Economy, Small Business

Economic Data Roundup (08/31/2016)

8/31/16 12:00 PM

iStock_000009946822_Small.jpgThere were a few important reports on the U.S. economy released this morning. First, data from ADP showed that business hiring cooled this month, with 177K private-sector payrolls being added to the economy in August. That was down from last month but in line with economists’ expectations and the July figure was revised higher, which altogether helped keep the less volatile 3-month average of ADP’s hiring estimates at a healthy +181K. Essentially all of the private-sector jobs added this month were in the services sector (+183K), which included large gains in the "professional and business" and “transportation and utilities” arenas, while payrolls in the goods-producing sector fell by a net 6K. Elsewhere in the report, small businesses were again found to be one of the main drivers of private-sector job growth in America, as firms with 1-49 employees added 63K workers in August. However, the pace of job creation at smaller companies has declined for four months in a row, and the August reading was the weakest sequential gain since September of last year. Subsequent reports will reveal whether this slowdown was simply a seasonal setback or the start of a new trend. Mark Zandi, chief economist of Moody’s Analytics, optimistically added that “The American job machine continues to hum along. Job creation remains strong, with most industries and companies of all sizes adding solidly to their payrolls. The U.S. economy will soon be at full employment.”

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Next, the pending home sales index from the National Association of Realtors (NAR) lifted by 1.3 percent to 111.3 in July, a welcome improvement from June’s downward-revised print and more than double the gain economists had anticipated. This was also the second highest reading of 2016-to-date for the headline index, and a 1.4 percent increase over the past twelve months. Regionally, sales fell in the Midwest (-2.9 percent) but rose in the Northeast (+0.8 percent), the South (+0.8 percent) and the West (+7.3 percent). The significant gain in the West, according to the report’s authors, was due largely to “stronger labor market conditions” enabling more people to purchase homes. However, NAR chief economist Lawrence Yun stressed that “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”

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Elsewhere, the Chicago purchasing managers’ index (PMI) from Market News International (MNI), a measure of regional business activity that is often viewed as an indicator for the overall U.S. economy, fell to 51.5 in August. That was much worse than economists had expected and the weakest headline reading since April. Under the hood, measures of new orders and production slowed to 3-month lows but employment firmed to the best level in more than a year. Fewer firms expanded their inventories in August, and reported inflationary pressures eased slightly for the fourth consecutive month. Lorena Castellanos, a senior economist at MNI, added that “Economic activity slowed down into the summer, suggesting June’s momentum was only a temporary revival in activity. … On a trend basis, though, the July-August growth rates paint a slightly better picture – albeit still weak – than that seen earlier in the year.”

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Sources: Econoday, Twitter, Bloomberg, ZH, ADP, MNI, NAR, FRBSL

Post author: Charles Couch