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

Job Creation and the Trade Deficit Both Grow: March 5 – 9

Payroll growth surprised to the upside while the trade deficit widened once again. Here are the five things we learned from U.S. economic data released during the week ending March 9.

#1Employers accelerated their pace of hiring during February. Nonfarm payrolls grew by a seasonally adjusted 313,000 workers during the month, the most jobs added since June 2016. Further, the Bureau of Labor Statistics upwardly revised its estimates of December and January job gains by a combined 54,000. Nonfarm employers have added 2.281 million people to their payrolls over the past year, for a monthly average of 190,083 jobs. Private sector employers added 287,000 jobs to their payrolls in February, split between 100,000 in the goods-producing side of the economy and 187,000 in the service sector. The industries adding the most workers during the month included construction (+61,000), retail (+50,300), professional/business services (+50,000), manufacturing (+32,000), health care/social assistance (+29,100), and financial activities (+28,000). The average workweek inched up by 1/10th of an hour to 34.5 hours (February 2017: 34.4) while average weekly earnings grew by $4.06 to $922.88 (up 2.9 percent over the past year).Growth in Employment-030918

Based on a separate survey of households, the employment rate remained at its post-recession low of 4.1 percent for a third consecutive month. An impressive 806,000 people entered the labor force, leading to a 3/10ths of a percentage point increase in the labor force participation rate to 63.0 percent, its highest point since last September. The labor force participation rate for adults aged 25 to 54—arguably a better measure of the number of adults in their prime working years—rose by half of a percentage point to a post-recession high of 82.2 percent. The typical length of unemployment slipped by 1/10th of a week to 9.3 weeks (February 2017: 10.1 weeks). 5.160 million people held a part-time job but were seeking a full-time opportunity, down from the 5.670 million at the same time a year earlier. The broadest measure of labor underutilization published by the BLS—the U-6 series—held firm at 8.2 percent (February 2017: 9.2 percent).

#2The U.S. trade deficit widened for a fifth consecutive month. The Census Bureau and the Bureau of Economic Analysis reports that exports declined 1.3 percent to a seasonally adjusted $200.9 billion while imports shrank by less than 0.1 percent to $257.5 billion. The resulting trade deficit expanded by 5.0 percent to -$56.6 billion. The trade deficit has grown by 16.2 percent over the past year. The goods deficit jumped by $2.8 billion to -$76.5 billion while the services surplus eked out a $0.1 billion increase to +$19.9 billion. The former resulted from a $3.3 billion decrease in exported goods (thanks to a decline in exports of both civilian aircraft and industrial supplies/materials). The U.S. had its largest goods deficits with China (-$35.5 billion), the European Union (-$15.0 billion), Germany (-$6.3 billion), Mexico (-$5.6 billion), and Japan (-$5.6 billion).

#3The service sector continued growing at a solid if slightly slower rate in February. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business shed 4/10ths of a point to a reading of 59.5. This was the 97th straight month in which the NMI was above a reading of 50.0, indicative of an expanding service sector. The NMI slipped because of a sharp 6.6 point drop in the index component associated with employment (to a still expanding reading of 55.0). Two other index components grew during February (business activity/production (up 3.0 points) and new orders (up 2.1 points)) while that for supplier deliveries held firm. Sixteen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, transportation/warehousing, and utilities. The press release noted that a “majority of respondents continue to be positive about business conditions and the economy.”

#4Even with a small upward revision for Q4, productivity gains continued to disappoint. The Bureau of Economic Analysis raised its estimate of nonfarm labor productivity during the final three months of 2017from a 0.1 percent decrease to being unchanged on a seasonally adjusted basis. This was the outcome of output growing 3.2 percent and the number of worked gaining 3.3 percent. Manufacturing sector productivity surged 6.0 percent during Q4, thanks to a 6.6 percent increase in output resulting from a mere 0.5 percent increase in the number of hours worked. Durable goods manufacturing productivity jumped 8.1 percent while that for nondurable goods manufacturing increased 3.4 percent. For all of 2017, nonfarm business productivity gained by a feeble 1.2 percent, which was nevertheless an improvement from being unchanged for all of 2016. Manufacturing sector productivity inched up 0.6 percent during 2017 after having gained by only 0.4 percent and 0.3 percent in 2016 and 2015, respectively.

#5Consumers took on credit card debt at a slower rate in January. The Federal Reserve indicates that outstanding consumer credit balances (net of any real estate related loans—e.g., mortgages, home equity loans) totaled a seasonally adjusted $3.855 trillion at the end of the month, up $13.9 billion from December and 5.3 percent from a year earlier. Balances of nonrevolving credit (e.g., student loans, college loans) jumped by $12.8 billion during the month to $2.825 trillion (+5.0 percent versus January 2017). Not rising as much were outstanding revolving credit balances (e.g., credit cards), which inched up by $0.7 billion to $1.030 trillion (+6.1 percent versus January 2017). Revolving balances had risen by $6.1 billion and $11.3 billion during December and November, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 3, 2018, First-Time Claims, seasonally adjusted): 231,000 (+21,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 222,500 (-8.6% vs. the same week a year earlier).
Factory Orders (January 2018, New Orders for Manufactured Goods, seasonally adjusted):$491.7 billion (-1.4% vs. December 2017, -6.6% vs. January 2017).
Wholesale Trade (January 2018, Inventories of Merchant Wholesalers, seasonally adjusted): $619.1 billion (+0.8% vs. December 2017, +4.8% vs. January 2017).
Beige Book

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

Payrolls Expand for the 86th Straight Month: December 4 – 8

Employers continued to expand their payrolls this fall. Here are the five things we learned from U.S. economic data released during the week ending December 8.

