecasts are suggesting this rate of growth to improve even further to 3.3 percent in the final quarter of 2017.

Job growth, which rose by 261,000 in October, averaged 169,000 per month through the first ten months of 2017 (down 12.2 percent from the same period of 2016), and would likely have been higher without the negative impacts from a particularly harsh hurricane season.  Had job growth stayed on track with the average through August, job growth through October would have been closer to 185,000 jobs per month.  Moreover, October’s official unemployment rate of 4.1 percent is the lowest reported since December 2000.

Not surprisingly, consumer confidence from both The Conference Board and the University of Michigan surveys has risen to the highest levels since the early 2000s, boosted in large part by the strengthening job market.  In turn, wages have come under increasing pressure, with average hourly earnings up 2.2 percent for the 12 months ending in October.

Still, because the Federal Reserve-preferred PCE price index rose by just 1.6 percent per year through September, it’s not clear just how many interest rate increases we’ll see in 2018.  Complicating matters further are higher inflation indicators from both the Producer Price Index and Consumer Price Index, which rose by 2.6 and 2.2 percent per year through September, respectively.

Certainly one area in which we’ve seen higher inflation is in the cost for building a new single-family home, which as of September 2017 was up by 5.2 percent year-on-year and 29.2 percent over the previous five years.  Combine that increase with tight supply in most markets, and the result has been a decline in home affordability.

As of 3Q 2017, the NAHB/Wells Fargo Housing Opportunity Index fell to 58.3 percent, for the lowest rate since the same quarter of 2008, and down sharply from the last peak of 77.5 in 1Q 2012.  Since 3Q 2008, median national home prices tracked by the same report rose by 26 percent.

Single-family new home sales, which dipped in July and August, rebounded by nearly 19 percent in September to 667,000 per year, and were up 17 percent year-over-year.  So far in 2017, new home sales have averaged 609,000 per month, up nine percent from the same period of 2016.    At current sales rates, existing inventory would take 5.0 months to sell, down slightly from 5.1 a year ago.

For existing homes, lack of inventory at the lower end of the market and rising prices have recently stunted sales, with September’s pace down 1.5 percent from a year ago and the share of first-time buyers declining to 29 percent from 34 percent.

Although September’s inventory did rise slightly to 1.90 million homes – or a timeline of 4.2 months at current sales rates -- it has fallen year-over-year for 28 consecutive months. While pending home sales in September were flat from August, they were still down 3.5 percent from a year ago, and have fallen on an annual basis in five of the past six months.

Thankfully, there does seem to relief on the horizon.  Looking ahead to 2018, FreddieMac is predicting home builders to take up much of this slack in overall housing inventory.  Annualized housing starts, which averaged 1.19 million for the first nine months of 2017, are forecast to rise by another nine percent to 1.33 million in 2018, with total single-family home sales rising by about two percent to 6.30 million units even as mortgage rates trend slowly upward.

As for potential consequences of tax reform on the housing market, given the high level of push-back from multiple interest groups, and with the Senate and House versions still far apart as of mid-November, that analysis must wait for another day.