Thursday, March 31, 2016

Job Cuts Increased 31 Percent in the First Quarter

Employers announced plans to cut 48,207 jobs in March, according to a report issued by Challenger, Gray & Christmas. March’s announced cuts were 21.7 percent below February’s total, but 31.7 percent above the year-ago rate. Cuts through the first quarter of 2016 were 31.8 percent higher than in the first quarter of 2015.

“Job cuts have slowed since surging in the first two months of the year, but the pace is still well above that of 2015,” Said John Challenger, CEO of Challenger, Gray & Christmas. “And it is not just the energy sector that is seeing heavier job cuts. Layoff announcements have increased significantly in the retail sector and computer sector as well. While it may be too early to sound the alarm bells, the upward trend outside of the energy sector is somewhat worrisome.”

During the first quarter, the energy sector announced 52,901 cuts, 39.9 percent higher than cuts during the same period last year. The retail and computer sectors also had significant increases in job cuts, with retail cuts increasing 41 percent and computer sector cuts increasing 148 percent from the first quarter of last year.

“What these sectors share in common is that they are all going through transformational changes,” said Challenger. “These changes are necessary and inevitable, but they come with a cost in the form of job loss.”

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Wednesday, March 30, 2016

ADP: 200,000 Jobs Added in March

The non-farm private sector added 200,000 jobs in March, according to the ADP National Employment Report, down from February’s downwardly revised total of 205,000. Growth in the services sector slowed slightly, while goods sector growth increased.

Small businesses with fewer than 50 employees added 86,000 jobs in March, up from 68,000 in February. Medium-sized businesses with 50-499 employees added 75,000 jobs, up from 60,000 in February. Large businesses added 39,000 jobs, approximately half of February’s total.

Goods producing employment rose by 9,000 jobs, up from 2,000 last month, amid gains in both construction and manufacturing.

Service providing employment rose by 191,000. The Professional and Business Services sector added 28,000 jobs, down from 51,000 in the previous month. The Trade Transportation and Utilities sector added 42,000 jobs, up from 24,000 in February.

“The Trade, Transportation and Utilities sector had its best month of employment gains since last June,” says Ahu Yildirmaz, VP and head of the ADP Research Institute. “Steady employment growth and accelerating wage growth in the workforce appear to be benefitting the Trade segment in particular.”

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Fed to “Proceed Cautiously”

In a speech to The Economic Club of New York, Federal Reserve Chair Janet Yellen said that the committee should proceed cautiously in adjusting monetary policy. “This caution is especially warranted because with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric.”

The Chair cited mixed domestic indicators, and concerns about global economic and financial developments in her speech, noting that foreign growth will likely be weaker than previously expected this year.

In addition, Yellen cited risks to the inflation outlook, noting that it had become “more uncertain since the turn of the year,” as foreign developments could delay the return of inflation to 2 percent. The Chair noted that these developments would “likely require a lower path for the federal funds rate than was anticipated in December.”

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Tuesday, March 29, 2016

Consumer Confidence Improved in March

The Conference Board’s Consumer Confidence Index increased in March, rising 2.2 points to 96.2 after falling in February.

The Present Situation Index fell 1.5 points to 113.5, while the Expectations Index rose 4.8 points to 84.7 in March.

“Consumers’ assessment of current conditions posted a moderate decline, while expectations regarding the short-term turned more favorable as last month’s turmoil in the financial markets appears to have abated,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening.”

Outlook for the labor market was favorable, as those anticipating more jobs in the coming months increased 0.7 points to 12.9 percent, while those expecting fewer jobs fell 1.4 points to 16.3 percent. Income expectations fell however, as 17.2 percent of respondents expected their income to increase, down from 17.7 percent in the previous month.

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Home Prices Continued to Grow in January

The 20-City Case-Shiller Composite Index increased 5.7 percent year-over-year in January, the same as in December. The 10-City Composite Index increased by 5.1 percent from the previous year, also the same increase as in the previous month. The National Index, which covers all nine census divisions increased 5.4 percent annually.

On a seasonally adjusted monthly basis, the National Index, 20-City Composite, and 10-City Composite all remained unchanged during January.

