Week in Review: August 1-5

Jobs, Diffusion Indices, and More Jobs

Quiet, quiet, quiet, and then: BAM!!! Monster jobs report. It was like the Orioles going scoreless for 8 innings and then scoring 12 runs in the ninth. Amazing! But before we get to the climax (the jobs report), let’s engage in the less scintillating.

Monday

S&P Manufacturing PMI

This measure of manufacturing activity fell to its lowest level in two years in July but, at a reading of 52.2, continues to show the sector growing (any reading above 50 in a diffusion index indicates growth). Note that manufacturing orders have also been strong, so this segment has some momentum, and you know what Zack says about that!

ISM Manufacturing PMI

This measure of manufacturing activity also fell in July to 52.8 and is at its lowest reading in two years. It’s nice when different indicators show the same thing. Big picture, these two indicators align with the rest of the diffusion indices we’ve seen lately; the economy is growing, but at a slowing pace.

Construction Spending

Construction spending fell 1.1% in June but is up 8.3% year over year. That’s mostly due to spending in the residential sector which, despite falling 1.6% in June, is up 15.4% year over year. Nonresidential spending fell 0.5% for the month but is up 1.2% year over year. These numbers are seasonally adjusted but don’t account for inflation, so in real terms nonresidential spending is down over the past year. That would be significantly worse if not for the manufacturing segment (+20.3% Y-o-Y).

As always, you can read more of my thoughts over at Associated Builders and Contractors.

Tuesday

Job Opening & Labor Turnover Survey (JOLTS)

Job openings fell for the third straight month in June and are now below 11 million for the first time since November 2021. The good news is that demand seems to be breaking, which is necessary if inflation is going to dissipate. The bad news is that there are still 10.7 million open, unfilled jobs, about 3.7 million more than in February 2020. As of June there are 0.6 unemployed workers per unfilled job, meaning that even if every unemployed American were suddenly hired, we’d still have 4.3 million job openings.

The quits rate, the share of all workers who quit their job during the month, stayed unchanged at 2.8% in June. Prior to the pandemic, that number had never been above 2.4%, so the labor market is still tight, and employees (for now) still enjoy increased bargaining power.

You can read more about the construction implications of the JOLTS data over at Associated Builders and Contractors.

Wednesday

MSA Unemployment Rates