JOLTS report shows stabilization in almost all metrics for May

 

 - by New Deal democrat

The JOLTS report for May showed most metrics continued to show a slight rebounding from their March lows. The overall picture for now appears to be one of stabilization, consistent with the fabled “soft landing.”



To the data: job openings (blue in the graph below), a soft statistic that is polluted by imaginary, permanent, and trolling listings, rose 221,000 from its downwardly revised post-2020 April low  to 8.140 million (vs. a pre-pandemic peak of 7.594 million). Actual hires (red) rose 141,000 from their second-lowest post-2020 level to 5.756 million (vs. a pre-pandemic peak of 6.0 million). Voluntary quits (gold) rose 7,000 from downwardly revised near-post 2020 lows in April 3.459 million. In the below graph, they are all normed to a level of 100 as of just before the pandemic:

For the past six months quits have been essentially even with their pre-pandemic levels, and for the past eleven months hires have been below those levels.

A similar situation remains the case with layoffs and discharges (blue in the graph below), which increased sharply from their 12 months low in April to 1.654 million, but continue to run roughly 20% below the level they had been at *any* point before the pandemic, and well within their overall flat trend for the past year:

The more leading weekly initial jobless claims (red), which have increased signficantly in the past month, suggest that layoffs and discharges may similarly increase out of this trend in the next several months.

Finally, the quits rate was unchanged at 2.2% for the seventh month in a row. I won’t bother with the long term graph this time around, but since, as I have noted for a number of months now, the quits rate (blue in the graph below, right scale) tends to lead average hourly earnings (red), this suggests that the deceleration in nominal wage growth may come to an end in upcoming months - which overall is probably a positive:

My big concern over the past year has been if a further deceleration in wage growth were to coincide with an upturn in inflation, because that would likely cause a decline in real consumer income and spending. Thus if the rate of wage growth is stabilizing, this is a good thing for workers, especially if inflation continues to gradually subside.

June manufacturing rebounds, May construction spending declines to (only) slightly negative

 

 - by New Deal democrat

As usual, the month starts out with important data on manufacturing and construction. There was bad news and good news. The bad news is that both were negative. The relatively good news is that they were so slightly negative as to be essentially flat.

First, the ISM report on manufacturing declined very slightly - by -0.2 - further to 48.5. This is the third month in a row that this index has been under the equipoise point of 50. On the other hand, the more leading new orders subindex recovered by 3.9 from last month’s dismal 45.4 to 49.3:

While this is a mildly negative report, manufacturing has not been nearly so important in the Millennium as it was in the post-WW2 period, so negative readings, unless *very* poor, normally have still not meant recession. For the last 20 years the weighted average of the manufacturing (at 25%) and non-manufacturing (at 75%) indexes have been much better correlated with expansion vs. contraction. Last month the ISM non-manufacturing index came in at 53.8, and its new orders component at 54.1. Similar readings for June would mean continued overall expansion.

Turning to construction, total nominal spending declined -0.1% in May, but is higher 6.4% YoY. The more leading residential sector also showed a -0.2% decline, and is higher by 6.6% YoY:

Since producer prices for construction materials declined -0.1% in May and are down -1.4% YoY, the “real” residential construction numbers are unchanged for total construction and less than -0.1% negative for residential construction spending:

Finally, the Inflation Reduction Act, which conferred favorable tax benefits for “restoring,” led to a sharp increase in manufacturing construction spending, which rose another 1.3% for the month to another new record, and accelerated to 20.3% higher YoY:

To reiterate my big theme for this year: I am especially concentrating on these two leading sectors to tell us whether we are having a continued “soft landing” or not. That both sectors are now tilting to negative (construction had been holding up until recently) is definitely not good. But the negative numbers are so slight that they do not even merit a yellow caution flag yet.

Weekly Indicators for June 24 - 28 at Seeking Alpha

 

 - by New Deal democrat

I didn’t do this yesterday, so let’s take care of it today ….

My “Weekly Indicators” post is up at Seeking Alpha.

The high frequency data continues to suggest an economy that is chugging along, not particularly hot but not particularly cool either.

As usual, clicking over and reading will bring you up to the virtual moment on the economic data, and reward me a little bit for organizing and presenting it to you in a coherent format.