“While low inventories are boosting prices, financing continues to be a concern for some potential purchasers, particularly young and first time home buyers,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The issue is availability of credit for people with substantial student or credit card debt. While rising home prices are certainly a factor in deterring home purchases, individual financial positions are more important than local housing market conditions.”

Home prices rose in eleven of the twenty cities covered by the index, but fell in eight cities. San Francisco and Minneapolis saw home prices fall by 0.7 percent and 0.5 percent respectively, while Portland, San Diego and Miami saw prices increase by 0.4 percent.

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Monday, March 28, 2016

Personal Income and Consumption Rose Slightly in February

Personal income increased 0.2 percent, $23.7 billion, in February, according to the Bureau of Economic Analysis, down from a 0.5 percent gain in January. Personal consumption expenditures also increased, rising 0.1 percent, or $11.0 billion.

Real disposable income – personal income less personal taxes – increased 0.3 percent in February, the same as the January rate.

The personal savings rate – personal savings as a percentage of personal income – was 5.4 percent, up 10 basis points from January’s rate.

Wages and salaries fell $9.4 billion, compared to a $46.5 billion increase in the previous month. The majority of the decline was due to a $12.9 billion dollar drop in private sector wages. In contrast, government wages increased by $3.5 billion.

The price index for PCE fell 0.1 percent in February, compared to a 0.1 percent January increase. Excluding food and energy, the index increased by 0.1 percent.

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Friday, March 25, 2016

GDP Revised to 1.4 Percent in Fourth Quarter

Real GDP for the fourth quarter of 2015 grew at an annual rate of 1.4 percent, according to the Bureau of Economic Analysis’s third estimate. GDP was revised up from the second estimate of 1.0 percent growth. During the third Quarter, GDP grew at a rate of 2.0 percent. The fourth quarter’s deceleration in growth reflected slowdowns in nonresidential fixed investment and in state and local government spending, as well as lower personal consumption expenditures.

Consumption was the largest contributor to GDP, accounting for 1.66 percent of growth, down from 2.04 percent during the third quarter. Consumption spending grew by $68.3 billion in the fourth quarter, down from growth of $83.5 billion in the third.

Net exports were a significant drag on GDP, subtracting 0.14 percent from growth, as an $8.2 billion increase in services exports was not enough to offset a $19.9 billion decline in goods exports. Nonresidential fixed investment also underperformed, subtracting 0.27 percent from GDP.

Federal government spending increased during the quarter, contributing 0.15 percent to GDP. This was offset by a decline in state and local government spending, which fell 0.13 percent.

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Thursday, March 24, 2016

Durable Goods Orders Fell 2.8 Percent in February

New orders for manufactured durable goods fell 2.8 percent to $229.4 billion in February, according to the U.S. Census Bureau. The February increase followed a 4.2 percent increase in January. The majority of the month’s decrease was due to a 6.2 percent drop in new orders for transportation equipment. Excluding transportation, new orders decreased 1.0 percent.

New orders excluding defense fell 1.9 percent on the month, as orders of nondefense aircraft and parts and nondefense capital goods both fell significantly in February. Nondefense aircraft and parts orders fell 27.1 percent to $10.1 billion, while nondefense capital goods orders fell 7.5 percent to $72.7 billion.

Shipments of manufactured durable goods, down two of the last three months, fell 0.9 percent to $238.3 billion, following a 1.5 percent increase in January.

Inventories of manufactured durable goods fell 0.3 percent to $394.3 billion, marking the seventh decline in the last eight months. Inventories fell by 0.2 percent in January.

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Wednesday, March 23, 2016

New Home Sales Rose in February

New single family home sales rose to a seasonally adjusted annual rate of 512,000 in February, according to the U.S. Census Bureau. The February rate is 2.0 percent above the revised January rate of 502,000, but 6.1 percent below the year-ago rate of 545,000.

Sales were mixed across regions, rising 38.5 percent in the West, but falling 24.2 percent in the Northeast, 17.9 percent in the Midwest, and 4.1 percent in the South.

The median price of a new home was $301,400, up from $283,900 in January. The average price was $348,900, down from $363,400 in the previous month.

