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Simply Economics will be taking off next week to celebrate
Thanksgiving. Simply Economics will return on December 2, 2011.
Happy Thanksgiving from all of us at Econoday!
The news from the financial markets has not been pretty, but hard data on the economy show a moderately strong improvement in overall economic growth. The consumer sector and manufacturing stand out while housing is holding steady, though at a depressed level. Inflation news was mostly good but may not last.
 The story was mostly the same all week. Equities were down sharply despite much better than expected economic news in the U.S. Weakness was tied to worries over European sovereign debt. The proxy measure for worry is now the yield on Italian bonds, Spanish bonds, and even French government bonds. Yields rise as fear of default rises and vice versa. For the countries with heavy debt burdens, higher yields eventually boost the cost of financing debt and raise the odds for a bailout or haircuts. While political change in leadership in Greece and Italy is seen as encouraging, investors are returning to the belief that resolution of the sovereign debt crisis is going to take some time.
Also, investors are finally beginning to worry about the impending deadline of November 23 for the Congressional super committee of bipartisan membership to pass legislation on deficit reduction. Republicans and Democrats appear to be making little progress. However, there is an increasing view that the deadline may be close to a nonevent because none of the automatic cuts take place until 2013, giving the Administration and Congress time to re-legislate. However, a downgrade to the U.S. credit rating could change the nonevent view.
But there are some notable specific highlights on a daily basis. On Monday, stocks fell as the yield on the Italian 5-year bond rose following an auction and Spanish 10-year rates surged to a euro-era record spread above German yields. Limiting losses on the Dow was Boeing after the company announced an order worth at least $18 billion.
Tuesday was a notably positive day, primarily due to stronger than expected retail sales. At mid-week, the usual worries returned but higher oil prices also weighed on stocks. West Texas Intermediate topped $100 per barrel on news of a plan to reverse the flow of oil out of Cushing, Oklahoma (standard stockpiling location for NYMEX and where WTI is oversupplied) to refineries on the Gulf Coast where the oil is more needed. Also, a report from Fitch Ratings, saying that U.S. banks face a serious risk to their creditworthiness if Europe’s debt crisis worsens, also bumped stocks down. Equities were down despite a sizeable boost in industrial production.
Stocks declined Thursday despite a favorable dip in initial jobless claims. Europe and lack of progress by the super committee were primary reasons. Equities were mixed but mostly up Friday with a surprisingly strong index of leading indicators providing lift.
Equities were down this past week. The Dow was down 2.9 percent; the S&P 500, down 3.8 percent; the Nasdaq, down 4.0 percent; and the Russell 2000, down 3.4 percent.
For the year-to-date, major indexes are mostly down as follows: the S&P 500, down 3.3 percent; the Nasdaq, down 3.0 percent; and the Russell 2000, down 8.2 percent. The Dow is up 1.9 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields were mixed this past week with mid-range up and long maturity yields down. Daily swings in rates were moderate at worst. Throughout the week, European debt worried investors and as rates rose on government bonds in Europe and flight to safety weighed on U.S. Treasury yields.
Turning to daily moves, rates edged lower Monday on concern about the ability of new governments in Greece and Italy to resolve their sovereign debt problems. Also, Fed purchases of longer maturity Treasuries (under Operation Twist) weighed on long bonds. Yields nudged up Tuesday on strong retail sales numbers. At mid-week, rates on Spanish bonds rose, nudging down yields on Treasuries. The Fitch Ratings report on European risk to U.S. banks also pushed Treasury rates down. Rates edged down further on Thursday despite a dip in initial jobless claims. Worries about Europe and a general rise in rates on government bonds throughout Europe (not just the usual suspects) were the reasons.
The week ended with a moderate firming in Treasury rates as Italian and Spanish yields declined on purchases by the European Central Bank to bolster markets and investor confidence.
For this past week Treasury rates were mixed as follows: 3-month T-bill, up 1 basis point; the 2-year note, up 5 basis points; the 5-year note, up 1 basis point; the 7-year note, unchanged; the 10-year note, down 5 basis points; and the 30-year bond, down 12 basis points.
 Despite strong economic data for the U.S., the spot price of crude ended the week down moderately but remained at recently elevated levels. The biggest daily moves were during the last three days of the week.
