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Economy in Brief

U.S. Job Growth Took A Breather In June
by Tom Moeller July 2, 2004

Non-farm payrolls rose just 112,000 last month, half the downwardly revised May gain of 235,000. Job growth also fell short of Consensus expectations for a 240,000 rise.

Renewed decline in factory sector payrolls accounted for some of last month's weakness as they fell 11,000 for the first m/m decline in five. Prior month's gains were downwardly revised. The breadth of hiring in the factory sector fell sharply as indicated by a one-month diffusion index of 45.8% versus readings over 50% during the prior four months.

Hiring in the construction sector also cooled, showing no increase after three months of solid increase (2.9% y/y).

Private service producing payrolls increased just 127,000 (0.1% m/m, 1.6% y/y) following three months of gain between 0.2% and 0.3%. Outright m/m declines were widespread, offset by firm growth in the transportation sector. Temporary help services employment rose 12,100 (0.5% m/m, 10.3% y/y), down sharply from recent rates of gain.

The breadth of increase amongst private non-farm payrolls fell to 57.0% versus 64.6% in May. That pulled the three-month diffusion index down to 66.4% from 74.8%.

The index of aggregate hours worked (employment times hours worked) fell 0.6% following an upwardly revised 0.7% May gain. For 2Q, aggregate hours rose at a 2.0% annual rate versus 1Q which rose at a 2.3% rate from 4Q03.

Average hourly earnings rose just 0.1% following 0.3% increases in the prior two months. The slowdown reflected slower gains in service industries. Factory sector earnings rose 0.2% (2.5% y/y) following an upwardly revised no-change in May.

From the separate household survey the unemployment rate held steady at an expected 5.6%. Employment rose for the third consecutive month, up 259,000 (1.0% y/y). The labor force grew 305,000 (+0.2% y/y). The labor force participation rate ticked slightly higher to 66.0% following four months at 5.9%.

Employment June May Y/Y 2003 2002 2001
Payroll Employment 112,000 235,000 1.1% -0.3% -1.1% 0.0%
  Manufacturing -11,000 24,000 -0.9% -4.8% -7.2% -4.8%
Average Weekly Hours 33.6 33.8 33.7 33.7 33.8 34.0
Average Hourly Earnings 0.1% 0.3% 2.0% 2.7% 2.9% 3.8%
Unemployment Rate 5.6% 5.6% 6.3% 6.0% 5.8% 4.8%
U.S. Light Vehicle Sales Weak Last Month
by Tom Moeller July 2, 2004

Unit sales of light vehicles gave back all of the gain in May and fell 13.4% last month to the lowest level since December 2000. Sales of 15.44M (-6.5% y/y) compared to Consensus expectations for sales of 16.8M.

Sales of light trucks flopped 14.8% to 8.37M. Car sales fell 11.7% to 7.08M.

The weakness in truck sales pulled sales of domestic light vehicles 15.0% lower to 12.13M (-8.0% y/y). Imported vehicle sales faired somewhat better with only a 7.1% m/m decline to 3.31M (-0.1% y/y). (US sales of light trucks totaled 7.84M last year while imported truck sales totaled 1.20M.)

Imports' share of the US market for new vehicles in June surged to 21.5%, the highest since 1991.

Light Vehicle Sales (SAAR, Mil.Units) June May Y/Y 2003 2002 2001
Total 15.44 17.84 -6.5% 16.69 16.81 17.26
  Autos 7.08 8.01 -6.9% 7.63 8.07 8.48
  Trucks 8.37 9.82 -6.1% 9.06 8.74 8.78
Factory Inventory Accumulation Hitting a Stride
by Tom Moeller July 2, 2004

Factory inventories rose 0.5% last month and the increase pulled the y/y comparison to its strongest in three years.

Factory orders slipped a less than expected 0.3% following a 1.1% drop in April. Durable goods orders fell 1.8%, revised from the advance report of a 1.6% drop.

Non-durable goods orders (which equal shipments) rose 1.5% (13.0% y/y) due to across the board strength.

Factory shipments rose 0.3%. Excluding the transportation sector shipments rose 0.4% (13.0% y/y).

Factory Survey (NAICS) May April Y/Y 2003 2002 2001
Inventories 0.5% 0.5% 1.1% -1.3% -1.8% -6.1%
New Orders -0.3% -1.1% 12.6% 3.7% -1.9% -6.7%
Shipments 0.3% -0.1% 12.2% 2.6% -2.0% -5.4%
Unfilled Orders 0.4% 0.7% 7.7% 4.2% -6.1% -5.9%
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