At the end of February, there was an estimated supply of 5.6 months at the current sales rate, unchanged from January’s reading.

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Monday, March 21, 2016

Existing Home Sales Fall after January High

Existing home sales fell 7.1 percent in February to a seasonally adjusted annual rate of 5.08 million, according to the National Association of Realtors (NAR). February’s reading follows January’s rate of 5.47 million units, a six month high.

“Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” said NAR Chief Economist Lawrence Yun. “The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages, and anxiety about the health of the economy are holding back a segment of would-be buyers.”

Annual sales of existing homes fell across all regions, dropping most sharply in the Northeast and Midwest, falling by 17.1 percent and 13.8 percent respectively. Sales in the West fell by 3.4 percent, and sales in the South fell by 1.8 percent.

The median existing home price increased to $210,800, a 4.4 percent increase from February 2015.

Distressed sales rose 1 point to 10 percent of sales in February. Seven percent of the month’s sales were foreclosures while 3 percent were short sales. On average, foreclosures and short sales sold for discounts of 17 percent and 16 percent respectively.

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Wednesday, March 16, 2016

FOMC: No Rate Hike in March

The Federal Reserve Open Market Committee (FOMC) decided to maintain the current target for the federal funds rate at 25-50 basis points, as the stance of monetary policy remains accommodative.

In a post meeting statement, the Committee noted that economic activity had been increasing at a moderate pace despite the risks posed by global economic and financial developments.

The release noted that inflation continued to run below FOMC objectives due to declines in energy prices and non-energy imports, but had picked up in recent months.

The Committee adjusted their economic projections, lowering the median federal funds rate estimates by 50 basis points in 2016 and 2017, 30 basis points in 2018, and 20 basis points in the long run. In addition, the committee altered their employment and GDP projections, revising their estimate of GDP growth down 20 basis points to 2.2 percent in 2016, and 10 basis points to 2.1 percent in 2017.

Unemployment projections were also revised from December, with estimates moving down 10 basis points to 4.6 percent in 2017, and 20 basis points to 4.5 percent in 2018.

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Industrial Production Fell in February

Industrial production fell 0.5 percent in February, largely due to declines in the indexes for utilities and mining. Total industrial production is now 1.0 percent below the year ago level.

The index for utilities fell 4.0 percent during the month, as unseasonably warm weather reduced demand for heating. Output for utilities is now 9.3 percent lower than it was in February 2015.

Mining output continued to fall in February, dropping 1.4 percent. Mining output has fallen at an average monthly rate of nearly 1.3 percent for the past six months.

Manufacturing output increased by 0.2 percent, largely due to an increase in durable manufacturing. Most major durable goods industries, such as machinery, and primary metals either advanced during the month or were little changed.

Capacity utilization fell to 76.7 percent, down 40 basis points from January, but up 1.3 percent on the year.

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Housing Starts Rise in February

Housing starts rose in February to a seasonally adjusted annual rate of 1.178 million, 5.2 percent above January’s revised estimate of 1.120 million, and 30.9 percent above the February 2015 rate. Housing starts have remained above the 1.0 million rate for 11 consecutive months.

Housing activity grew in three of the four regions, with starts rising 26.1 percent in the West, 19.9 percent in the Midwest and 7.1 percent in the South. Starts fell sharply in the Northeast however, falling by 51.3 percent.

New building permits dropped during the month, falling 3.1 percent below the January’s rate to 1.167 million, but grew 6.3 percent from February 2015.

Housing completions fell in February to a seasonally adjusted annual rate of 1.016 million, 4.2 points below January’s rate, but up 17.5 points from a year ago.

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Gas Prices Bring down CPI in February

The Consumer Price Index fell 0.2 percent in February, largely due to declines within the energy index, which offset increases in other indexes. Over the last 12 months, the index for all items increased 1.0 percent before seasonal adjustment.

The energy index declined 6.0 percent from January due to a 12.5 percent decline in energy commodities, a 13.0 percent decline in gasoline and a 2.9 percent decline in fuel oil. Over the past 12 months, the energy index declined 12.5 percent due to declines in each energy component.

