Trend Alert: This Week's Big News About the U.S. Economy

It’s the last day of the trading week and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report—I recap all of the most important news impacting your wealth right here every week. Let’s take a look at this week’s big headlines:

May Brings Bump in Construction Spending

After April’s 0.8% increase, construction spending bumped up just 0.1% in May. Construction activity rose to a seasonally adjusted annual rate of $958.1 billion, which is a 6.6% year-over-year increase. Single-family home construction dropped 1.4%, while apartment construction fell 0.6%. Yet, housing construction is still up 7.5% year-over-year. Government project spending actually increased in May, rising 1% thanks to a 2% jump in spending on state and local building projects. This is a solid back-to-back gain in construction spending, after the pretty dismal start to the year. Looking forward, housing and overall construction should continue to gain momentum—which will ultimately help lift economic growth.

Defense Dip Weighs On Headline Factory Goods Orders

The Commerce Department reported this week that orders to U.S. factories dropped 0.5% in May due to a decrease in military and transportation equipment demand. Orders for durable goods slipped 0.9%, while orders for nondurable goods dropped 0.2%. Factory orders were up 2.5% year-over-year. While this was a disappointing report, what we need to consider is that U.S. factories are busy—and they’re hiring. The Institute for Supply Management (ISM) announced earlier this week that manufacturing expanded in June, and manufacturers added 10,000 jobs in May.

June Payrolls Pay It Forward

This morning, the Labor Department reported that 288,000 jobs were added in June, which was nicely higher than economists’ forecast for 215,000 jobs. As a result, the unemployment rate slipped to 6.1%. Economists had expected the rate to remain unchanged at 6.3%. The number of jobs added in May was also revised higher, up to 224,000 from the original 217,000. The June payroll report once again showed modest job growth and marked the fifth-straight month of job gains of more than 200,000. With the May revision, we’ve now surpassed the job total of December 2007, and the unemployment rate is now at its lowest level since September 2008.

Fewer Firings, More Hiring

For the week ending June 28, initial claims for unemployment jumped by 2,000 to 315,000. Economists were looking for 313,000. The four-week average was essentially unchanged at 315,000. The little change in last week’s jobless claims compared to the previous week’s initial report of 312,000 is a good sign that employers are limiting their pink slips—and fewer firings is usually a prelude to an acceleration in job growth.

Record Exports Shrink Trade Gap

In May, the trade gap shrank by more than forecast, thanks to record exports. The trade gap narrowed by 5.6% to $44.4 billion, marking the largest drop since November 2013. Economists were looking for a contraction to $45 billion. Exports rose to $195.5 billion in May, up from $193.5 billion in April. This was a very positive development. The shrinking trade gap shows that global economic growth is picking up steam—which will likely spur on more demand for American-made goods and help support further growth here in the U.S.

Have a great July 4th weekend,

Sincerely,

signed: Louis Navellier

Louis Navellier

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