Spot WTI jumped over $3 per barrel on Wednesday. A strong industrial production number helped. But the big news was on Wednesday as crude climbed above $100 a barrel to a five-month high after Enbridge Inc. agreed to acquire ConocoPhillips’ share of the pipeline that runs between Cushing, Oklahoma, and the Gulf Coast. Notably, Enbridge announced it will reverse the direction of the pipeline, relieving some of the buildup in crude at Cushing, Oklahoma, and supporting prices for the NYMEX contract. WTI settled at $102.59 a barrel, the highest since the end of May.
However, spot crude fell back by almost $4 per barrel on Thursday on worries about contagion from European sovereign debt. Rising bond yields in Spain and France boosted concern that the European debt crisis would not be contained. The prices of crude dipped about a buck and a half on Friday as analysts reconsidered the impact of the Enbridge reversal of pipeline flow to Gulf production facilities. Later analysis appeared to indicate that the reversal of one pipeline would not be enough to end the glut at Cushing and that additional pipelines are needed.
Net for the week, the spot price for West Texas Intermediate declined $1.74 per barrel to settle at $97.25. The price of crude has risen steadily since early October and likely will feed into higher energy costs.
Economic news was broadly favorable for the housing, the consumer sector, and manufacturing. Inflation numbers generally improved—at least temporarily.
 Maybe consumers are consoling their still glum mood by heading to the mall. Regardless, consumer spending in recent months has been notably more positive than readings on the consumer mood. In October, retail sales continued to gain--not at September’s rapid pace but still quite healthy. Overall retail sales in October advanced 0.5 percent, following a 1.1 percent jump in September.
Excluding autos, retail sales increased a strong 0.6 percent in October after increasing a robust 0.5 percent in September. Due to a decline in prices, gasoline sales tugged down on the core, dipping 0.4 percent, following a 0.7 percent jump the month before. However, sales excluding autos and gasoline in October jumped a strong 0.7 percent, following a 0.5 percent gain in September. Component gains were widespread.
 The strongest component increase was for electronics & appliance, followed by building materials & gardening equipment and nonstore retailers (up 1.5 percent). Also seeing gains were motor vehicles, food & beverage, health & personal care, sporting goods & hobby, miscellaneous store retailers, and food services & drinking places.
The largest decline was in clothing & accessory stores and furniture & home furnishing. Gasoline station sales also slipped. General merchandise store sales were unchanged in October.
The October retail sales report shows a consumer much more willing to spend than sentiment surveys suggest. This is a good start for putting together estimates for fourth quarter GDP growth. Also, the strong and relatively hard numbers (by estimation process) for retail sales and unit new auto sales add to the argument that the government is underestimating job growth and personal income. That is, the underlying fundamentals for spending implicitly are stronger than being measured.
 Housing starts in October unexpectedly held up instead of retreating after a strong gain the month before. And homebuilders may be growing somewhat more hopeful as housing permits jumped. Housing starts in October nudged back only 0.3 percent, after rebounding a sharp 7.7 percent the prior month. The October annualized pace of 0.628 million units beat analysts’ estimate for 0.605 million units and is up 16.5 percent on a year-ago basis. The dip in October was led by an 8.3 percent decline in the multifamily component, following a 35.0 percent spike in September. The single-family component rebounded 3.9 percent after a 2.6 percent decrease the month before.
 It is not gangbusters but it certainly suggests moderate improvement for future construction as housing permits jumped 10.9 percent after declining 5.8 percent in September. But the optimism is mainly for multifamily construction. The October rate of 0.653 million total units annualized is up 17.7 percent on a year-ago basis.
For the latest month, multifamily permits gained 24.4 percent while single-family permits rose 5.1 percent. Homebuilders clearly are more optimistic about the multifamily sector than single-family. Apparently, even though supply has come down, it is still somewhat an issue for the single-family sector, along with continued soft demand. Indeed, months’ supply for new single-family home has come down from a recent high of 12.2 months for January 2009 to 6.2 months for September 2011. Demand and tighter credit are the big issues.
Even though growth appears to be stronger for multifamily housing than for single-family, there are signs of modestly improved optimism on the part of home builders. The housing market index, compiled by the nation's home builders, jumped three points in November to 20 for a second straight three-point gain and its strongest reading since the government's round of housing stimulus in May last year. The gain in the November report was centered in the current sales component with future sales and traffic also showing gains. Nonetheless, gains in housing data are against low baselines as the level of housing activity remains at an anemic level.
 The latest news from the industrial sector—along with retail sales—has all but killed talk of a double dip recession for the U.S. Industrial production surged a convincing 0.7 percent in October, following a 0.1 percent dip the prior month. The latest boost reflected a very strong 0.5 percent rise in manufacturing output and a 2.3 percent rebound in mining output.
