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MONDAY ECONOMIC REPORT


Essential Takes on Leading Economic Indicators
By Chad Moutray, Ph.D., CBE – July 15, 2019 – SHARE Facebook Twitter Twitter

Manufacturing Job Openings Hit Yet Another All-Time High in May

The Weekly Toplines
  • Job openings in the manufacturing sector rose to a new all-time high, up from 496,000 in April to 509,000 in May. Durable goods job postings increased to 323,000 in May, the highest level since January 2001 (329,000), and openings in the nondurable goods sector also improved to a six-month high in the latest report, at 185,000.
  • There continued to be more job openings in the U.S. economy (7,323,000) than the number of people looking for work (5,888,000 in May and 5,975,000 in June) for the 15th straight month. That suggests there were roughly 1.4 million more job postings than there were unemployed people to fill them, echoing the workforce concerns seen in the manufacturing sector.
  • The National Federation of Independent Business also continued to find the difficulties in filling jobs as their top “single most important problem” in its June survey. Overall, the Small Business Optimism Index signaled highly elevated sentiment among owners, even as trade uncertainties caused the measure to drop slightly in the latest month.
  • Americans appeared to be willing to incur more credit card debt, which should boost spending, with U.S. consumer credit outstanding increasing 5.0 percent in May. This extended the solid 5.2 percent gain in April, with revolving credit largely boosting the latest figures.
  • The Federal Reserve seems poised to cut short-term interest rates after its July 30–31 meeting, according to testimony from Federal Reserve Chair Jerome Powell. In his Semiannual Monetary Policy Report to Congress, Powell referred to “uncertainty” in the economic outlook, both from slowing global growth and in trade policy. As such, the statement noted that some Federal Open Market Committee participants “saw the case for a somewhat more accommodative monetary policy.” Financial markets have already priced in a 25-basis-point cut in the federal funds rate.
  • Decelerating inflationary pressures, both for consumer and producer prices, are aiding the FOMC’s more “dovish” stance. Reduced energy costs have helped to keep a lid on pricing pressures in May and June, and overall core inflation continues to hover around the Federal Reserve’s stated goal of 2 percent.

JOLTS Graph
Economic Indicators

Last Week's Indicators:
(Summaries Appear Below)

Monday, July 8
Consumer Credit

Tuesday, July 9
Job Openings and Labor Turnover Survey
NFIB Small Business Survey

Wednesday, July 10
None

Thursday, July 11
Consumer Price Index

Friday, July 12
Producer Price Index

This Week's Indicators:

Monday, July 15
New York Fed Manufacturing Survey

Tuesday, July 16
Industrial Production
NAHB Housing Market Index
Retail Sales

Wednesday, July 17
Housing Starts and Permits

Thursday, July 18
Conference Board Leading Indicators
Philadelphia Fed Manufacturing Survey

Friday, July 19
Real GDP by Industry
State Employment Report
University of Michigan Consumer Sentiment

Deeper Dive
  • Consumer Credit: U.S. consumer credit outstanding increased 5.0 percent in May, extending the solid 5.2 percent gain in April. Total consumer credit registered $4.088 trillion in May, with $1.072 trillion in revolving credit and $3.016 trillion in nonrevolving credit. Revolving credit (including credit cards and other credit lines) has recovered from softness earlier in the year, jumping 8.2 percent in May. This suggests Americans are willing to incur more credit card debt, which should boost spending. In contrast, nonrevolving credit (including auto and student loans) has been slowing, from 5.2 percent in March, to 4.2 percent in April, to 3.9 percent in May.
  • Consumer Price Index: Consumer prices edged up 0.1 percent for the second straight month in June. Reduced energy costs, which fell 2.3 percent in June, helped to keep a lid on inflationary pressures for consumers, with food prices flat. Over the past 12 months, the consumer price index has risen 1.7 percent, down from 1.8 percent year-over-year in May. Consumer prices had risen 2.9 percent in July 2018, the highest year-over-year rate since February 2012, and the current data reflect the sizable deceleration in consumer price growth over the past year.

