Wednesday, June 29, 2016

Personal Income and Consumption Rose in May

Personal income increased 0.2%, $37.1 billion in May, according to the Bureau of Economic Analysis, down from a 0.5% gain in April. Personal consumption expenditures also increased, rising 0.4% or $53.5 billion. Real disposable income – personal income less personal taxes – increased 0.1%, compared with a 0.2% increase in April.

The personal savings rate – personal savings as a percentage of personal income – was 5.3%, down from 5.4% in the previous month.

Wages and salaries increased $14.7 billion, compared to a $40.4 billion increase in April. The majority of the gain was due to an $11.8 billion increase in private sector wages and salaries. Government wages and salaries also increased, rising $2.9 billion.

The price index for PCE increased 0.2% in May, compared with a 0.3% April increase. Excluding food and energy, the index also increased by 0.2%.

Read the BEA release.
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Tuesday, June 28, 2016

Consumer Confidence Improved in June

The Conference Board Consumer Confidence Index rose to 98.0 in June, up 5.6 points from the previous month.

The Present Situation Index rose 5.1 points to 118.3, while the Expectations Index rose 6.0 points to 84.5.

“Consumers were less negative about current business and labor market conditions, but only moderately more positive, suggesting no deterioration in economic conditions, but no strengthening either,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Overall, consumers remain cautiously optimistic about economic growth in the short-term.”

The labor market outlook was more favorable in June, as the share of consumers expecting more jobs in the coming months increased 1.7 points to 14.2%, while those anticipating few jobs decreased 0.3 points to 17.9%. Income expectations improved as well, as 18.2% of consumers expected their incomes to increase within the coming months, up from 16.5% in May.

Read the release.
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Home Prices Rose Broadly in April

The 20-City Case-Shiller Composite Index increased 5.4% year-over-year in April, just below March’s rate of 5.5%. The 10-City Composite Index increased by 4.7% annually, down from a 4.8% increase in the previous month. The National Index, which covers all nine Census divisions increased by 5.0%, down from 5.1% in March.

On a seasonally adjusted monthly basis, the 20-City Composite increased by 1.1%, the 10-City Composite increased by 1.0%, and the National Index increased by 0.1%.

“The housing sector continues to turn in a strong price performance with the S&P/Case-Shiller National Index rising at a 5% or greater annual rate for six consecutive months,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “However, the outlook is not without a lot of uncertainty and some risk. Last week’s vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months.”

Home prices rose in seventeen of the twenty cities covered by the index. Detroit saw the largest gain with prices increasing 1.0% on a seasonally adjusted basis, while home prices in Cleveland fell by 0.4%.

Read the S&P release.
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GDP Revised up to 1.1% in First Quarter

Real GDP for the first quarter of 2016 grew at an annual rate of 1.1%, according to the Bureau of Economic Analysis’s third estimate. First quarter GDP was revised up from the second estimate of 0.8% growth, as consumption was revised downward and exports increased more than previously estimated. During the fourth quarter of 2015, real GDP grew at a rate of 1.4%.

Personal consumption’s GDP contribution was revised down to 1.0% of growth, compared to a 1.3% contribution in the previous estimate. Consumption spending grew by $42.2 billion during the first quarter of 2016.

The drag from fixed investment on GDP was revised down to 0.1% from 0.3% in the previous estimate. Non-residential fixed investment subtracted 0.6% from growth, which was partially offset by a 0.5% contribution from residential fixed investment.

Net exports were revised from a negative contribution of 0.2% to a positive contribution of 0.1%, as exports increased by $1.8 billion during the quarter.

Read the BEA release.
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Friday, June 24, 2016

Consumer Sentiment Fell in May

Consumer sentiment fell to 93.5 in June, down 1.2 points from the previous month, according to the University of Michigan Consumer Sentiment Index.

The Current Economic Conditions Index improved 0.9 points to 110.8, while the Index of Consumer Expectations fell 2.5 points to 82.4.

“Consumer were a bit less optimistic in late June due to rising concerns about prospects for the national economy,” said Richard Curtin, Chief Economist of UM Surveys of Consumers.

“While no recession is anticipated, consumers increasingly expect a slower pace of economic growth in the year ahead. Importantly, the persistent strength in personal finances will keep the level of consumer spending at relatively high levels and continue to support uninterrupted economic expansion.”

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Durable Goods Orders Fell in May

New orders for manufactured durable goods fell 2.2% to $230.7 billion in May, following a 3.3% April increase, according to the U.S. Census Bureau. The majority of the month’s decrease was driven by a 5.6% decline in new orders for transportation equipment. Excluding transportation, new orders fell 0.3%.