 Within the manufacturing component, gains were led by a 3.1 percent surge in autos as the rebound from prior Japan-supply dislocations appears to be hitting a peak. Excluding autos, manufacturing still posted a second-straight and respectable 0.3 percent gain. Output of consumer goods and business equipment saw robust increases.
Capacity utilization jumped five-tenths to 77.8 percent which is the highest reading of the recovery.
Despite the weak labor market and questions over European demand for U.S. goods, the manufacturing sector is once again the focal piece of economic strength.
 In recent months, the Empire State and Philly Fed manufacturing surveys have shown numbers underperforming relative to national data. Nonetheless, the two surveys are showing improvement relative to their own recent numbers.
Optimism is returning in the New York region's manufacturing sector where the assessment of general business conditions, at plus 0.61 for November, is in positive ground for the first time since May. Really improving is the six-month outlook for general conditions which is at plus 39.02 from October's unusually low 6.74. Business sentiment, like consumer sentiment, may finally be picking back up after the debt limit debacle in August.
Sentiment is lagging actual order levels with new orders, at minus 2.07, showing a monthly contraction and unfilled orders, at minus 7.32, showing a slightly deeper contraction. But manufacturers in the region see this contraction as temporary with their six-month outlooks pointing to growth for each but especially for new orders.
Manufacturing activity in the mid-Atlantic continues to grow this month but at a less robust pace as the Philly Fed general business conditions index eased to 3.6 from 8.7 in October. Most indicators for current activity decelerated. The new orders index eased to 1.3 in November from 7.8 in October, indicating softness in future activity. Also, unfilled orders turned to a negative 1.5 from plus 3.4 in October. The shipments index decelerated to 7.3 from 13.6.
However, manufacturers apparently are a little optimistic about future activity as the number of employees index rose to 12.0 from 1.4 in October. The six months out index for general business activity jumped to 41.9 from 27.2 in October.
 The inventory cycle can add or subtract from economic growth, depending on whether businesses are boosting inventories in anticipation of higher demand, cutting inventories during downturns, or are somewhere in between. With the recent softening of overall economic growth, the risk was a build in unwanted inventories, which would lead to a cut in factory orders.
Importantly, in recent months businesses have been carefully managing their inventories, keeping them lean as sales move incrementally forward. Business inventories were unchanged in September with business sales up 0.6 percent, a combination that keeps the inventory-to-sales ratio at 1.27. This ratio has been pretty steady for the last two years after spiking as high as 1.49 during the recession when sales of course plunged.
The retail inventories component is the new piece in September's report and shows a 0.1 percent decline for September. Given the solid strength in this past week's retail sales report for October, retail inventories are not likely to have built up much last month or even may have dipped. Businesses may actually have to think about ordering more stock for the shelves than they have been—though likely cautiously more. However, even a moderate rise in inventory growth would help boost economic growth this point in the recovery.
 Consumer price inflation finally softened in October at the headline level. The consumer price index in October declined 0.1 percent, following a 0.3 percent boost in September. Excluding food and energy, the CPI rose a modest 0.1 percent, matching September’s gain.
By major components, energy declined 2.0 percent, following a jump of 2.0 percent in September. Gasoline dropped 3.1 percent after spurting 2.9 percent higher in September. Food price inflation softened to a 0.1 percent rise after jumping 0.4 percent. Within the core, upward pressure was seen in medical care and apparel with declines in new vehicles and used cars partially offsetting.
At the headline level, year-on-year, CPI inflation slowed to 3.6 percent from 3.9 percent in September (seasonally adjusted) in August. The core rate nudged up to 2.1 percent from 2.0 percent the month before on a year-ago basis.
The October CPI numbers are consistent with the Fed’s hope for an easing in inflation. However, the headline number will be under upward pressure in November from the rebound in crude oil prices. And if the recovery continues to improve, that lowers the odds of significant improvement in the inflation rates.
 Weaker energy costs turned producer price inflation negative—at least temporarily in October. Producer prices fell 0.3 percent in October after jumping 0.8 percent in September.
By major components, energy fell 1.4 percent after rebounding 2.3 percent in September. Gasoline dropped 2.4 percent, following an increase of 4.2 percent. Food costs decelerated to a 0.1 percent rise, following a 0.6 percent boost in September.
 At the core level, the PPI was unchanged in October, following a 0.2 percent rise the month before. Declines in prices for prices of passenger cars and light trucks played a key role in keeping the core flat.
