Slower Job Growth, Exports Decline Again: What We Learned During the Week of February 1-5

Data released last week further confirms that the U.S. economy is growing at only a modest rate. Here are the 5 things we learned from U.S. economic data released during the week ending February 5.

#1U.S. employers slowed the pace of hiring during January. The Bureau of Labor Statistics reports nonfarm employers added 151,000 workers during the month, the smallest single-month payrolls gain since September. Further, the BLS lowered its estimate of December job gains by 30,000 to +262,000 while it added 28,000 jobs to its estimate of November jobs creation to +280,000. Private sector employers added 158,000 jobs during the month, with payrolls gains split between 118,000 in the service sector and 40,000 in the goods producing sector. The industries with the largest payroll gains020516graphic during the month were retail (+57,700), health care & social assistance (+44,000), leisure & hospitality (+44,000) and manufacturing (+29,000). Meanwhile, employers in temporary help services and transportation/warehousing shed a combined 45,500 jobs during the month. Average weekly earnings totaled $878.49, up $6.67 for the month and up 2.5% from a year earlier. Meanwhile, a separate survey of households has the unemployment rate slipping 1/10th of a percentage point to 4.9%, its lowest reading since February 2008.

#2Exports dropped for a 3rd straight month. According to the Census Bureau and Bureau of Economic Analysis, the U.S. trade deficit grew by $1.2 billion during December to -$43.4 billion. Imports increased by $0.7 billion to $224.9 billion (-6.5% vs. December 2014) while exports contracted by $0.5 billion to $181.5 billion (-6.9% vs. December 2014). The former grew because of increased imports of automobiles and industrial suppliers & materials (e.g., crude oil and nonmonetary gold) while exports slowed because of declines in global purchases of U.S. automobiles, industrial supplies and materials (e.g., petroleum products) and food. While the goods deficit expanded by $1.3 billion to -$62.5 billion, the services surplus grew by $0.2 billion to +$19.2 billion. The U.S. had its largest goods deficits with China, the European Union, Germany and Japan. The U.S. trade deficit totaled -$531.5 billion for all of 2015, 4.6% larger than the 2014 deficit. Exports were 4.8% below 2014 levels while imports fell 3.1%.

#32015 ended with a small gain in real personal spending. The Bureau of Economic Analysis estimates real personal consumption expenditures (PCE) were at a seasonally adjusted annualized rate (SAAR) of $11.345 trillion (based on 2009 chained dollars), up 0.1% from November and 2.6% from a year earlier. Real spending on goods fell 0.3% during the month, split between a 0.7% drop in sales of durable goods and a 0.2% decline in sales of nondurables. Spending on services gained 0.3% during December. Without adjustments for price variations, consumer spending was unchanged during the month. Personal income gained 0.3% during December, with wages/salaries up 0.2%. Disposable income gained 0.3% during the month, with “real” disposable income up 0.4% after adjustments for price variations. Real disposable income has increased 3.1% over the past year. Also growing was the savings rate, up 2/10ths of a point to +5.5%. The savings rate was at +5.0% in December 2014. The PCE deflator, a measure of price changes, slipped 0.1% during the month, thanks in part to a 3.9% drop in prices for gasoline and other energy goods. The core deflator—removing both energy and food goods—was unchanged during the month and was up only 1.4% over the past year (that is, below the Federal Reserve’s 2.0% target inflation rate).

#4Purchasing managers report manufacturing and service sector activity was consistent with modest GDP growth in January. The Purchasing Managers Index (PMI) from the Institute for Supply Management added 2/10ths of a point during the month to a seasonally adjusted 48.2. This was the 4th straight month in which the measure was below a reading of 50.0, indicative of a contracting manufacturing sector. The good news is that 3 of the 5 index’s components both improved during the month, rising to or above the critical reading of 50.0: production, new orders and supplier deliveries. The measure for inventories remained at 43.5 while the employment index shed 2.1 points to 45.9. Just 8 of 18 tracked manufacturing segments expanded during the month. The press release noted that a PMI reading of 48.2 is consistent with a modest GDP growth rate of 1.6%.

The headline index reading from the ISM’s survey of the nonmanufacturing sector lost 2.3 points during January to a seasonally adjusted reading of 53.5. The index has been above a reading of 50.0 for 72 straight months, although the January reading was below its average for all of 2015. All 4 index components remained above a reading of 50.0, but 3 of 4 declined during the month: business activity, new orders and employment. Only the measure for supplier deliveries improved during January. Just 10 of 18 service sector industry segments expanded during the month. Per the press release, the index reading of 53.5 is consistent with a GDP growth rate of 1.8%.

#5Private sector construction spending slowed in December. The Census Bureau estimates the value of private sector construction put into place dropped 0.6% during the month to $824.0 billion, on a seasonally adjusted annualized basis. Despite the drop (and that spending was unchanged in November), private sector construction spending was up 9.9% from the same month a year earlier. Residential spending grew at its fastest rate in 4 months with a 0.9% bump (+8.1%. vs. December 2014) while nonresidential spending declined 2.1% (+11.9% vs. December 2014). Every sector of private sector nonresidential spending dropped during the month except for that for power and communications. Overall construction spending eked out a 0.1% increase during December, thanks to a 1.9% jump in public sector spending. Overall construction spending was at a SAAR of $1.117 trillion, 8.2% above the December 2014 pace.

Other data released over the past week that you might find of interest:
Jobless Claims (week ending January 30, 2016, seasonally adjusted): 285,000 (+8,000 vs. previous week; +1,000 vs. same week a year earlier). 4-week moving average: 284,750 (-1.5% vs. same week a year earlier).
Vehicle Sales (January 2016, seasonally adjusted annualized rate): 17.58 million (+1.4% vs. December 2015, +5.2% vs. January 2015).
Consumer Credit (December 2015, Outstanding Balance): $3.547 trillion (+$21.3 billion vs. November 2015, +6.9% vs. December 2014).
Factory Orders (December 2015, New Orders, seasonally adjusted): $456.5 billion (-2.9% vs. November 2015, -3.9% vs. December 2014).
Productivity (2015 Q4, Nonfarm Output per Hour, seasonally adjusted annualized rate): -3.0% vs. 2015 Q3, +0.3% vs. 2014 Q4.
Bankruptcy Filings (2015): 844,895 filings (-9.9% vs. 2014).

The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.

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