New orders excluding defense decreased 0.9% on the month, as orders of nondefense capital goods fell 0.8% to $68.5 billion, which was partially offset by a 1.0% increase in new orders for nondefense aircraft and parts.

Shipments of manufactured durable goods fell 0.2% in May to $231.7 billion, after a 0.4% April increase.

Inventories of manufactured durable goods fell 0.3% to $382.5 billion, following a 0.4% April decrease. Inventories have now declined for ten of the last eleven months.

Read the Census release.
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Thursday, June 23, 2016

New Home Sales Fell in May

New single-family home sales fell to a seasonally adjusted annual rate of 551,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. The May rate is 6.0% below the revised April estimate of 586,000, but 8.7% above the May 2015 estimate.

Sales were mixed across regions, falling 33.3% in the Northeast, 0.9% in the South and 15.6% in the West. In contrast, sales in the Midwest rose by 12.9%.

The median price of a new home was $290,400, down 9.3% from April. The average price was $358,000, down 5.1% from the previous month.

At the end of May there was an estimated supply of 5.3 months at the current sales rate, up from a 4.9 month supply in April.

Read the Census/HUD release.
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Wednesday, June 22, 2016

Existing Home Sales Reach Highest Pace in Nine Years

Existing home sales rose 1.8% in May to a seasonally adjusted annual rate of 5.53 million, the highest pace in nine years according to the National Association of Realtors (NAR). The May reading follows April’s downwardly revised rate of 5.43 million. Annual sales of existing homes were mixed across regions, rising 4.1% in the Northeast, 4.6% in the South and 5.4% in the West, but falling 6.5% in the Midwest.

“This spring’s sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” said NAR Chief Economist Lawrence Yun. “With first-time home buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now.”

The median existing-home price moved up to $239,700, a 4.7% increase from May 2015.

Distressed sales slipped 1 point to 6% of sales in May. Five percent of May sales were foreclosures, while 1% were short sales. On average, foreclosures and short sales sold for discounts of 12% and 11% respectively.

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Friday, June 17, 2016

Housing Starts Slipped in May

Housing starts fell to a seasonally adjusted annual rate of 1.164 million in May, 0.3% below the revised April estimate of 1.167 million, but 9.5% above the May 2015 rate. Housing starts have remained above the 1.0 million rate for 14 consecutive months.

Housing activity was mixed across regions in May. Starts fell 33.3% in the Northeast and 2.5% in the Midwest, but rose 1.5% in the South and 14.4% in the West.

New building permits rose during the month, rising 0.7% above April’s rate to 1.138 million. New permits, however, declined year-over-year, falling 10.1% below the May 2015 rate.

Housing completions rose in May to a seasonally adjusted annual rate of 0.988 million, 5.1% above April’s rate but down 3.5% from a year ago.

Read the Census release.
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Thursday, June 16, 2016

Builder Confidence Increased in June

The National Association of Home Builders/Wells Fargo Housing Market index rose 2 points to 60 points in June, after remaining unchanged over the previous four months.

“Rising home sales, an improving economy and the fact that the HMI gauge measuring future sales expectations is running at an eight month high are all positive factors indicating that the housing market should continue to move forward in the second half of 2016,” said NAHB Chief Economist Robert Dietz.

Index components posted gains in June. The index measuring sales conditions rose 1 point to 64, the index measuring buyer traffic rose 3 points to 47 and the index measuring sales expectations in the next six months rose 5 points to 70.

The three month moving averages for regional HMI scores varied. The Northeast fell 2 points to 39, the Midwest fell 1 point to 57, while the West rose 1 point to 68 and the South rose 2 points to 61.

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CPI Increased 0.2% in May

The consumer price index increased 0.2% in May, as the indexes for energy and all items less food and energy rose during the month. Over the last twelve months, the all items index rose 1.0% before seasonal adjustment.

The energy index increased for the third consecutive month, rising 1.2%. The gasoline index drove the increase, rising 2.3% after an 8.1% increase in April. Fuel oil and natural gas prices also increased, rising 6.2% and 1.7% respectively.

The food index fell 0.2% following a 0.2% gain in April. Prices for food at home fell 0.5%, the fifth decline in the past seven months. Food away from home also fell 0.5% in May.

Prices for all items less food and energy increased 0.2%, the same increase as in April. The advance was primarily due to a rise in the shelter index, which increased 0.4%, its largest advance since February 2007.

