The Trade Deficit Shrinks, Job Openings Expand: June 4 – 8

The trade deficit narrowed while employers sought even more workers. Here are the five things we learned from U.S. economic data released during the week ending June 8.

#1A small rise in exports leads to a smaller trade deficit in April. The Census Bureau and Bureau of Economic Analysis find exports grew by $0.6 billion during the month to $211.2 billion (+9.9 percent versus April 2016) while imports contracted by $0.4 billion to $257.4 billion (+8.0 percent versus April 2016). As a result, the trade deficit narrowed to its lowest level since last September at -$46.2 billion. The goods deficit shrank by $1.0 billion to -$66.3 billion while the services surplus essentially held steady at +$22.1 billion. The latter was pushed up by a $0.3 billion gain in exported goods (led by industrial supplies, food/beverages) and a $0.7 billion drop in imported goods (driven by a $2.8 billion decline for consumer goods and a $0.9 billion drop for automobiles). The U.S. had its largest goods deficits with China (-$30.8 billion), European Union (-$13.2 billion), Mexico (-$6.0 billion), Japan (-$5.9 billion), and Germany (-$5.6 billion).Trade Deficit 060818

#2There were more job openings in April than the number of people unemployed. The Bureau of Labor Statistics reports that there were a seasonally adjusted 6.698 million job openings at the end of April, up 65,000 for the month, 9.7 percent from a year earlier, and the most in the 17+ year history of the data series. Further, there were more job openings at the end of the more than that were people unemployed (6.346 million). The number of private sector job openings has grown 10.0 percent over the past year to 6.117 million, with large 12-month comparables for transportation/warehousing (+46.2 percent), professional/business services (+22.9 percent), retail (+22.5 percent), manufacturing (+20.9 percent), and leisure/hospitality (+11.0 percent). Employers hired 5.578 million workers during the month, up 92,000 from March and 6.8 percent from a year earlier, with private sector hiring also rising 6.8 percent from April 2017 levels. 5.408 million people left their jobs during April, up 86,000 for the month and 5.8 percent from a year earlier. This number includes 3.387 million people who had voluntarily quit their jobs (+1.4 percent versus April 2017).

#3The service sector grew even hotter in May. The Institute for Supply Management’s NMI jumped by 1.8 points during the month to a seasonally adjusted reading of 58.6. This was the 100th straight month in which the measure has been above a reading of 50.0, indicative of an expanding service sector. All four components of the NMI improved from their April readings: supplier deliveries (+4.0), business activity/production (+2.2), new orders (+0.5), and employment (+0.5). Fourteen of 18 tracked service sector industries expanded during May, led by wholesale trade, mining, and real estate. The press release expressed optimism among survey respondents, but also noted some “concerns about the uncertainty surrounding tariffs, trade agreements and the impact on cost of goods sold.”

#4Fewer aircraft orders slowed factory orders in April. New orders for manufactured goods dropped 0.8 percent during the month to a seasonally adjusted $494.5 billion. This represented a 7.4 percent year-to-year increase for the Bureau of Labor Statistics measure. As we saw with the durable goods report a few weeks ago, the headline number was dragged down by a 28.9 percent drop in orders for civilian aircraft. Net of all transportation goods, factory orders gained 0.4 percent during the month and has grown 7.4 percent over the past year. Increasing during the month were orders for furniture (+2.2 percent), fabricated metal products (+1.8 percent), electrical equipment/appliances (+1.8 percent), primary metals (+1.4 percent), computers/electronics (+1.1 percent), motor vehicles (+1.0 percent), and nondurable goods (+0.1 percent). Shipments eked out a less than $0.1 billion gain to $492.8 billion (+7.2 percent versus April 2018) with shipments net of transportation goods up 0.4 percent for the month. Unfilled orders grew for the fifth time in six months (+0.5 percent to $1.153 trillion) while inventories expanded for the 18th straight month (+0.3 percent to $666.9 billion).

#5Productivity was more feeble during Q1 than previously believed. The Bureau of Labor Statistics estimates nonfarm productivity grew 2.7 percent on a seasonally adjusted annualized basis (SAAR) while hours worked grew 2.3 percent during the first three months of 2018. As a result, nonfarm productivity 0.4 percent during the quarter, down from the 0.7 percent previously estimates and below the 1.3 percent productivity growth rate during the final three months of 2017. Nonfarm productivity has grown 1.3 percent over the past year. Manufacturing sector productivity contracted 1.2 percent during the quarter, sharply down from a 0.5 percent gain previously reported. Even with the pullback during Q1, manufacturing sector productivity has surged 4.3 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending June 2, 2018, First-Time Claims, seasonally adjusted): 222,000 (-1,000 vs. previous week; -12,000 vs. the same week a year earlier). 4-week moving average: 225,500 (-7.4% vs. the same week a year earlier).
Consumer Credit (April 2018, Outstanding Consumer Credit Balances (net of mortgages and other real estate backed loans, seasonally adjusted): $3.883 trillion (+$9.2 billion vs. March 2018, +4.8% vs. April 2017).

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

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