November 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 199,000 jobs in November (+180,000 expected). Also, September and October 2023 employment changes were revised down by a combined 35,000 (September: -35,000; October unchanged). Except for July and October, job gains of all months in 2023 have been revised lower.

Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down to 3.7%, as growth in the number of employed (+747,000) exceeded that of the labor force (+532,000). 

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Observations from the employment reports include:

* For a change, the two surveys moved in parallel, which augments their credibility. Also, the CES (business birth/death model) adjustment (+4,000) was very modest, and the seasonal adjustment was slightly smaller than the average November of the prior decade. It is worth noting, however, that the numbers included about 47,000 formerly striking auto and motion picture workers returning to work.

* Goods-producing industries gained 29,000 jobs; service providers: +170,000. Job gains occurred in health care (+76,800) and government (+49,000). Employment also increased in manufacturing (+28,000), reflecting the return of workers from a strike. Employment in retail trade declined (-38,400). Total nonfarm employment (157.1 million) is now 4.7 million jobs above its pre-pandemic level in February 2020 (private sector: +4.6 million; public sector: +96,000). Nonetheless, employment is perhaps 5.1 million below its potential if accounting for growth in the working-age population since January 2006.

As mentioned above, manufacturing added 49,000 jobs (led by durable goods: +36,000), thanks to an increase of 30,000 in motor vehicles and parts consistent with the end of strike activity. That result disagrees with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which contracted further (to 45.8) in November. Wood products manufacturing gained 1,000 jobs (ISM was unchanged); paper manufacturing: -500 (ISM decreased); construction: +2,000 (ISM increased).

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* The number of employment-age persons not in the labor force fell (-352,000) to 99.6 million; that level is 4.4 million higher than in February 2020. Because the working-age civilian population expanded (+180,000) more slowly than the number of employed (+747,000), the employment-population ratio (EPR) rose to 60.5%, which is 0.6PP below its February 2020 level. 

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* Also, because the working-age civilian population grew by 180,000 while the labor force expanded by 532,000, the labor force participation rate increased fractionally to 62.8%. Average hourly earnings of all private employees nudged up by $0.12 (to $34.10), and the year-over-year increase was unchanged at +4.0%. Because the average workweek for all employees on private nonfarm payrolls edged up to 34.4 hours, average weekly earnings rose (+$7.53) to $1,173.04 (+4.0% YoY). With the consumer price index running at an annual rate of +3.2% in October, the average worker appears likely to have gained a bit of purchasing power. 

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* Full-time workers rose (+347,000) to 134.8 million; there are now 4.1 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by 8.2 million during that period. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 295,000, while those working part time for non-economic reasons jumped (+323,000); multiple-job holders: -15,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in November retreated by $11.8 billion, to $240.7 billion (-4.7% MoM; +1.3% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year; the average of the three months ending November was up 1.0% from the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2023 International Trade (Softwood Lumber)

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With October exports of goods and services at $258.8 billion (-1.0% MoM; +1.3% YoY) and imports at $323.0 billion (+0.2% MoM; -3.2% YoY), the net trade deficit was $64.3 billion (+5.1% MoM; -18.0% YoY). 

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Softwood lumber exports ticked up (15 MMBF or +13.9%) in October, while imports rose (76 MMBF or +6.4%). Exports were 16 MMBF (+14.5%) above year-earlier levels; imports: 45 MMBF (-3.4%) lower. As a result, the year-over-year (YoY) net export deficit was 61 MMBF (-5.0%) smaller. Also, the average net export deficit for the 12 months ending October 2023 was 7.6% below the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the lumber-trade graph above).

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North America (55.6% of total softwood lumber exports -- of which Mexico: 39.4%; Canada: 16.2%), Asia (16.5% -- especially Japan; 2.1%; China: 6.1%), and the Caribbean (23.2% -- especially the Dominican Republic: 8.1%; Jamaica: 6.3%) were the primary destinations for U.S. softwood lumber exports. Year-to-date (YTD) exports to China were 69.5% higher than the same month of the prior year. Meanwhile, Canada was the source of most (82.8%) softwood lumber imports into the United States. Imports from Canada were 8.6% lower YTD/YTD. Overall, YTD exports were down 1.9% compared to the prior year; imports: -7.7%.

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U.S. softwood lumber export activity through the Gulf customs region represented 38.2% of the U.S. total; West Coast: 33.9%, and Eastern: 20.0%. Mobile (17.9% of the U.S. total), San Diego (19.1%) Laredo (14.5%), and Seattle (9.0%) were the most active districts. At the same time, the Great Lakes customs region handled 57.4% of softwood lumber imports -- most notably the Duluth, MN district (18.1%) -- coming into the United States. 