    At the same time, core inflation (which excludes food and energy) rose 2.1 percent year-over-year (seasonally adjusted), up from 2.0 percent in the prior release. Other than for apparel and medical care commodities, all other major segments have seen costs rise over the past 12 months. Even with a slight acceleration in price growth in June, inflation appears to be stable for now, at the Federal Reserve’s stated goal of core price inflation around 2 percent. As such, the Federal Open Market Committee is expected to reduce short-term rates later this month, with participants more interested in stimulating more economic growth than with inflation.
  • Job Openings and Labor Turnover Survey: Job openings in the manufacturing sector rose to a new all-time high, up from 496,000 in April to 509,000 in May. Durable goods job postings increased to 323,000 in May, the highest level since January 2001 (329,000), and openings in the nondurable goods sector also improved to a six-month high in the latest report, at 185,000. Over the past 12 months, job openings have averaged more than 481,000 per month—a highly elevated pace. This echoes ongoing concerns about the difficulties in finding talent in the tight labor market, which remains the top challenge among manufacturers in the latest NAM Manufacturers’ Outlook Survey.
    With that said, the pace of hiring and separations slowed in May. Hiring in the manufacturing sector eased from 367,000 in April to 345,000 in May, but separations also decelerated, down from 357,000 to 336,000. As a result, net hiring edged down from 10,000 in April to 9,000 in May.

    Meanwhile, nonfarm job openings changed little for the month, down from 7,372,000 in April to 7,323,000 in May. More importantly, there continued to be more job openings in the U.S. economy than the number of people looking for work (5,888,000 in May and 5,975,000 in June) for the 15th straight month. That suggests there were roughly 1.4 million more job postings than there were unemployed people to fill them.
  • NFIB Small Business Survey: The National Federation of Independent Business reported that the Small Business Optimism Index dipped from 105.0 in May to 103.3 in June. Despite softening from August’s all-time high (108.8), small businesses remain upbeat overall. Twenty-four percent of respondents in June said the next three months would be a “good time to expand,” which remains strong despite pulling back from 30 percent in May. The decline in the headline index stemmed from some weakening in sales expectations, down from a net percentage of 23 percent seeing higher sales over the next three months to 17 percent.

    At the same time, the labor market remained solid overall. The percentage of small business owners saying they had job openings declined from 38 percent to 36 percent, but remained not far from the all-time high set in December and March at 39 percent. The net percentage planning to hire in the next three months edged down from 21 percent to 20 percent in this survey, but remained a healthy figure. In addition, respondents cited the quality of labor as the top “single most important problem” for the 15th straight month.
  • Producer Price Index: Producer prices for final demand goods and services inched up 0.1 percent in June for the second straight month. At the same time, producer prices for final demand goods fell 0.4 percent in June, extending the 0.2 percent decline in May. Reduced energy costs pulled headline input prices for goods lower in both of the past two months, down 1.0 percent and 3.1 percent in May and June, respectively. In contrast, food prices rebounded after two months of decreases, up 0.6 percent in June. Core inflation for goods, which excludes food and energy, was unchanged in June for the third consecutive month. Meanwhile, producer prices for final demand services rose 0.4 percent for the month.

    Over the past 12 months, producer prices for final demand goods and services have risen 1.6 percent (seasonally adjusted), slowing from 1.9 percent year-over-year growth in the previous release. In addition, core producer prices have grown 2.1 percent year-over-year, down from 2.3 percent in May.  

    Overall inflationary pressures continue to suggest some stabilization from last year, when rising input prices posed a major challenge for manufacturers. Indeed, core raw material costs have decelerated since peaking at 3.1 percent year-over-year in September. This provides some comfort to the Federal Reserve, particularly as it explores possible rate cuts in the coming months.

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