Prices for all items less food and energy rose 0.3 percent, consistent with January. Most indexes rose, including shelter, apparel and healthcare related sectors. The communication index was one of the few to decrease during the month, falling 0.5 percent. The index for all items less food and energy increased 2.3 percent year-over-year, and has increased steadily from the 1.7 percent rate in May 2015.

The food index increased 0.2 percent during the month, as the food at home index rose after declining in previous months. Over the past 12 months, the food index has increased by 0.9 percent.

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Tuesday, March 15, 2016

Builder Confidence Unchanged in March

The National Association of Home Builders/Wells Fargo Housing Market Index held steady at 58 points in March, unchanged from February’s reading.

“While builder sentiment has been relatively flat for the last few months, the March HMI reading correlates with NAHB’s forecast of a steady firming of the single-family sector in 2016,” said NAHB Chief Economist David Crowe. “Solid job growth, low mortgage rates and improving mortgage availability will help keep the housing market on a gradual upward trajectory in the coming months.”

Index components were mixed during March. Current sales conditions were unchanged at 65, after falling three points in February. The buyer traffic index rose four points to 43, while the index measuring sales expectations fell three points to 61.

The three-month moving averages for regional HMI were mixed. The Midwest posted a one point gain to 58, while the West fell three points to 69. The Northeast fell one point to 46, while the South was unchanged at 59.

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Retail Sales Fell 0.1 Percent in February

There were $447.3 billion of retail and food service sales in February (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), down 0.1 percent from January, but up 3.1 percent from a year ago, according to the U.S. Census Bureau.

Core retail sales – excluding automobiles and parts – fell 0.1 percent in February, up from a 0.4 percent decrease in January. Year-over-year, core sales increased 2.1 percent. Retail trade sales fell 0.3 percent on the month, and 2.7 percent on the year.

Sales at gasoline stations declined 4.4 percent from the previous month and 15.6 percent from a year ago. Sales at motor vehicle and parts dealers fell 0.2 percent from January, but improved 6.8 percent from February 2015.

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Producer Prices Fell in February

Producer prices fell 0.2 percent in February, seasonally adjusted, after advancing 0.1 percent in January, according to the U.S. Bureau of Labor Statistics. February’s decrease was attributable to a fall in prices for final demand goods.

Prices for final demand goods fell 0.6 percent, marking the third consecutive month of decline. The majority of the decrease could be traced to a 3.4 percent decline in prices for final demand energy. Prices for final demand foods also moved down, falling 0.3 percent. Excluding food and energy, the index for final demand goods increased 0.1 percent.

The index for final demand services was unchanged, following three consecutive advances. A 0.4 percent decline in the index for final demand trade services and a 0.7 percent decline in prices for final demand transportation and warehousing, were offset by a 0.3 percent rise in prices for final demand services, less trade, transportation and warehousing.

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Thursday, March 10, 2016

Household Net Worth Rose in Fourth Quarter

Household net worth rose $1.6 trillion during the fourth quarter of 2015 to $86.8 trillion, a 1.9 percent increase from the previous quarter and a 3.1 percent increase from a year ago.

Household holdings of nonfinancial assets increased during the fourth quarter, growing 1.7 percent. The majority of this increase came from real estate holdings, which increased by $458.3 billion. Growth in wealth derived from consumer durable goods increased by $54.7 billion, compared to a $41.4 billion increase in the third quarter.

Household and non-profit holdings of financial assets increased 1.8 percent from the previous quarter. The increase was largely due to increases in deposits and corporate equities, which grew a combined total of $539.9 billion during the quarter. Equity in noncorporate businesses also increased during the period. In contrast, loans decreased by approximately $25.7 billion during the quarter.

Household nonfinancial debt increased at an annual rate of 3.4 percent in the fourth quarter, as consumer credit grew 5.9 percent. Mortgage debt grew at a 1.5 percent annual rate. The household savings rate rose to 5.1 percent during the fourth quarter, up from 5.0 percent in the third.

Nonfinancial business debt rose at an annual rate of 5.0 percent, virtually the same as in the previous quarter’s rate of increase.