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Southern yellow pine comprised 24.0% of all softwood lumber exports; Douglas-fir (12.3%), treated lumber (15.5%), other pine (15.7%) and finger-jointed (11.4%) were also significant.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

November 2023 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil fell by $7.95 (-9.3%) to $77.69/barrel in November. That retreat occurred within the context of a weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of August’s dec6rease of 789,000 barrels per day (b/d) in the amount of petroleum products demanded/supplied (to 20.1 million b/d), and accumulated oil stocks that continued an upward trend -- to near the midpoint of the five-year average range (November 2023 average: 443 million barrels). 

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Selected highlights from the 01 December 2023 issue of OilPrice.com’s Oil & Energy Insider include:

“Oil markets were left both confused and underwhelmed by the OPEC+ decision to cut 2.2 million b/d in 1Q2024, with oil prices falling toward a weekly loss,” wrote editor Michael Kern. “Oil markets welcomed the new OPEC+ deal that pledged 2.2 million b/d in voluntary cuts for 1Q2024 in a very lukewarm manner, with Brent erasing all its earlier gains and dropping back to $81 per barrel. With even the most seasoned industry watchers starting to lose track of which country will be cutting what amount against which reference level, the production target confusion was aggravated by the fact that markets expected deeper cuts, going over and above what Saudi Arabia or Russia have already curbed from their output.

OPEC+ Cuts Production Further. Members of the OPEC+ oil group agreed to voluntary production cuts totaling 2.2 million b/d for Q1 2024 as the group’s de facto leader Saudi Arabia rolled over its current voluntary cut of 1 million b/d and Russia widened its pledge to 500,000 b/d.

Brazil to Become Member of OPEC+ Family. South America’s largest oil producer Brazil is set to officially become a member of OPEC+ [as an observer] from January 2024 even though it would not join the oil group’s ongoing round of production cuts, seeing output soar to all-time highs in recent months.

Referendum Raises the Specter of a Venezuela-Guyana War. Venezuela will carry out a referendum [since approved] on its territorial dispute with Guyana over the contested oil-rich Essequibo territory on December 3, leading to a notable uptick in military activities in the wider region.

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

November 2023 ISM and S&P Global Surveys

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The Institute for Supply Management‘s (ISM) monthly sentiment survey of U.S. manufacturers reflected no change in the rate of contraction in the sector during November. The PMI registered 46.7%, unchanged from October’s reading. (50% is the breakpoint between contraction and expansion.) ISM’s manufacturing survey represents under 10% of U.S. employment and about 20% of the overall economy. Only the customer inventories index remained above 50; the largest changes occurred among prices paid (+4.8 percentage points), exports (-3.4PP), and order backlogs (-2.9PP). 

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Concurrent activity in the services sector -- which accounts for 80% of the economy and 90% of employment -- accelerated (+0.9PP, to 52.7%). Inventory sentiment (+7.8PP), imports (-6.3PP), and inventories (+5.9PP) exhibited the largest changes.

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Respondent comments included the following –

Wood Products. “Elevated financing costs have dampened demand for residential investment. Our business has been negatively impacted through reduced new orders for our products and services. We are purchasing less for production and finished goods inventories.”

Construction. “Opportunities across the construction industry remain strong. The labor market for skilled trades workers is tight.”

 

Changes in S&P Global’s headline index value for manufacturing declined whereas services increased. Details from S&P Global’s surveys follow --

Manufacturing. Renewed decline in US manufacturing performance as demand wanes.

Key findings:

• New orders contract with output growth slowing in response
• Input cost inflation eases notably
• Employment falls for second month running

Services. Renewed upturn in new business supports output growth in November.

Key findings:

• Slight expansions in new orders and activity
• Employment growth slows to fractional rate
• Cost inflation weakest since October 2020

 

Commentary by Chris Williamson, S&P Global’s chief business economist --

Manufacturing. “US manufacturers reported yet another tough month in November. Output barely rose as inflows of new work showed a renewed decline, hinting at little – if any – contribution to fourth quarter GDP from the goods-producing sector.

“Orders have in fact risen in only three of the past 18 months, reflecting a prolonged period of subdued post-pandemic demand, in turn linked to consumers switching their spending to services such as travel and recreation, and business customers reducing excess inventories which had been accumulated during the supply concerns of the pandemic.

“Encouragingly, there are some signs of the inventory cycle starting to turn, with producers of intermediate goods (inputs supplied to other firms) now reporting modest order book growth.

“US producers nevertheless continue to focus on cost cutting by trimming headcounts, and have now taken the knife to payroll numbers for two consecutive months. Barring the early months of the pandemic, the survey has not seen such a back-to-back monthly fall in factory employment since 2009.

“The decline in employment could feed through to weaker consumer spending, but will also reduce wage bargaining power.

