Although it was very disappointing, the September Employment Situation Summary, which told us that the economy added only 142,000 seasonally adjusted jobs as hundreds of thousands of Americans withdrew from the labor force, was not the worst economy-related news of the day.
That dubious honor belongs to the Census Bureau's Factory Orders report. At least the employment report showed more people holding payroll jobs and overall August payroll employment 2 percent greater than a year ago. By contrast the Census report continued a nearly year-long pattern of declining year-over-year orders and shipments accompanied by still-bloated inventories. As anyone could have predicted, Martin Crutsinger at the Associated Press completely ignored these alarming trends.
The news highlighted at the beginning of the bureau's release was bad enough:
- Seasonally adjusted new orders fell by 1.7 percent from July to August.
- Shipments fell by 0.7 percent.
- Inventories only fell by 0.3 percent, causing the inventory/sales ratio to increase to an uncomfortably high 1.35.
But the real story here, which Crutsinger should not have lost in his recitation of current-month details, is the long-term decline in orders and shipments.
Here's the ugly data showing that seasonally adjusted orders and shipments are each on a 10-month year-over-year losing streak:
So the scoreboard for the past 10 months reads as follows:
- Orders: Nov. 2013 - Aug. 2014, $5.084 trillion; Nov. 2014 - Aug. 2015, $4.767 trillion; down by 6.2 percent.
- Shipments: Nov. 2013 - Aug. 2014, $4.999 trillion; Nov. 2014 - Aug. 2015, $4.838 trillion; down by 3.2 percent.
Meanwhile, inventories remain extraordinarily high. Zero Hedge contends that the inventory-sales ratio, stuck for the past few months at around 1.35, is "a recessionary warning."
Crutsinger's headline and report today kept AP readers and subscribing media outlets ignorant of all of this:
ORDERS TO US FACTORIES DOWN 1.7 PERCENT IN AUGUST
Orders to U.S. factories fell in August by the largest amount in eight months, led by a drop in demand for commercial airplanes and weakness in a key category that tracks business investment spending.
Factory orders declined 1.7 percent in August after a slight gain of 0.2 percent in July, the Commerce Department reported Friday. It was the biggest setback since orders dropped 3.7 percent in December.
Demand in a key category that serves as a proxy for business investment slipped 0.8 percent in August, following solid gains in June and July.
Manufacturing has been under stress this year as a strong dollar has hurt export sales. The big fall in energy prices has also led to cutbacks by energy companies.
As would be expected, Crutsinger wrapped up on a falsely positive note:
The overall economy, as measured by the gross domestic product, grew at an annual rate of 3.9 percent in the April-June quarter, a sharp increase after an anemic 0.6 percent rise in the first quarter. Economists are forecasting that growth in the current July-September quarter will slow slightly to around 2.5 percent.
The trouble is that two of the more respected forecasters are predicting far worse for the third quarter. The Federal Reserve of Atlant's model is currently at an annualized 0.9 percent for the third quarter before considering today's dismal factory orders and employment news, while Moody's is at 2.2 percent.
Setting the more pessimistic assumptions aside, this is surely one of the few times I've seen a reduction in growth from an annualized 3.9 percent to 2.5 percent described as "slight." Who do you think you're kidding, Marty?
In light of the above information relating to factory orders and shipments, it's amazing that no one is questioning whether the economy's reported growth is legitimate. We can be sure that if a Republican or conservative was in office instead of Democrat Barack Obama, that question would be in a hot topic in many business press reports.
Cross-posted at BizzyBlog.com.