Federal government nonfinancial debt increased at a rate of 18.5 percent during the fourth quarter, largely due to the restoration of funds which were depleted as part of the Treasury’s “extraordinary measures” during the 2015 debt limit impasse.

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Tuesday, March 8, 2016

Small Business Optimism Slipped in February

The NFIB Small Business Optimism Index fell 1 point to 92.9 in February. Six of the ten components posted declines on the month, while four components were unchanged.

Labor market conditions weakened in February, as 49 percent of small businesses reported hiring or trying to hire, down from 52 percent in January. Forty-two percent of employers reported few or no qualified applicants for available positions, down 3 percentage points from the previous month. A seasonally adjusted net 10 percent of employers plan to create new jobs, down 1 point from January and 5 points from December.

The percent of owners reporting higher sales in the past three months rose to a net negative 6 percent, up 1 point from January. Eleven percent of small business owners reported weak sales as their top business problem, down 1 point from the previous month.

Capital spending continued to slow, with 58 percent of businesses reporting capital outlays, down 3 points on the month. The percent of owners planning capital outlays in the next 3 to 6 months fell 2 points to 23 percent.

Credit conditions deteriorated slightly, as 4 percent of owners reported that all their borrowing needs were unmet, up 1 point from January. Fifty-two percent of respondents explicitly said they did not want a loan, up 2 points on the month. Just one percent of owners cited financing as their top business problem, compared to 5 percent during the great recession.

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Monday, March 7, 2016

Consumer Credit Grew 3.6 Percent (SAAR) in January

Consumer Credit increased at a seasonally adjusted annual rate of 3.6 percent in January, rising $10.5 billion (compared to $6.4 billion in December) to $3.54 trillion.

Revolving credit fell at an annual rate of 1.4 percent ($1.1 billion) to $935.3 billion, marking the first decline in revolving credit since February of 2015.

Non-revolving credit increased at an annual rate of 5.4 percent, or $11.6 billion, compared to December’s increase of $900 million. Total outstanding non-revolving credit now stands at $2.61 trillion.

Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 37 percent of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25 percent and 24 percent, respectively, of outstanding non-revolving credit.

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Friday, March 4, 2016

Foreign Trade Deficit Widened in January

The U.S. international trade deficit widened in January to $45.7 billion, up $1.0 billion from December. The widening of the balance was driven by a $3.8 billion decrease in exports, partially offset by a $2.8 billion decrease in imports.

The goods deficit increased $1.1 billion to $63.7 billion, while the services surplus increased $0.1 billion to $10.0 billion.

Exports of goods fell $4.0 billion to $116.9 billion, driven largely by a $1.2 billion decrease in capital goods, as well as decreases in exports of consumer goods and fuel oil. Exports of services grew $0.2 billion to $59.6 billion, largely on account of travel and transportation.

Imports of goods fell $2.9 billion to $180.6 billion, largely due to a $1.8 billion fall in crude oil imports, as well as a $1.2 billion decline in capital goods imports.

Imports of services increased less than $0.1 billion to $41.5 billion, due to marginal increases in travel and other business services.

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242,000 Jobs Added in February, Unemployment Holds at 4.9 Percent

Total nonfarm payroll employment rose by 242,000 in February, up from last month’s upwardly revised total of 172,000. The national unemployment rate was unchanged at 4.9 percent.

The services sector added 245,000 jobs, up from 153,000 in January. The majority of new service jobs were in education and healthcare, which added 86,000. Retail trade employment continued to grow, adding 54,900 jobs during the month. Over the past 12 months, retail trade has added 339,000 jobs.

Goods producing industries shed jobs during the month. Employment in mining and logging fell by 18,000, and has lost 171,000 jobs since peaking in September 2014. The manufacturing sector also shed jobs in February, as employment in both durable and nondurable goods manufacturing fell by 12,000 and 4,000 jobs respectively. Construction employment was a bright spot within goods producing industries, adding 19,000 jobs in February. Over the past 12 months, the construction industry has added 253,000 jobs.

The civilian labor force participation rate moved up slightly to 62.9 percent in February. The number of long-term unemployed, those jobless for 27 weeks or more, edged up slightly to 2.2 million in February. The number of discouraged workers, those who gave up looking for work was 599,000, down 133,000 from a year ago.