For the overall PPI, the year-ago rate in October was 6.1 percent, compared to September’s 7.0 percent (seasonally adjusted). The core rate in October firmed to 2.8 percent from 2.5 percent in September.
However, as with the CPI, the recent run up in crude oil prices likely will boost the headline PPI rate in the near term.
 Another strong argument for no double dip recession came from the October index of leading indicators. Positive and broad-based momentum in economic data is strongly evident in the index which showed a very strong 0.9 percent rise for October.
Gains among the components are wide and convincing. The largest positive contribution came from building permits (0.27 percentage points), followed by the rates spread between the 10-year T-bond and fed funds (0.22 percent points). Also providing positive lift were the factory workweek, the stock market, consumer expectations, new orders for consumer goods & materials, new orders for nondefense capital goods, and an easing number of unemployment claims. There's only one negative in the month and it is marginal with vendor deliveries coming in with a 0.01 percentage point negative contribution.
Bluntly, the latest report indicates that the risk of another downturn has receded and that economic growth will continue through the winter. Also, from the latest report, the coincident index posted a 0.2 percent gain following two prior months of no change.
Despite weakness in equity markets, economic data from the real sector look moderately healthy and improved. The recovery has gained momentum and barring a major shock should continue to gradually gain further traction.
Heading into the Thanksgiving holiday, markets likely will focus on whether the deadlines are met by the so-called “super committee” on deficit reduction to enact replacement legislation. If legislative deadlines are not met, earlier enacted automatic spending cuts, falling equally on domestic and military programs, will take place. A draft of the legislation is due Monday and the panel faces a Wednesday, November 23 deadline for getting legislation out of committee.
Key sectors get updates in the holiday shortened week. Housing is updated on Monday with existing home sales. On Tuesday, revised Q3 GDP will get close attention as will the FOMC minutes. The day before Thanksgiving brings news about the manufacturing sector and the consumer. Durable goods orders, personal income and spending and consumer sentiment are on tap.
Existing home sales in September declined 3.0 percent to a 4.91 million annual rate after surging 8.4 percent in August. Three of the four Census regions were down with only the Northeast showing a gain. Supply on the market at the current sales rate inched higher, to 8.5 months. Prices fell 3.4 percent for the median to $165,400.
Existing home sales Consensus Forecast for October 11: 4.80 million-unit rate
Range: 4.69 to 5.15 million-unit rate
GDP in the third quarter improved to a 2.5 percent annualized increase, following an anemic 1.3 percent in the second quarter. The latest was the strongest growth rate since the third quarter of 2010—also posting at 2.5 percent. Demand numbers also improved as final sales of domestic product increased an annualized 3.6 percent in the third quarter after a 1.6 percent rise the prior quarter. Final sales to domestic purchasers (excludes net exports) gained 3.2 percent, following a 1.3 percent gain in the second quarter. Economy-wide inflation according to the GDP price index held steady at a 2.5 percent pace.
Real GDP Consensus Forecast for second estimate Q3 11: +2.4 percent annual rate
Range: +2.0 to +2.9 percent annual rate
GDP price index Consensus Forecast for second estimate Q3 11: +2.5 percent annual rate
Range: +2.5 to +2.5 percent annual rate
The Richmond Fed manufacturing index for October was unchanged at minus six. New orders, at minus five, were also in the negative column for the fourth straight month with backlog orders, at minus 15, down for a sixth straight month. Shipments, at minus six, are also in the negative column for a sixth straight month.
Richmond Fed manufacturing index Consensus Forecast for November 11: -1
Range: -3 to 0
The Minutes of the November 1-2 FOMC meeting are scheduled for release at 2:00 p.m. ET. The release date was moved up one day from normal due to the Thanksgiving holiday. FedSpeak in recent weeks has been playing up differences within the FOMC on whether the Fed should engage in detailed “guidance” in the FOMC statement, on whether potential further quantitative easing would have benefits exceeding costs, and even whether the Fed should have mortgage-backed securities in its portfolio. The minutes may give details on these debates.
Durable goods orders declined revised 0.6 percent in September after edging up 0.1 percent the prior month. Importantly, excluding transportation, durables rebounded a revised 1.8 percent, following a 0.2 percent decrease in August. The only major industry category to decline in September was transportation which dropped 7.1 percent after rising 0.8 percent in August. Weakness was primarily in aircraft—defense and nondefense. Outside of transportation, orders were healthy across the board.
