Blowout jobs number
- April Nonfarm Payrolls: +288K vs. consensus +210K, +203K previous (revised from 192K).
- Unemployment rate: 6.3% vs. 6.6% consensus, 6.7% previous.
From the report:
In April, the unemployment rate fell from 6.7 percent to 6.3 percent, and the number of unemployed persons, at 9.8 million, decreased by 733,000. Both measures had shown little movement over the prior 4 months. Over the year, the unemployment rate and the number of unemployed persons declined by 1.2 percentage points and 1.9 million, respectively. (See table A-1.)
In April, the number of unemployed reentrants and new entrants declined by 417,000 and 126,000, respectively. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search, and new entrants are persons who have never worked.) The number of job losers and persons who completed temporary jobs decreased by 253,000 to 5.2 million. (See table A-11.)
The number of long-term unemployed (those jobless for 27 weeks or more) declined by 287,000 in April to 3.5 million; these individuals accounted for 35.3 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has decreased by 908,000. (See table A-12.)
The civilian labor force dropped by 806,000 in April, following an increase of 503,000 in March. The labor force participation rate fell by 0.4 percentage
point to 62.8 percent in April. The participation rate has shown no clear trend in recent months and currently is the same as it was this past October. The
employment-population ratio showed no change over the month (58.9 percent) and has changed little over the year. (See table A-1.)The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 7.5 million in April. These individuals were working part time because their hours had been cut back or because they were unable to find full-time work. (See table A-8.)
In April, 2.2 million persons were marginally attached to the labor force, down slightly from a year earlier. (The data are not seasonally adjusted.) These
individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted
as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)Among the marginally attached, there were 783,000 discouraged workers in April, little changed from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in April had not searched for work for reasons such as school attendance or family responsibilities. (See table A-16.)
How good is that news?
U.S. Vehicle Sales Decline Modestly
According to the Autodata Corporation, unit sales of light vehicle sales during April were off 2.2% (+5.6% y/y) to 16.04 million (SAAR). That gave back just a piece of the 6.9% March rise, so sales remained near the highest level of the economic expansion.
Auto purchases fell 2.6% (+1.5% y/y) to 7.55 million and remained down from November’s high of 8.14 million. Sales of domestic autos declined 2.8% (+0.1% y/y) to 5.33 million. Sales of imports were off 2.2% (+5.0% y/y) to 2.22 million.
Sales of light trucks declined 1.8% m/m (+9.5% y/y) to 8.49 million, leaving them at the highest level since October 2007.
Imports’ share of the U.S. light vehicle market slipped to 20.0% last month. By vehicle type, imports’ share of the U.S. car market was roughly steady at 29.4%. Imports’ share of the light truck market fell to 11.6%, the lowest since 2005.
Two charts from CalculatedRisk: the first shows that car sales have plateaued since last summer. Last 3 months: 15.92M units SAAR:
The second continues to suggest that we are at or near a cyclical peak:
Trucks sales are leading the way, reflection of stronger manufacturing and construction sectors:
Ford F-150 Pickup Truck Sales Post Best April Since 2006
Sales of pickup trucks are often a sign of strength or weakness in the small business and construction sector as these types of businesses are the most common users of these vehicles. With that in mind, today’s numbers from Ford (F) for the month of April continue to suggest strength in that sector. For the month of April, Ford sold 63,387 F-series trucks, which represents the best April since 2006. It is also slightly above the April average of 61K dating back to 1996.
With the strong April sales total, Ford’s year to date F-series sales are currently at 237K, which is also the best since 2006 and 2K above the YTD average of 235K going back to 1996. After a rough start to the year for truck sales, where truck sales fell 1% y/y in January, things have really gotten back on track in the last three months. In February, the YTD growth for F-series trucks improved to +1%. In March, it climbed to 2.6%, and now in April, the year to date total is up 3.9% y/y.
Global manufacturing bounces higher US, UK and official Chinese output data show monthly rises
The official purchasing managers’ index for China’s manufacturing sector hit a reading of 50.4 in April – up from 50.3 in March.
The official survey is at odds with HSBC’s preliminary China manufacturing PMI for April, which gave a reading of 48.3, showing contraction. The two China PMI gauges often produce different readings because they involve different sets of companies. The state survey questions a large group of government-backed enterprises, while HSBC and its partner Markit quiz a smaller sample of managers of private sector businesses.