Read the BLS release.
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Wednesday, June 15, 2016

FOMC: No Rate Hike as Labor Market Slows

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

In a post meeting statement, the Committee noted that growth in the labor market has slowed, and market-based measures of inflation compensation declined during the intermeeting period. During the press conference, Federal Reserve Chair Janet Yellen cited global risks to the U.S. economy, noting that the EU referendum in the United Kingdom “could have consequences in turn for the U.S. economic outlook.”

The Committee adjusted their economic projections, lowering the median funds rate estimates by 30 basis points in 2017, and 60 basis points in 2018. The estimated long-run median also fell by 30 basis points. In contrast, the Committee revised their core PCE estimates upward, raising the estimates by 10 basis points for the present year and in 2017.

Read the FOMC statement.
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Industrial Production Fell in May

Industrial production fell 0.4% in May after rising 0.6% in April, according to the Federal Reserve. The decrease was largely due to declines in the manufacturing and utilities index, which were partly offset by a small gain in mining. Over the last 12 months, industrial production fell 1.4%.

Mining output rose 0.2% after eight consecutive months of declines. The mining increase was due to a rebound in coal mining for the month of May. Oil and gas extraction were largely unchanged for the month.

The utilities index fell 0.1%, as an increase in electrical output was partially offset by a gain in natural gas utilities.

Manufacturing fell 0.4%, in large part due to a 0.7% decline in the production of durable goods. Nondurable goods production was little changed during the month.

Capacity utilization fell to 74.9%, down 40 basis points from the previous month, but up 0.8% from a year ago.

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Producer Prices Rose 0.4% in May

Producer prices rose 0.4% in May, seasonally adjusted, after rising 0.2% in April, according to the U.S. Bureau of Labor Statistics. The majority of May’s increase was attributable to an increase in prices for final demand goods. Over the past 12 months, producer prices fell 0.1%.

Prices for final demand goods moved up 0.7%, the third increase in the past ten months. Approximately one third of the increase was due to a rise in gasoline prices which advanced 6.6%. Excluding food and energy, prices for final demand goods increased by 0.3%.

The index for final demand services rose 0.2% after moving up 0.1% in April. Most of the increase was due to margins for final demand trade services which advanced 1.2%. In contrast, prices for final demand services excluding trade, transportation and warehousing fell 0.2%. Prices for final demand transportation and warehousing services fell 0.6%.

Read the BLS release.
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Tuesday, June 14, 2016

Small Business Optimism Slowed in May

The NFIB Small Business Optimism Index increased 0.2 points in May, rising to 93.8. Four of the ten components posted gains on the month, while four declined. The entire gain in the index was due to a 5 point increase in Expected Business Conditions which remains 9 points below its year ago level.

Labor market conditions improved as 56% of small business owners reported hiring or trying to hire, up from 53% in April. Forty-eight percent of employers reported few or no qualified applicants for available positions, up 2 percent from the previous month. A seasonally adjusted net 12% of employers plan to create new jobs, up 1 point from April.

The percent of owners reporting higher sales in the past three months fell 2 points to a net negative 8%. Fourteen percent of small business owners reported weak sales as their top business problem, down 3 points from the previous month.

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

Credit conditions deteriorated were unchanged, as 4% of owners reported that all their borrowing needs were not met. Fifty-two percent of respondents explicitly said they did not want a loan. Only 1% of owners cited financing as their top business problem, down from 2% in April.

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Retail Sales Rose 0.5% in May

There were $455.6 billion of retail and food service sales in May (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), up 0.5% from the previous month and 2.5% from a year earlier, according to the U.S. Census Bureau.

Core retail sales – excluding automobiles and parts – increased 0.4% after rising 0.8% in the previous month. Year-over-year core sales increased by 2.7%.

Retail trade sales rose 0.4% on the month compared to a 1.4% rise in April, and rose 2.0% from a year ago.

Sales at gasoline stations increased 2.1% in May, but were 9.5% lower than a year ago. Sales at department stores fell 0.9% on the month, and were 5.8% lower than in May 2015.

Read the Census release.
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Thursday, June 9, 2016

Household Net Worth Rose in the First Quarter

Household net worth rose in the first quarter of 2016 to $88.1 trillion, a 1.0% increase from the previous quarter and a 2.4% increase from a year ago.