New orders for durable goods Consensus Forecast for October 11: -1.0 percent
Range: -2.1 percent to +1.2 percent
New orders for durable goods, ex-trans., Consensus Forecast for October 11: 0.0 percent
Range: -0.5 percent to +0.4 percent
Personal income in September edged up 0.1 percent, following a 0.1 percent dip in August. Importantly, the wages & salaries component rebounded 0.3 percent, after declining 0.1 percent in August. Consumer spending in September ramped up, gaining 0.6 percent, following a 0.2 percent rise in August. Spending was led by durables with nondurables and services also gaining.
Turning to inflation numbers, the headline PCE price index increased 0.2 percent after gaining 0.3 percent in August. The core rate slowed to no change from up 0.2 percent in August.
Looking ahead, in personal income, there should be a moderate gain in the private wages & salaries component as aggregate earnings for total private workers gained 0.3 percent. The manufacturing component in industrial production is likely to be robust in October as aggregate production worker hours in manufacturing surged 1.0 percent in October. Personal spending should be healthy as unit new motor vehicle sales increased 1.2 percent while retail sales excluding autos jumped 0.6 percent in October. Headline CPI inflation declined 0.1 percent in October while the core CPI edged up 0.1 percent.
Personal income Consensus Forecast for October 11: +0.3 percent
Range: +0.1 to +0.5 percent
Personal consumption expenditures Consensus Forecast for October 11: +0.3 percent
Range: +0.2 to +0.5 percent
PCE price index Consensus Forecast for October 11: 0.0 percent
Range: -0.1 to +0.2 percent
Core PCE price index Consensus Forecast for October 11: +0.1 percent
Range: 0.0 to +0.2 percent
Initial jobless claims in the November 12 week continued a recent, mild downtrend with a 5,000 decline to 388,000. Initial claims decreased three weeks in a row and in four of the last five. The four-week average dipped 4,000 to 396,750. Continuing claims, in data for the November 5 week, dropped 57,000 to 3.608 million. The insured unemployment rate was 2.9 percent for the week ending November 5, unchanged from the prior week's unrevised rate.
Jobless Claims Consensus Forecast for 11/19/11: 390,000
Range: 375,000 to 400,000
The Reuter's/University of Michigan's consumer sentiment index held on to its strong gain in the last half of October, coming in at 64.2 for the mid-month November reading. This compares with an implied 64.3 reading in the last half of last month and a 60.9 reading for all of October. Sentiment is at its highest since June of this year. The September gain was centered in the leading component of expectations which, compared to all of October, is up more than four points at 56.2. The coincident component of current conditions is at 76.6, compared to 75.1 for all of October.
Consumer sentiment Consensus Forecast for final November 11: 64.6
Range: 63.5 to 66.0
The Kansas City Fed manufacturing index improved to 8 in October from 6 in September and 3 in August. The increase was mainly concentrated in nondurable goods plants, particularly for food and chemicals, while durable goods producers reported a slight slowing in activity. Most other month-over-month indexes also improved modestly in October. The production index rose from 3 to 6, and the shipments, order backlog, and new orders for exports indexes also edged up. In contrast, the new orders index fell slightly from 5 to 3, while the employment index remained unchanged.
U.S. Holiday: Thanksgiving Day. All Markets Closed.
NYSE Early Close.
SIFMA Recommended Early Close 2:00 ET
The highlight of the week after Thanksgiving is Friday's all-important employment situation report for November. Consumer confidence and its take on consumer morale is on tap for Tuesday. The ADP employment is due on Wednesday and motor vehicle sales on Thursday. Housing highlights include new home sales Monday, FHFA HPI and Case-Shilller both on Tuesday and pending home sales at mid-week. Also garnering attention will be Beige Book Wednesday and ISM manufacturing Thursday.
At the time of the publication of the November 18, 2011 Simply Economics, consensus forecasts were not yet available for the week of November 28 through December 2.
New home sales in September jumped 5.7 percent in September to a 313,000 annual rate. The gain was centered in the two largest regions, the South and the West. The rise in sales drew down supply to 6.2 months at the current sales rate for the leanest level in a year-and-a-half and compared 6.6 months in August. However, the median price dropped 3.1 percent on the month to $204,400 for the third straight monthly decline.
The Dallas Fed general business activity index in October jumped up from minus 14.4 to 2.3, its first positive reading in six months. The production index, however, in October remained positive but edged down from 5.9 to 4.1, suggesting growth slowed slightly. Other measures of current manufacturing conditions also indicated growth in October, and the pace of new orders increased with a reading of 8.3, compared to 3.6 in September. The shipments index fell from 9.4 to 2.7, suggesting shipment volumes continued to increase but at a slower pace.
