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 the market moving Unemployment Rate report:
Unemployment Rate Slips to 5.6%
In December, 252,000 payroll jobs were created. This was significantly better than economists’ estimate of 230,000 new jobs. October and November payrolls were also revised 50,000 higher. The unemployment rate fell again in December; it is now at 5.6%. This was a positive report overall. However, wages also declined 0.2% in December and the labor force participation rate fell 0.2% to 62.7%. So the Fed won’t want to raise key interest rates until wages rise and labor force participation improves. Overall, the December payroll report was positive, especially because it clearly signaled that the Fed cannot raise key interest rates.
Orders for Factory Goods Fall For Fourth Consecutive Month
In November, U.S. factory orders fell 0.7%. This was a steeper drop than expected; economists were calling for a 0.3% decline. Durable goods orders dragged down the total number, falling a revised 0.9% due to the volatile transportation component (particularly commercial jet orders). Non-defense capital goods orders (which also exclude aircraft), fell 0.2%. This is the fourth consecutive month that factory goods orders have declined. This is partly because foreign demand has softened. However, the U.S. remains an oasis relative to other countries; in Germany, factory orders plunged 2.4% in November.
Trade Gap Shrinks to 11 Month Low
In November, the U.S. trade deficit shrank 7.7% to $39 billion. Economists had expected the trade deficit to shrink to $40.6 billion, so this was a larger drop than expected. Notably, crude oil imports fell to the lowest level in over 15 years, thanks to a strong U.S. dollar and rising domestic crude oil production. Overall, imports fell 2.2% to $235.4 billion and exports shrank 1.8% to $196.4 billion. The trade gap is now the smallest it’s been in 11 months. This is good news, so economists are now revising their fourth-quarter GDP estimates higher. This is one of several ways that the energy boom is helping the U.S. economy.
Layoff Activity Remains Low
For the week of January 3, first-time jobless claims declined another 4,000 to a seasonally adjusted 294,000. Economists were calling for a 290,000 annual rate, so jobless claims didn’t fall quite as much as expected. At the same time, the four-week moving average fell by 250 to 290,500. This is the 17th week in a row that the four-week moving average of jobless claims has remained below 300,000—the generally accepted benchmark of normal economic activity.
Credit Card Debt Unexpectedly Falls
In November, consumer credit rose by $14.1 billion, below economists’ expectations of a $16.0 billion increase. Meanwhile, October consumer credit was revised up from $13.2 billion previously to $16.0 billion. In November, revolving debt (which includes credit card debt) fell by $946 million. Non-revolving debt (which covers auto and student loans) jumped $15 billion. The big surprise with this report was that credit card debt fell for the first time in three months. It appears that lower fuel prices are enabling Americans to pay off their credit cards. Meanwhile, demand for cars and student loans remains high.
Wholesale Stockpiles Jump Most in 7 Months
In November, wholesale inventories jumped 0.8%, outstripping economists’ estimates of just a 0.3% gain. October wholesale stockpiles were revised up to reflect a 0.6% increase, up from 0.4% earlier. Auto, electrical goods, hardware and machinery stockpiles all rose. Meanwhile, wholesalers reported a 0.3% drop in sales. It would take 1.21 months to clear all inventory at the current sales pace. This was the largest increase in wholesale inventories in seven months. This is especially impressive given that falling oil prices weighed on the value of petroleum stocks. So we’ll likely see another round of upward revisions to fourth-quarter GDP.
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,