Not all the data within the official PMI were rosy. The export orders index read 49.1, signalling that exporters may be struggling.
INFLATION WATCH
John Van Dyk says he needs to hire 80 construction framers this year to keep up with Colorado’s recovering home-building market, doubling his company’s size. So far, he has hired only 20.
“We’re really concerned about this summer,” said Mr. Van Dyk, whose Van Dyk Construction Inc. employs carpenters who assemble and erect housing frames. “For the first time in my 35-year career, I have to think of whether I dare to take on any additional work.”
Mr. Van Dyk’s predicament points up a negative feedback loop in the home-building industry here in Denver and in several other rebounding U.S. home markets: New-home prices have surged over the past two years and remain elevated amid a shortage of supply, but boosting supply has been slow-going amid a shortage of home lots and skilled construction workers.
That shortage of skilled labor in many markets has spurred contractors to boost pay scales, often to boom-time levels and beyond—expenses that have been passed on to buyers for as long as they will tolerate the higher prices. In recent months, buyers finally have balked, resulting in sluggish sales of new homes so far this spring.
A labor shortage tends to hit home buyers both with higher prices and expensive delays, said David Crowe, chief economist of the National Association of Home Builders. “It’s a direct impact on the cost of the home because you have to pay more for the resources to build it,” he said. “And it’s an indirect increase because it delays final delivery of the home, and that costs money, too.”
Few areas have been hit as hard by the labor shortages as Denver, where the median price of a new home registered $373,605 last year, up 22% from the 2011 median, according to John Burns Real Estate Consulting Inc. in Irvine, Calif. Nationally, the median new-home price was $268,900 last year, up 18.4% from 2011, according to the U.S. Census Bureau. (…)
The supply crunch doesn’t figure to ease soon, given the labor shortage. Many Colorado contractors say they have lost skilled labor to energy companies drilling in northeastern Colorado and North Dakota, where many of the top construction workers went during the downturn as the industry’s national unemployment rate rose as high as 27.1%. Those workers now are tending to oil rigs and building drilling platforms.
The shortage of skilled construction workers also partly reflects the return of Mexican workers to their home country during the downturn without returning since. Other workers went to companies conducting rebuilding work in the wake of floods that swept 24 Colorado counties in September. (…)
Other markets grappling with labor shortages include most Texas markets, Minneapolis and Oklahoma, which like Denver, are losing many workers to the oil and gas fields. Builders in South Florida and Charlotte, N.C., are having difficulty staffing their construction jobs, too. Ed Brady, president of Brady Homes Illinois Inc. in Bloomington, Ill., says labor shortages have lengthened his build time on homes to 120 to 150 days from 90.
Nationally, wages for construction workers are rising at nearly three times the rate for all workers, increasing by 6.3% in February from a year earlier, according to the U.S. Department of Labor. In comparison, the increase across all industries averaged 2.2% in that span.
In Denver, framers can command wages of $35 to $40 an hour, on par with the market’s peak in 2005 and 2006, Mr. Van Dyk said. An experienced tile setter can make $100,000 a year, up from a typical rate of $70,000, according to Ed Routzon, president of Guy’s Floor Service Inc. in Denver. Backhoe operators can earn $60,000 to $70,000 a year, slightly more than during the boom.
The national unemployment rate for construction workers remains in double digits at 11.3%, though it is down by more than half from its peak in 2010. Economists note that the figure includes both skilled and unskilled workers, and finding one of the former not already working is rare.
Finding highly specialized trade workers “is proving very, very difficult,” said James Bolger, director of operations at Colorado Concept Lighting Inc., a high-end electrical contractor that has sought for several months to double its staff of four electricians. “It’s like looking for a unicorn or jackalope.” (…)
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Pundits who have dug deep in the recent stats on consumer spending (here’s a good one: Spending Rises But Is It A Sign Of A Stronger Economy) seem to have overlooked the sharp acceleration in wages and salaries which have been rising at a 5.3% annualized rate in Q1 (+5.5% in last 2 months) (table from Haver Analytics). Since employment has not accelerated much, salaries must have risen…
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Drought Batters U.S. Wheat Belt Wheat prices are up 15% this year, as concern about a lack of moisture in Kansas and elsewhere in the Great Plains is curtailing the prospects for output of wheat.