Household holdings of nonfinancial assets increased during the first quarter, growing 1.8%. The majority of this increase came from real estate holdings, which increased by $498.4 billion. Growth in wealth derived from consumer goods increased by $53.1 billion, compared to a $52.1 billion increase in the fourth quarter.

Household and non-profit holdings of financial assets increased 0.4% from the previous quarter. The increase was largely due to increases in deposits and loans, which grew a combined total of $136.9 billion during the quarter. Holdings of debt securities and corporate equities declined, falling by a total of $222.5 billion.

Household nonfinancial debt increased at an annual rate of 2.7% during the first quarter, as consumer credit grew 6.1%. Mortgage debt grew at a 1.6% annual rate. The household savings rose to 5.7%, up from 5.3% in the fourth. Nonfinancial business debt rose at an annual rate of 7.9%, up from a 5.3% rate in the previous quarter.

Federal government nonfinancial debt increased at a rate of 4.6%, down from a rate of 18.5% in the previous quarter which was due to “extraordinary measures” associated with the 2015 debt limit impasse. State and local government nonfinancial debt increased at an annual rate of 2.2.

Read the Federal Reserve release.
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Tuesday, June 7, 2016

Consumer Credit Grew 4.5% (SAAR) in April

Consumer credit increased at a seasonally adjusted annual rate of 4.5% in April, down from a 9.6% increase in March. Total outstanding credit rose $13.4 billion during the month (compared to $28.4 billion in March) to $3.60 trillion.

Revolving credit rose at an annual rate of 2.1% ($1.6 billion) to $951.5 billion, compared to a 13.3% increase in March.

Non revolving credit rose at an annual rate of 5.4%, or $11.8 billion, compared to March’s increase of 8.2%. Total outstanding non-revolving credit now stands at $2.65 trillion.

Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 37% of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25% and 23%, respectively, of outstanding non-revolving credit.

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Monday, June 6, 2016

Bank Economists See Rebound After Slow First Quarter

The U.S. economy is expected to overcome a sluggish start to 2016 and turn in a steady full year performance, according to the Economic Advisory Committee of the American Bankers Association. The group forecasts inflation-adjusted GDP growth of 1.9 percent this year and 2.1 percent in 2017.
"Ill winds from the East hindered the markets and the expansion at the outset of the year," said Carl Tannenbaum, chairman of the group and chief economist of Northern Trust. "But moderating turbulence from emerging markets and the sustained thrust of American consumers should put the U.S. economy back on course."
The committee, which includes 16 chief economists from among the largest North American banks, believes that a rising dollar and slackening global trade lowered real GDP growth in 2015 but expects this force to be less of a drag this year.
"Low oil prices, slower international sales and an elevated level of global uncertainty have led many firms to cut back on capital expenditures," noted Tannenbaum. "This will be a limiting factor for the economy this year, but should lead to catch-up investments that stimulate growth in 2017."
The group forecasts a sluggish 0.4 percent increase in capital investments in 2016, but anticipates a recovery to 3.1 percent growth next year.
"Fortunately, consumption will keep us going," Tannenbaum said.  "Spending has proven resilient throughout the current expansion."
The group expects consumer spending growth to slow from 2.7 percent last year, but to hold at 2.2-2.4 percent this year and next.  This maintains a positive contribution to GDP, mitigating an expected moderation in inventory accumulation throughout the economy.
"Households are fundamentally healthy thanks to rising income, job gains and stronger balance sheets," Tannenbaum said. 
The group expects that 2.2 million jobs will be added this year, pushing wages up 2.6 percent and the national unemployment rate down to 4.8 percent, very low by historical standards.
Housing is expected to be another driving force, according to the group.  With rising home prices and still-low mortgage rates, residential investment is expected to rise 8.5 percent this year and 4.6 percent next year.
According to the group, diminishing labor market slack will cause inflation to converge to the Fed’s 2 percent objective.  The core PCE price index is not expected to exceed this level before the end of 2017.  This should allow the Federal Reserve to implement a gradual series of increases in the federal funds rate.
"Although the economy is growing near its long-run potential and inflation is headed toward the 2 percent objective, persistent consumer and business uncertainty is likely to keep the Fed from raising rates aggressively,” said Tannenbaum. 
The group expects the Federal Reserve to raise its federal funds target zone two times over the course of 2016, from 0.25-0.50 percent at present to 0.75-1.00 percent.
The bank economists expect the measured pace of Fed rate hikes and continued global demand for U.S. government bonds to keep long-term interest rates low. The group's consensus is that the 10-year Treasury rate will rise from 1.8 percent at present to 2.1 percent at year-end, and that mortgage rates will increase from 3.6 percent to 3.9 percent over the same period.
While the consensus calls for sustained growth, the committee sees risks to the outlook as skewed toward the downside. 
"The largest threats are developments globally and the impact these could have on exports and financial markets," said Tannenbaum. 
The committee sees sustained strength in the quality and availability of bank loans. Delinquency and charge-off rates will remain near historical lows. Consumer bank credit is expected to grow 6.1 percent and business bank credit 9.0 percent over the course of this year.
"Banks are in an excellent position to support continued expansion," Tannenbaum said.

