Both the labor market and business sentiment started 2020 on a high note. Here are the five things we learned from U.S. economic data released during the week ending February 7.
Hiring continued in January. The Bureau of Labor Statistics finds nonfarm payrolls expanded by a seasonally adjusted 225,000 in January, following gains of 261,000 and 147,000 in November and December, respectively. Private-sector employers added 206,000 workers, split between 32,000 in the goods-producing side of the economy and 174,000 in the service sector. Industries adding the workers in January included health care/social assistance (+47,200), construction (+44,000), leisure/hospitality (+36,000), transportation/warehousing (+28,300), and professional/business services (+21,000). (The same report featured a revision to 2019 payrolls data that now shows employers added 2.096 million workers during the year, down 12,000 from the prior estimate). Hourly wages averaged $28.44 in January, up 3.1 percent from a year earlier.
A separate household survey finds the unemployment rate edging up 1/10th of a percentage point to a still very low 3.6 percent. The labor force participation rate jumped 2/10ths of a percentage point to 63.4 percent. The participation rate for adults aged 25-54 rose by 2/10ths of a percentage point to 83.1 percent, its best reading since September 2008. The median length of unemployment inched up 3/10ths of a week to 9.3 weeks, while the count of part-time workers seeking full-time work grew by 36,000 to 4.182 million. The broadest measure of labor underutilization—the U-6 series—added 2/10ths of a point to 6.9 percent (still very close to its post-recession low).
A slowdown in trade activity led to a trade deficit contraction in 2019. Per the Census Bureau and the Bureau of Economic Analysis report that 2019 exports totaled $2.500 trillion (off $1.5 billion from 2018) while imports summed to $3.117 trillion (off $12.5 billion from 2018). The resulting trade deficit for 2019 of -$616.8 billion was $10.9 billion smaller than that of 2018, its first decline since 2013 and the equivalent to 2.9 percent of U.S. GDP. The goods deficit for all of 2019 narrowed by $21.4 billion to -$866.0 billion while the services surplus shrank by $10.4 billion to +$249.2 billion. These figures include the December trade data, which found the trade deficit growing by $5.2 billion during the month to a seasonally adjusted -$48.9 billion.
Purchasing managers indicate that business activity gained in January. The Institute for Supply Management’s PMI—the headline index from its Manufacturing Report on Business—surged by 3.1 points to a reading of 50.9. This was the first time since last July that the PMI was above a reading of 50.0, the threshold between an expanding and contracting manufacturing sector. Four of five PMI components advanced in January: production (up 9.5 points to 54.3), new orders (up 4.4 points to 52.0), employment (up 1.4 points to 46.6), and supplier deliveries (up 7/10ths of a point to 52.9). The inventories component shed 4/10ths of a point to 48.8. Only eight of 18-tracked manufacturing industries expanded during the month, led by furniture, wood products, and food/beverage goods. The press release noted that “global trade remains a cross-industry issue” for many companies.
The NMI—the headline index from the ISM’s Non-Manufacturing Report on Business—added 6/10ths of a point in January to 55.5, its best reading since last summer. Two of four NMI components improved during the month: business activity (up 3.9 points to 60.9) and new orders (up 9/10ths of a point to 56.2). Slumping were measures for inventories (down 4.5 points to 46.5) and supplier deliveries (down 8/10ths of a point to 51.7). Twelve of 18 service sector industries expanded during the month, led by agriculture, management of companies/support services, and health care/social assistance. While “mostly positive” about business conditions, survey respondents noted that they “continue to have difficulty with labor resources.”
Factory orders expanded for the second time in three months in December. The Census Bureau indicates new orders for manufactured goods rose 1.8 percent during the month to a seasonally adjusted $499.3 billion. Durable goods orders jumped 2.4 percent while those for nondurables advanced 1.1 percent. A proxy for business investment—civilian non-aircraft orders—fell 0.8 percent. Shipments increased or a third straight month with a 0.5 percent rise, including a 1.1 percent bounce in nondurables shipments (durable shipments, however, fell 0.2 percent). Unfilled orders mostly held steady at $1.156 trillion while inventories expanded for the 12th time in 13 months (rising 0.5 percent to $704.9 billion). Even with December’s advance, last year was not a great year for manufacturing: factory orders totaled $5.957 trillion for all of 2019, down 0.6 percent from 2018.
Productivity improved as 2019 ended. The Bureau of Economic Analysis reports that nonfarm business sector labor productivity grew 1.4 percent during the fourth quarter of 2019, an improvement over the 0.2 percent contraction in Q3. Output increased 2.5 percent during the quarter, fueled by a 1.1 percent gain in hours worked. Manufacturing sector productivity, however, contracted during Q4. The 1.2 percent drop in manufacturing sector productivity was split by declines for durable and nondurable goods of -0.8 percent and -2.2 percent, respectively. Over the past year, nonfarm productivity jumped 1.8 percent (its best annual gain since 2010), while manufacturing productivity slumped 0.7 percent.
Other U.S. economic data released over the past week:
– Jobless Claims (week ending February 1, 2020, First-Time Claims, seasonally adjusted): 202,000 (-15,000 vs. previous week; -28,000 vs. the same week a year earlier). 4-week moving average: 211,750 -6.1% vs. the same week a year earlier).
– Wholesale Trade (December 2019, Total Inventories of Merchant Wholesalers, seasonally adjusted): $674.5 billion (-0.2% vs. November 2019, +2.1% vs. December 2018).
– Construction Spending (December 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.328 trillion (-0.2% vs. November 2019, +5.0% vs. December 2018).
– Consumer Credit (December 2019, Outstanding Non-Real Estate Consumer Credit Balances, seasonally adjusted): $4.197 trillion (+$22.1 billion vs. November 2019, +4.7% vs. December 2018).
– Senior Loan Officer Opinion Survey
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What We Learned About the U.S. Economy Last Week 