#1Hiring remained solid in November. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 228,000 during the month, following a gain of 244,000 during October. In all, payrolls have expanded by 2.071 million over the past year and have increased in each of the past 86 months. The goods-producing side of the economy added 62,000 jobs during November, led by manufacturing (+31,000) and construction (+24,000). The private service sector added 159,000 workers, with large increases seen in professional/business services (+46,000), health care/social assistance (+40,500), retail (+18,700), and leisure/hospitality (+14,000). The average workweek length increased by 1/10th of an hour to 34.5 hours (November 2016: 34.3 hours) while average weekly earnings grew by $4.38 to $915.98 (+3.1 percent versus November 2016).Payroll Gains 2011-2017 120817

Meanwhile, a separate household survey finds the unemployment rate held steady at its 17-year low of 4.1 percent (seasonally adjusted) The civilian labor force grew by 148,000, but the labor force participation rate remained at 62.7 percent. The labor force participation rate for adults aged 25 to 54 increased by 2/10ths of a percentage point to 81.8 percent (matching September as its highest point in nearly seven years). The median length of unemployment fell by 3/10ths of a week to 9.6 weeks (November 2016: 10.2 weeks) while the count of part-time workers seeking a full-time job grew slightly by 48,000 to 4.801 million (November 2016; 5.659 million). Finally, the broadest measure of labor underutilization (the U-6 series) inched up by 1/10th of a percentage point to 8.0 percent, just above its post-recession low.

#2Rising imports in October led to the largest trade deficit since January. Exports essentially held steady during the month at $195.9 billion (+5.6 percent versus October 2016) while imports jumped by $3.8 billion to $244.6 billion (+7.0 percent versus October 2016). As a result, the trade deficit expanded by $3.8 billion to -$48.7 billion according to the Census Bureau and Bureau of Economic Analysis. The goods deficit also grew by $3.8 billion to -$69.1 billion (+9.0 percent versus October 2016) while the services surplus held firm at +$20.3 billion (also virtually unchanged from a year earlier). In the case of the former, imports grew for crude oil (+$1.5 billion) and consumer goods (+$0.8 billion). Meanwhile, a $2.6 billion rise in industrial supplies/materials exports was counterbalanced by declining exports of soybeans (-$1.4 billion) and civilian aircraft (-$1.1 billion). The U.S. has its largest goods deficits with China (-$31.9 billion), the European Union (-$12.0 billion), Mexico (-$6.0 billion), and Japan (-$5.3 billion).

#3The service industry grew at a slower pace during November. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business slumped 2.7 points during the month to a reading of 57.4. Despite the decline, this was the 95th straight month in which the NMI was above a reading of 50.0 (indicative of a growing service sector). All four components of the measure fell during the month: new orders (-4.1 points), supplier deliveries (-4.0 points), employment (-2.2 points), and business activity/production (8/10ths of a point). Sixteen of 18 tracked service sector industries expanded during November, led by retail, wholesale trade, and utilities. The press release noted that survey respondents’ comments “indicate that the economy and sector will continue to grow for the remainder of the year.”

#4Factory orders sputtered in October. The Census Bureau reports that new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $479.6 billion. Even with the decline, this represented a 3.7 percent increase from the same month a year earlier. Transportation orders fell 4.2 percent as orders for civilian and defense aircraft slumped 18.5 percent and 7.6 percent, respectively. Net of transportation goods, orders jumped 0.8 percent for the month and was 6.8 percent ahead of year-ago levels. Growing for the month were new orders for machinery (+1.9 percent), electrical equipment/appliances (+0.8 percent), computers/electronics (+0.7 percent), and nondurable goods (+0.7 percent). New orders for nondefense capital goods net of aircraft (a proxy for business investment) gained 0.3 percent during October and has risen 9.6 percent over the past year. Shipments grew for the tenth time in 11 months with a 0.6 percent increase to $484.2 billion. Unfilled orders were essentially unchanged for the month at $1.135 trillion while inventories grew for the 11th time in 12 months with a 0.2 percent increase at $661.6 billion.

#5Q3 productivity growth remained solid after a revision The Bureau of Labor Statistics indicates nonfarm business sector productivity grew 3.0 percent during the quarter, matching the previous estimate of Q3 productivity reported a month earlier and the most significant gain in productivity since Q3 2014. This was the result of a 4.1 percent rise in output generated by a 1.1 percent gain in the number of hours worked during the quarter. Even with the bounce during the quarter, productivity has grown by a mere 1.5 percent over the past year. Manufacturing sector production fell 4.4 percent during the quarter, split by falls of -4.7 percent and -4.4 percent for durable and nondurable manufacturing, respectively. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 2, 2017, First-Time Claims, seasonally adjusted): 236,000 (-2,000 vs. previous week; -15,000 vs. the same week a year earlier). 4-week moving average: 241,500 (-3.4% vs. the same week a year earlier).
Consumer Credit (October 2017, Outstanding Consumer Credit Balances (net of mortgages and other real estate-backed loans), seasonally adjusted): $3.802 trillion (+$20.5 billion vs. September 2017 +5.4% vs. October 2016).
University of Michigan Consumer Sentiment (December 2017-preliminary, Index (1966Q1=100), seasonally adjusted): 96.8 (vs. November 2017: 98.5; vs. December 2016: 98.2).
Wholesale Inventories (October 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $605.3 billion (-0.5% vs. September 2017, +3.9% vs. October 2016).

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