(…) U.S. grain prices still are well below levels reached during the record-setting drought in 2012. But the recent gains for wheat, a key global food staple, have sparked concerns about higher food inflation in the U.S. and overseas. World food prices rose 2.3% in March to their highest level in 10 months, driven in part by higher grain prices, according to the Food and Agriculture Organization of the United Nations.
Wheat prices in the U.S., the world’s largest exporter, also have risen because of fears that Ukraine’s tensions with Russia will result in lower exports and grain output from the eastern European country, potentially sending buyers to the U.S. for supplies.
Still, global wheat supplies remain at healthy levels, thanks to bountiful harvests from other major wheat producers like the European Union and Canada, analysts said. (…)
BASF Mulls U.S. Investment BASF said it was considering investing over $1.39 billion to build a gas complex in the U.S. to take advantage of low-cost shale gas
EARNINGS WATCH
Almost 75% through earnings season:
From Moody’s:
According to Bloomberg News, the operating income for the 71% of S&P 500 member companies who have released first-quarter results was up by 5.9% annually. In turn, the consensus estimate for the annual increase of the complete first-quarter tally of S&P 500 operating income has been lifted from the 1.1% of mid-April 2014 to a recent 4.6%. Nevertheless, unless the annual increase of S&P 500 member-company revenue accelerates from the recent 5.9% of Q1-2014’s unfinished tally, S&P 500 operating income will be hard put to match the projected 8.3% average annual increase for 2014’s final three quarters.
S&P’s tally of 311 companies having reported Q1 shows a beat rate of 68% and a miss rate of 22%, unchanged in the past week and among the best in several years. Yet, EPS estimates for Q1 have declined 1.7% from $27.62 to $27.15. If that holds, trailing 12-month earnings will total $108.68 ($109.15 last week)
Market Cap to GDP: The Buffett Valuation Indicator
Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett. Back in 2001 he remarked in a Fortune Magazine interview that “it is probably the best single measure of where valuations stand at any given moment.” (…)
Unfortunately, the “market cap” numerator is rather stale. The Fed won’t publish the Q1 data until the June 5th. (…)
In a recent CNBC interview (April 23rd), Warren Buffett expressed his view that stocks aren’t “too frothy”. However, both the “Buffett Index” and the Wilshire 5000 variant suggest that today’s market is indeed at lofty valuations, now above the housing-bubble peak in 2007. In fact, the more timely of the two (Wilshire / GDP) has risen for seven consecutive quarters and is now approaching two standard deviations above its mean — a level exceeded for six quarters during the dot.com bubble.
Mr. Buffett thus joins Prof. Shiller in reneging his own indicator. I still stand by the Rule of 20 which incidentally agrees with Warren Buffett that stocks aren’t “too frothy”, while also being only modestly attractive (see U.S. EQUITIES: BETTER INTERNALS, SCARY EXTERNALS).
BERNANKE’S GAMBIT NOW TOO SUCCESSFUL:
Retirement Investors Flock Back to Stocks Retirement investors are putting more money into stocks than they have since markets were slammed by the financial crisis six years ago.
Stocks accounted for 67% of employees’ new contributions into retirement portfolios in March, according to the most-recent data from Aon Hewitt, which tracks 401(k) data for 1.3 million people at large corporations.
That is the highest percentage since March 2008, when stocks were teetering under the weight of mounting mortgage defaults, and compares with 56% in March 2009, when the market hit bottom.
The rising deposits, combined with the powerful bull market that took the Dow Jones Industrial Average to a record high on Wednesday, have left retirement savers with their biggest exposure to stocks in more than six years. In March, stocks made up 66% of the assets in the 401(k)s surveyed by Aon Hewitt, up from 48% in February 2009. (…)
Individual investors, notorious for mistiming the market, didn’t fare well in the financial downturn. At the stock market’s peak in October 2007, investors put 69% of new 401(k) contributions into stocks, according to Aon Hewitt. The S&P 500 went on to lose 57% of its value by March 2009. (…)
IRAs also have seen increased signs of risk-taking. In 2013, bond and money-market mutual funds made up about 25% of all mutual-fund holdings in IRAs, according to the Investment Company Institute. That is the lowest percentage since 2007, when such funds made up 21% of fund holdings.
The average workplace retirement-plan participant at Vanguard Group, the biggest U.S. mutual-fund company by assets, had 72% allocated to stocks in 2013, up from a low of 65% in 2008 and four percentage points higher than 2007, according to the Valley Forge, Pa., firm. (…)