Average hourly earnings declined by 3 cents to $25.35 in February after a 12 cent increase last month. Year-over-year, earnings have grown by 2.2 percent.

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Thursday, March 3, 2016

ISM: Non-Manufacturing Index Slips in February

The ISM Non-Manufacturing Business Index fell to 53.4 points in February, down 0.1 points from January’s rate. Despite the decline in the index, February marked the 73rd consecutive month of growth as indicated by readings over 50. Fourteen non-manufacturing industries reported growth in February, while three reported contraction.

Growth in the Business Activity Index increased to 57.8, up 3.9 points from January’s reading. Respondents noted that although the economy is in slow growth mode, local markets remain competitive. Twelve of the eighteen industries reported an increase in business activity, while four reported a decline.

Non-manufacturing employment fell for the first time since February 2014, as the index slipped 2.4 points to 49.7. Respondents suggested that flat revenue and organizational streamlining led to workforce reductions.

The New Orders Index registered 55.5, down 1.0 points from January. Respondents reported that new clients and seasonal growth contributed to business expansion during the month.

Supplier deliveries slowed for the second consecutive month, as the index moved down 1.0 points to 50.5 (readings above 50 for this index indicate slower deliveries). Five industries reported slowed deliveries, equal to the number of industries reporting faster deliveries.

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Manufactured Goods Orders Rose 1.6 Percent in January

New orders for manufactured goods increased 1.6 percent to $463.9 billion in January, following a 2.9 percent decline in December, according to the U.S. Census Bureau. This was the second increase in the last six months. Excluding transportation, new orders fell by 0.2 percent to $384.3 billion.

New orders for manufactured durable goods grew 4.7 percent to $237.1 billion in January, following a 4.6 percent decrease in December. Orders for transportation equipment led the increase, rising 11.4 percent to $79.6 billion.

Shipments of manufactured durable goods increased 2.0 percent to $241.6 billion, after a 1.8 percent decrease in December. Shipments excluding transportation fell 0.7 percent, compared to a 0.5 percent decline in the previous month. Shipments of nondurable goods fell for the seventh consecutive month, dropping 1.4 percent to $226.8 billion. Declines in shipments of petroleum and coal products drove the decrease.

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Energy Sector Continues to Cut Jobs

Employers announced plans to cut 61,599 jobs in February, according to a report issued by Challenger, Gray & Christmas. February’s announced cuts were 18 percent below January’s total, but 22 percent above the year-ago rate. The planned cuts were led by the energy sector, which has announced plans to shed 45,154 jobs in the first two months of the year.

“Low oil prices continue to take a toll on workers in the energy and industrial goods sectors,” said John A. Challenger, CEO of Challenger, Gray & Christmas. “The major concern is that the job losses in cities and towns that rely heavily on oil production will begin to drag down other parts of the local economy. Shockingly, we have not seen a precipitous rise in unemployment in the many cities that were benefitting from the recent oil boom, suggesting that the job losses are contained to the energy sector for the moment.”

The technology sector also experienced increased job cuts. So far this year, 16,006 cuts have been announced by computer firms, a 143 percent increase from the first two months of 2015.

“There will always be heavy churn in the tech sector. It is an area that embodies change, trial and error, and constant reinvention,” said Challenger. “Even among the more established firms in the industry, we see workforce volatility, as they branch into new products or services, some of which may or may not succeed.”

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Wednesday, March 2, 2016

Beige Book: Labor Market Improves, Growth in Manufacturing Mixed

Economic activity expanded across most of the twelve Federal Reserve Districts, according to the February edition of the Federal Reserve Beige Book. Six Districts reported moderate to modest growth, while conditions in New York and Dallas were essentially flat. Kansas City reported a moderate decline in activity.

Labor markets continued to improve, as the majority of Districts reported modest growth. Conditions in Atlanta, Dallas and San Francisco were mixed however, amid decreased employment in the energy sector. Contacts in several cities reported difficulty filling low-skilled positions, as well as difficulty finding skilled workers in IT, engineering and healthcare. Wages increased as most Districts experienced slight to strong wage growth.