The S&P/Case-Shiller 20-city home price index (SA) showed no change in August. The reading ended three prior months of 0.1 percent declines. Given that this index is based on a three-month-moving average, it suggests incremental improvement in the underlying data for August. The unadjusted reading was plus 0.2 percent versus plus 0.9 percent and plus 1.1 percent in the two prior months.
The Conference Board's consumer confidence index fell 6.6 points in October to 39.8 with the current conditions component down a sharp seven points to 26.3 and the expectations component down 6.4 points to 48.7. Stand-out weakness appeared in the current assessment of business conditions where fewer, 11.0 percent, describe conditions as good and more, 43.7 percent, describe conditions as bad. Stand-out weakness also was in income expectations where fewer, 10.3 percent, see their income rising and more, 19.2 percent, see their income decreasing.
The FHFA purchase only house price index slipped 0.1 percent in August after edging up 0.1 percent the prior month. The August dip ended a string of four monthly gains in a row. On a year-on-year basis, the FHFA HPI was down 4.0 percent, compared to down 4.1 percent in July.
ADP private payroll employment rose 91,000 in September, little changed from its revised 89,000 estimate for August. The BLS figure from the employment report put private payrolls for September at a 104,000 gain.
Nonfarm business productivity in the third quarter rebounded an annualized 3.1 percent in the third quarter after dipping 0.1 percent in the previous quarter. The output component improved to 3.8 percent from 1.8 percent in the second quarter. Hours worked increased an annualized 0.6 percent after a 2.0 percent rise the prior quarter. Unit labor costs fell an annualized 2.4 percent, following a 2.8 percent increase in the second quarter. The consensus forecast was for a 0.7 percent dip.
The Chicago PMI nudged down to 58.4 in October from September's 60.4 level but remained well above 50 to indicate monthly expansion in general business activity. New orders came in at 61.3, showing monthly expansion against September's outsized 65.3 for one of the strongest monthly rates of expansion of the last six month. Backlog orders rose nearly six points to 51.2 to show a monthly build and to end two months of draws.
The pending home sales index fell 4.6 percent in September with declines split about evenly across regions. September's decline was unusually steep, following declines of 1.2 percent in August and 1.3 percent in July.
The Beige Book being prepared for the December 13 meeting is released this afternoon. The previous Beige Book indicated that the pace of economic growth was “modest” and analysts will be looking for language indicating an improvement in growth.
Sales of total light motor vehicles rose 1.2 percent in October after surging 8.0 percent the month before. October’s sales pace was 13.3 million units annualized, compared to 13.1 million in September. The October gain was centered in car sales, both domestic and import, while truck sales fell back slightly. Domestic car and light truck sales posted at 10.1 million, following 10.0 million in September. Imports came in at 3.1 million, matching September’s pace.
Initial jobless claims for 11/26/11 will be posted. The prior week’s data were not available at time of publication of the November 18, 2011 Simply Economics.
The composite index from the ISM manufacturing survey in October eased to 50.8 from 51.6 in September. However, weakness was largely in the inventory component which dropped from 52.0 in September to below breakeven at 46.7, indicating contraction for the latest month. The new orders index which, after three straight of months of marginal contraction, moved to the plus column with a 2.8 point gain to 52.4. Backlogs dropped less rapidly as this index was up 6.0 points to 47.5.
Construction spending in September gained 0.2 percent after rebounding 1.6 percent in August, which was revised up from an original 1.4 percent increase. September’s advance was led by a 0.9 percent increase in residential outlays, following a 0.4 percent rise in August. By subcomponents, strength was in non-new homes (improvements—including remodeling and additions to earlier completed original buildings). Private nonresidential construction spending advanced 0.3 percent, following a 0.8 percent rise the month before. Public outlays declined 0.6 percent after a 3.5 percent boost the prior month.
Nonfarm payroll employment in October posted a gain of 80,000 after rising 158,000 in September and increasing 104,000 in August. Revisions for August and September were up net 102,000. As in recent months, greater strength was seen in private nonfarm payrolls which advanced 104,000, following a 191,000 rise in September and a 72,000 increase in August. Earnings were moderately healthy as average hourly earnings in October rose 0.2 percent, following a 0.3 percent boost the month before. The average workweek for all workers in October was unchanged at 34.3 hours. From the household survey, the unemployment rate edged down to 9.0 percent from 9.1 percent in September.
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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