The U.S. economy failed to create jobs for the first time since last spring. Here are the five things we learned from U.S. economic data released during the week ending January 8.
A sharp drop in the leisure and hospitality sector ended the labor market’s recent winning streak. Nonfarm payrolls contracted by a seasonally adjusted 140,000 jobs in December, the first decline in the Bureau of Labor Statistics data series since last April. For the year, the U.S. economy shed 9.37 million jobs, nearly double the previous record of 5.05 million lost jobs in 2009. Private sector payrolls fell by 95,000 jobs, as the 188,000 loss in the service sector more than counterbalanced the 93,000 additions in the goods-producing side of the economy. Leisure/hospitality shed the most jobs (-498,000) as government-imposed restrictions (and perhaps winter weather) shut down (or scaled back the operations of) restaurants, bars, and recreation opportunities. Also shrinking were payrolls in education services (-62,500) and state/local governments (-51,000). Sectors adding workers included professional/business services (+161,000, including 67,600 temporary workers), retail (+120,500), construction (+51,000), transportation/warehousing (+46,600), and manufacturing (+38,000).
The separate household survey kept the unemployment rate at a pandemic-low 6.7 percent as the labor force grew by tepid 31,000 people. The labor force participation rate also held steady at 61.5 percent (the same measure for adults 25 to 54 inched up 1/10th of a percentage point to 81.0 percent). The median length of unemployment fell by 1.9 weeks to 16.8 weeks (nonetheless well above the year-ago median of 9.1 weeks). Also declining was the number of part-time workers seeking a full-time opportunity, shrinking by 471,000 to 6.170 million. The broadest measure of labor underutilization decreased by 3/10ths of a point to 11.7 percent (its lowest reading since the start of the pandemic but still almost double its December 2019 mark of 6.8 percent).
Factory orders jumped in November. The Census Bureau reports new orders for manufactured goods gained 1.0 percent to a seasonally adjusted $487.2 billion. Durable and nondurable goods orders rose 1.0 percent and 1.1 percent, respectively, while a proxy for business investment (civilian non-aircraft capital goods orders) increased 0.5 percent. Even with seven consecutive monthly advances, factory orders over the first 11 months of 2020 were 7.3 percent over the comparable months in 2019. Shipments also continued their seven-month growth streak, adding 0.7 percent in November to $492.9 billion. 2020 shipments through November were 6.3 percent behind the prior year’s comparable. Unfilled orders narrowed 0.1 percent to $1.073 trillion while inventories expanded 0.7 percent to $629.9 billion.
Both manufacturing and service sector activity swelled in December. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, jumped 3.2 points to a reading of 60.7. The PMI has been above a reading of 50.0—the threshold between an expanding and contracting manufacturing industry—for seven consecutive months. Index components tied to production, new orders, employment, and inventories all improved during the month. Sixteen of 18 tracked manufacturing industries reported growth in December, led by apparel, furniture, and wood products. The press release noted that “labor market difficulties” linked to the pandemic “will continue to restrict” further manufacturing sector growth.
Meanwhile, the Services PMI added 1.3 points in December to a reading of 57.2. As with the case above, the service sector measure has been above a reading of 50.0 every month since June. Improving were measures for business activity/production and new orders, but the employment indicator moved back to a contractionary reading in December. While 14 of 18 tracked service sector industries expanded during the month, four others did not, including arts/entertainment/recreation and accommodation/food services as local/state governments have reimposed closures in the face of the current wave of infections. The press release noted that purchasing managers were “cautiously optimistic about business conditions with the recent approval and impending distribution of vaccines.”
The trade deficit rose to a 14-year high in November. The Census Bureau and the U.S. Bureau of Economic Analysis estimate exports jumped 1.2 percent during the month to $184.2 billion while imports surged 2.9 percent to $252.3 billion. The resulting trade deficit of -$68.1 billion, which was up $5.0 billion from October and a whopping 66.0 percent from a year earlier, was its highest point since August 2006. The goods deficit widened by $5.0 billion to -$86.4 billion, while the services surplus shrank by less than $0.1 billion to +$18.2 billion. The former’s expansion resulted from higher imports for consumer goods (including cell phones), industrial supplies/materials, and capital goods. The trade deficit for the first 11 months of 2020 (-$604.8 billion) was 13.9 percent ahead of the previous year’s pace.
Housing set the pace for construction spending’s rise in November. The Census Bureau estimates the seasonally adjusted annualized rate for the value of construction put in place during the month rose 0.9 percent to $1.459 trillion. This was up 3.8 percent from a year earlier. Private sector construction spending jumped 1.2 percent to $1.112 trillion (+4.1 percent versus November 2019). Private residential construction expenditures (i.e., housing) surged 2.7 percent in November and was 16.1 percent above year-ago levels. The same comparables for single-family homes were +5.1 percent and +18.1 percent. Private nonresidential construction spending dropped 0.8 percent during the month and was 9.5 percent off the year-ago pace. Public sector construction spending slipped 0.2 percent in November to $347.6 billion (+2.6 percent versus November 2019).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending January 2, First-Time Claims, seasonally adjusted): 787,000, -3,000 vs. the previous week, +575,000 vs. the same week a year earlier). 4-week moving average: 818,750 (+272.6% vs. the same week a year earlier).
- Vehicle Sales (December 2020, Total Light Vehicle Sales, seasonally adjusted annualized rate): 16.271 million (+4.1% vs. November 2020, -3.5% vs. December 2019).
- Wholesale Inventories (November 2020, Inventories of Merchant Wholesalers, seasonally adjusted): $649.8 billion (Unchanged vs. October 2020, -2.1% vs. November 2019.
- Consumer Credit (November 2020, Outstanding Non-Real Estate Back Consumer Credit, seasonally adjusted): $4.177 trillion (+$15.3 billion vs. October 2020, +0.5% vs. November 2019).
- FOMC Minutes
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What We Learned About the U.S. Economy Last Week 