Click here for detailed forecast numbers.

Friday, June 3, 2016

Manufactured Goods Orders Rose 1.9% in April

New orders for manufactured goods increased 1.9% to $460.5 billion in April, following a 1.7% March increase, according to the U.S. Census Bureau. This was the third increase in the last four months.

New orders for manufactured durable goods increased 3.4% to $236.2 billion, following a 2.0% March increase. Orders for transportation equipment led the increase, rising 8.7% to $86.9 billion.

Shipments of manufactured durable goods increased 0.5% to $232.5 billion after falling in the previous two months. Transportation equipment led the increase, rising 1.1% to $80.8 billion. Excluding transportation, shipments increased 0.4% during the month, compared to a 0.9% increase in March.

Inventories of manufactured durable goods, down nine of the last ten months, fell 0.1% to $384.5 billion, following a 0.2% decrease in March.

Read the Census release.
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Foreign Trade Balance Widened in April

The U.S. international trade deficit increased in April to $37.4 billion, up $1.9 billion from March, according to the Census Bureau and the Bureau of Economic Analysis. The widening of the balance was driven by a $4.5 billion increase in imports, partially offset by a $2.6 billion increase in exports.

The goods deficit increased $1.4 billion to $58.8 billion, while the services surplus increased $0.5 billion to $21.4 billion.

Exports of goods moved up $2.9 billion to $120.1 billion, driven largely by a $1.8 billion increase in exports of industrial supplies and materials. Exports of services fell $0.3 billion to $62.7 billion, due to decreases in travel and transport.

Imports of goods rose $4.3 billion to $178.9 billion, primarily due to a $2.5 billion increase in capital goods, along with a $1.1 billion increase in industrial supplies. Imports of services increased $0.3 billion to $41.4 billion amid increased transport services.

Read the Census/BEA release.
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38,000 Jobs Added in May, Unemployment Falls to 4.7%

Total nonfarm payroll employment rose by 38,000 in May, the fewest number of workers in almost six years. The national unemployment rate fell to 4.7%.

Healthcare services contributed the majority of the month’s job gains, adding 46,000 jobs in May. Professional and business services added 10,000 jobs, after increasing by 55,000 in April.

Gains in healthcare and professional business services were offset by job losses in goods producing industries, which shed 36,000 jobs during the month. Durable goods manufacturing led the losses, with employment declining by 18,000. The construction and mining sectors also contracted, losing 15,000 and 11,000 jobs respectively.

Employment in information declined in May, as a month long strike among telecoms workers at Verizon Communications affected approximately 35,000 workers who were not included on payrolls during the survey period.

The civilian labor force participation rate fell by 0.2 points to 62.6% in May. The number of long-term unemployed, those jobless for 27 weeks or more, fell by 178,000 to 1.9 million. Discouraged workers, those who gave up looking for work was 538,000, unchanged from a year ago.

Average hourly earnings grew by 5 cents to $25.59, after a 9 cent increase in April. Year-over-year earnings have grown by 2.5%.

Read the BLS release.
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Thursday, June 2, 2016

ADP: 173,000 Jobs Added in May

The non-farm private sector added 173,000 jobs in May, according to the ADP National Employment report, an increase from April’s upwardly revised growth of 166,000. Service-providing employment provided all of the month’s growth, while the goods-producing sector shed jobs during the month.

Small businesses with fewer than 50 employees added 76,000 jobs, down from 101,000 in April. Medium-sized businesses with 50-499 employees added 63,000 jobs, up from 39,000 last month. Large businesses added 34,000 jobs, up from 25,000 in April.

“Job creation appears to have slowed as we move further into 2016,” Said Ahu Yildirmaz, Vice President of the ADP Research Institute. “Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown.”

Service providing employment rose by 175,000 jobs, up from 173,000 in April, as the professional and business services and trade-transportation and utilities sectors saw significant job growth during the month.