“Lower wage pressures, combined with a marked cooling of raw material input cost inflation, have already fed through to a lowering of average factory selling price inflation for goods to a rate below the average seen in the decade prior to the pandemic, the rate of increase dipping again in November to help further lower consumer price inflation in the months ahead.”

 

Services. “The latest PMI data point to a further cooling of inflation pressures, but the surveys also signal only modest economic growth and near-stagnant employment, with the risk of the expansion losing further momentum as we head towards 2024.

“While service sector businesses continued to report further output gains in November, growth remains considerably weaker than seen earlier in the year, and forward-looking indicators point to growth slowing in the months ahead.

“Firms providing both goods and services have become increasingly concerned about excessive staffing levels in the face of weakened demand, resulting in the smallest overall jobs gain recorded by the survey since the early pandemic lockdowns of 2020.

“The cooling jobs market has been accompanied by lower wage growth which, combined with recent oil price falls, helped pull business cost growth down to its lowest for three years, dropping in November to a level indicative of inflation approaching the Fed’s 2% target in the coming month.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

November 2023 Currency Exchange Rates

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In November, the monthly average value of the U.S. dollar (USD) was unchanged relative to Canada’s “loonie,” depreciated against the euro (-2.3%), and appreciated versus the Japanese yen (+0.1%). On the broad trade-weighted index basis (goods and services) the USD weakened by 1.8% against a basket of 26 currencies. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2023 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments in October decreased $8.2 billion or 1.4% to $577.8 billion. Durable goods shipments decreased $2.2 billion or 0.8% to $280.4 billion, led by transportation equipment. Meanwhile, nondurable goods shipments decreased $5.9 billion or 1.9% to $297.3 billion, led by petroleum and coal products. Shipments of wood products decreased 0.2%; paper: +0.4%.

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Inventories increased $0.5 billion or 0.1% to $857.0 billion. The inventories-to-shipments ratio was 1.48, up from 1.46 in September. Inventories of durable goods increased $1.3 billion or 0.3% to $524.8 billion, led by transportation equipment. Nondurable goods inventories decreased $0.8 billion or 0.2% to $332.2 billion, led by petroleum and coal products. Inventories of wood products expanded by 0.3%; paper: -0.1%.

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New orders decreased $21.8 billion or 3.6% to $576.8 billion. Excluding transportation, new orders fell by $6.0 billion or 1.2% (-1.4% YoY). Durable goods orders decreased $15.9 billion or 5.4% to $279.4 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- retreated by $0.2 billion or 0.3% (+0.8% YoY). New orders for nondurable goods decreased $5.9 billion or 1.9% to $297.3 billion.

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Unfilled durable-goods orders increased $4.0 billion or 0.3% to $1,356.8 billion, led by transportation equipment. The unfilled orders-to-shipments ratio was 6.90, up from 6.88 in September. Real (inflation-adjusted) unfilled orders, which -- prior to the pandemic -- had been a good litmus test for potential sector growth, show a less-positive picture; in real terms, unfilled orders in June 2014 were back to 104% of their December 2008 peak. Real unfilled orders then jumped to 110% of the prior peak in February 2015, thanks to the largest-ever batch of aircraft orders. Real unfilled orders trended lower through 2020, but have since exhibited a modest upward trend.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

October 2023 Construction Spending

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Construction spending during October 2023 was estimated at a seasonally adjusted annual rate (SAAR) of $2,027.1 billion, 0.6% (±1.0%)* above the revised September estimate of $2,014.7 billion (originally $1,996.5 billion); expectations were for +0.3%. The October figure is 10.7% (±1.6%) above the October 2022 SAAR of $1,830.5 billion; the not-seasonally adjusted YoY comparison (shown in the table below) is +11.4%.

During the first 10 months of this year, construction spending amounted to $1,646.0 billion, 5.6% (±1.2%) above the $1,559.1 billion for the same period in 2022.

* 90% confidence interval includes zero. The U.S. Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

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Private Construction

Spending on private construction was at a SAAR of $1,579.3 billion, 0.7% (±0.8%)* above the revised September estimate of $1,567.9 billion (originally $1,555.9 billion):
- Residential. $884.4 billion, +1.2% (±1.3%)* of which
- Home improvement. $340.1 billion, +2.0% (-1.4% YoY);
- Nonresidential. $694.8 billion, +0.1% (±0.8%)*.

Public Construction

Public construction spending was $447.8 billion, 0.2% (±2.0%)* above the revised September estimate of $446.9 billion (originally $438.7 billion):
- Educational. $97.2 billion, +0.4% (±2.3%)*;
- Highway. $132.0 billion, -0.3% (±4.8%)*.

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Click here for a discussion of October’s new residential permits, starts and completions, and here for a discussion of new and existing home sales, inventories and prices.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.