Banking conditions were positive, as loan demand increased in most Districts. St. Louis and Atlanta reported strong and healthy demand for mortgage lending and refinancing. In the Dallas region, lending grew in most categories, but contacts indicated that low oil prices were hurting demand. Credit quality was stable in most Districts. However, the San Francisco District noted that low commodity prices could undermine asset quality in the months ahead.

Consumer spending picked up in recent months, with retailers reporting sales that were slightly higher than a year ago. Reports about the effect of lower gas prices on spending were mixed, as some contacts attributed the lower prices to increased consumer spending, while others were disappointed at the extent to which low gas prices were increasing spending.

Manufacturing activity was mixed, with about half of Districts reporting flat to moderate growth, and half reporting slight to moderate declines. Many of the declines were attributed to weak energy sector demand, as well as the strengthening dollar and weakening global outlook negatively affecting exports.

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ADP: 214,000 Jobs Added in February

The non-farm private sector added 214,000 jobs in February, according to the ADP National Employment Report, an increase from January’s downwardly revised estimate of 193,000. The services sector saw increased growth on the month, while growth in goods producing employment trailed off.

Small businesses, businesses with less than 50 employees added 76,000 employees in February, compared to 75,000 in January. Medium-sized businesses with 50-499 employees added 62,000 jobs, down from 74,000 in January. Large businesses added 76,000 jobs, up from January’s total of 44,000.

Goods producing employment rose by 5,000 jobs after rising by 19,000 last month. Gains in construction sector employment, were partially offset by a 9,000 job loss in manufacturing.

Service-providing employment rose by 208,000 in February, up from 174,000 last month. Professional and business services contributed 59,000 jobs to the total, while the trade transportation and utilities sector grew by 20,000.

“Despite the turmoil in the global financial markets, the American job machine remains in high gear,” said Mark Zandi, chief economist of Moody’s Analytics. “Energy and manufacturing remain blemishes on the job market, but other sectors continue to add strongly to payrolls. Full-employment is fast approaching.”

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Tuesday, March 1, 2016

Contraction in Manufacturing Industry Slowed

The ISM Manufacturing Index rose to 49.5 points in February – up 1.3 points from January’s reading of 48.2. February’s reading marked the fourth consecutive monthly decline in the manufacturing sector, as readings below 50 indicate contraction in the manufacturing industry. Of the eighteen industries, nine reported growth, while seven reported contraction. Business sentiment was mixed as some respondents reported solid domestic sales, but weak international demand.

The employment index registered 48.5 in February, an increase of 2.6 points, but the third consecutive month of contraction. Six industries including textiles, furniture and miscellaneous manufacturing reported growth, while eight industries including petroleum, apparel and transportation equipment reported contraction.

The index of new orders registered 51.5, unchanged from January. Twelve industries reported growth, while four industries reported a decrease in new orders.

Export orders fell 0.5 points to 46.5 in February, indicating contraction in export orders for the second consecutive month. Five industries including primary metals, miscellaneous manufacturing and machinery reported growth in orders, while seven industries reported declines.

The inventories index increased 1.5 points to 45.0 in February, indicating that raw materials inventories are contracting at a slower pace. Inventories have contracted for eight consecutive months now.

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Construction Spending Rose 1.5 Percent in January

Construction spending rose 1.5 percent in January to $1,140.8 billion (SAAR). December’s spending estimate was revised up to $1,123.5 billion. January’s figure is 10.4 percent above January 2015’s estimate of $1,033.3 billion.

Total private construction rose to $831.4 billion, 0.5 percent above December’s estimate of $827.3 billion.

Private residential construction was at a seasonally adjusted annual rate of $433.2 billion, largely unchanged from the previous month’s rate.

Private nonresidential construction rose 1.0 percent to a seasonally adjusted rate of $398.2 billion, as construction in lodging, manufacturing and power posted gains.

Public construction grew 4.5 percent to $309.4 billion (SAAR), largely due to a 14.7 percent increase in highway and street construction. In contrast, spending on education declined by 1.9 percent for the month.

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