Goods-producing employment contracted by 1,000 in May, following a 7,000 job contraction in April. Manufacturing employment led the losses in the goods-producing sector, shedding 3,000 jobs during the month.

Read the ADP release.
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May Job Cuts Fall to Five-Month Low

Employers announced plans to cut 30,157 jobs in May, according to a report issued by Challenger Gray & Christmas. May’s announced cuts were 53% below April’s total, and 27% lower than the year-ago-rate. Cuts through the first five months of 2015 amounted to 275,218 cuts, up 13% from the same period last year.

“May could be the start of a summer slowdown in the pace of job cutting as companies take a pause following the period of heavy downsizing that started the year,” said John A. Challenger, CEO of Challenger Gray & Christmas.

Most job cuts came from the energy sector, with firms announcing 7,572 layoffs during the month – a much lower rate than in previous months. Year-to-date, energy firms have announced more than 75,232 cuts in 2016, up 25% from the 60,210 announced during the same period last year.

“In general, oil prices have improved somewhat since the beginning of the year, though they are still less than half of what they were at oil’s recent peak,” said Challenger. “However, the recent gains may be enough to at least temporarily slow job cuts in the sector.”

Most industries saw cuts decline in May. The computer industry saw cuts decline 83% on the month to 2,836, while cuts in the financial sector fell 68% to 901, after reaching a four-month high in April. Retailers also announced 75% fewer cuts in May.

Read the Challenger, Gray & Christmas release.
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Wednesday, June 1, 2016

Beige Book: Construction and Banking Conditions Improve

Economic activity expanded across most of the twelve Federal Reserve Districts, according to the May 2016 edition of the Federal Reserve Beige Book. Most Districts reported moderate growth, while some reported that the pace of growth slowed.

Banking conditions remained positive as loan demand increased moderately in all but the Dallas District, which reported that lending was mixed overall. Banks in Philadelphia, Cleveland and Dallas reported increased auto lending, while St. Louis and San Francisco banks reported improved credit quality.

Construction and real estate activity expanded since the previous Beige Book, with strong commercial construction activity and project pipelines reported in several Districts. Atlanta noted one-to-two year backlogs. Residential construction and commercial real estate activity also increased in most Districts. Sales for entry-level and low priced houses were strong.

Labor conditions strengthened between April and May with most Districts noting tight labor markets. Contacts in the Boston District noted robust demand for high-skilled workers, while contacts in several other Districts noted increasing difficulty in finding highly-skilled workers to fill positions. These difficulties placed upward pressure on wages. In contrast, soft labor markets were reported in energy related sectors.

Consumer spending increased in many Districts, although Boston, Cleveland, Minneapolis and Dallas reported mixed or flat activity. Retailers reported increased competition from online stores, and noted that consumers are shying away from in-store shopping.

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Construction Spending Fell in April

Construction spending fell 1.8% in April to $1,113.9 billion (SAAR). March’s spending estimate was revised up to $1,155.1 billion. During the first four months of the year, construction spending amounted to $334.8 billion, 8.7% higher than in the first four months of 2015.

Total private construction fell to a rate of $843.1 billion, 1.5% below the revised March estimate of $855.9 billion.

Private residential construction fell 1.5% to a seasonally adjusted annual rate of $439.7 billion.

Private nonresidential construction fell 1.5% to a rate of $403.5 billion, falling broadly across most categories.

Public construction fell 2.8% to a rate of $299.2 billion, in large part due to a 6.6% decline in highway and street construction.

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Manufacturing Expands for Third Consecutive Month

The ISM Manufacturing Index rose to 51.3 points in May – up 0.5 points from April’s reading of 50.8. May’s reading marks the third consecutive month of growth in the manufacturing industry, as readings above 50 indicate expansion. Of the eighteen manufacturing industries, twelve reported growth while six reported contraction.

The employment index registered 49.2 points, marking the sixth consecutive month of contraction. Ten industries including textile mills, wood products and printing and related support activities reported expansion. Six industries including apparel, leather and allied products and petroleum and coal products reported contraction.

The index of new orders registered 55.7 points in May, down 0.1 points. Fourteen industries reported growth in new orders, while four industries, including apparel, leather and allied products and transportation equipment, reported a decline.

Exports held at 52.5 in May, indicating expansion. Six industries, including wood products, food, beverages and tobacco, and transportation equipment reported an increase in exports, while six industries including nonmetallic mineral products and chemical products reported a decline in export orders.

The inventories index slipped 0.5 points to 45.0. Inventories contracted in May for the eleventh consecutive month.

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