It’s Friday 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 throughout the week —I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines, starting with existing construction spending.
September Construction Spending Weaker Than Expected
In the month of September, construction spending dipped for a second month in a row. Spending declined by 0.4% at an annual rate of $950.9 billion. This came as a surprise to economists, who were expecting a 1.1% increase in construction spending. Breaking it down, public construction spending dropped by 1.3% and federal government spending on construction projects fell by 0.3%. The report also showed August’s construction spending was revised to reflect a 0.5% drop instead of the previously stated 0.8% decline. Private construction spending fell by 0.1% to its lowest since last year. One bright spot in the report was that after falling for four months in a row, housing construction rose 0.4% in September. And despite the recent pullback in construction spending, it is still 2.9% above where it was a year ago.
In September, Factory Goods Orders Fall
Factory goods orders for September fell by 0.6% or $2.8 billion to $499.4 billion. This is the second month in a row that this measure has fallen, and it was a steeper drop than expected. However, much of September’s pullback came from the volatile aircraft category; demand for aircraft continued to plunge after it soared over 300% in July. August’s orders were also revised up slightly from a 10.1% decline to a 10% dip. Following last week’s durable goods report, which revealed that orders fell 1.3% in September, the contraction in factory goods orders didn’t come as a huge surprise.
Jobless Claims Plunge to Lowest Level In 14 Years
For the week ending November 6, jobless claims dropped to a 278,000 annual rate, while the four-week average plunged to a 14-year low. . . Economists had predicted a 285,000 annual rate. The four-week moving average dipped by 2,250 to 279,000, the lowest level since April 2000 Given that there were no special factors skewing this week’s results, it is exciting to see layoff activity continue to hover around multi-year lows.
Trade Gap Widens In September
On Tuesday, the Commerce Department announced that the U.S. trade deficit surged 7.6% to $43.0 billion in September. Economists had expected the trade gap to remain largely unchanged at $40.2 billion. The primary culprit was that exports declined 1.5% to $195.6 billion, the biggest monthly decline since February. Breaking it down, U.S. exports declined 3.2% with China, 6.5% with the European Union and 14.7% with Japan. So there is no doubt that the economic woes in the Eurozone and Japan are impacting U.S. export growth. Excluding petroleum products, the U.S. trade deficit remains at $47.2 billion, which is the highest level in seven years. So despite increasingly domestic crude oil production, the U.S. trade deficit is likely to remain high, especially in light of a strong U.S. dollar, which makes U.S. exports more expensive. I also expect the wider trade gap to result in a downward third-quarter GDP revision to about 3%, down from the preliminary estimate of 3.5%.
October Payroll Report Misses Expectations
Like the first Friday of every month, the big news was the October payroll report, where the Labor Department reported that 214,000 new payroll jobs were created in October. This was significantly lower than economists’ consensus estimate of 243,000 new jobs. The good news is that payroll figures for the previous two months were revised higher by a cumulative 31,000 jobs. Also positive was that all major sectors reported job growth. The unemployment rate declined to 5.8%, down from 5.9% in the previous month. Hourly earnings rose 0.1% and have risen 2% in the past year, which is also a positive development for workers. This report is proof positive that we are in a “Goldilocks” economy. The Fed has implied repeatedly that it will not raise interest rates until there is wage growth, so although wages have risen slightly higher than inflation, there is insufficient wage growth for the Fed to raise interest rates any time soon.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Monday.
Have a great weekend,