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 Rises to 5.7%
The Labor Department reported this morning that nonfarm payrolls climbed by 257,000 in January. This beat analysts’ estimates for a 230,000 increase. Payrolls for November and December were also revised higher by 70,000 and 77,000 more jobs, respectively. The unemployment rate increased to 5.7%, while wages rose 0.5% in January, the biggest increase in six years. The upward revisions for November and December were particularly bullish, especially November which was the biggest monthly payroll increase since May 2010. Overall, this was a very positive payroll report and may reignite speculation that the Fed may raise key interest rates due to the fact that wages are now finally rising.
Construction Spending Misses Estimates
During December, construction spending increased less than expected, rising 0.4% to an annual rate of $982.1 billion. Economists were expecting a 0.7% increase in December. November’s construction spending was revised up to show a 0.2% drop, compared to the previously reported 0.3% slip. Private construction spending increased 0.1%, while public construction spending rose 1.1%. Total construction spending for 2014 rose 5.6%. Despite missing economists’ estimates, construction spending was at its highest level since 2008.
Jobless Claims Rise
For the week ending January 31, initial claims for unemployment increased by 11,000 to a seasonally adjusted 278,000. Economists were looking for claims to total 290,000. The four-week moving average dropped to 292,750. With claims still below the 300,000 mark, it shows that labor market is still improving.
Orders for Factory Goods Fall For Fifth Consecutive Month
The Commerce Department reported that new orders for factory goods slipped 3.4% to $471.5 billion in December. This followed November’s 1.7% decline, and was steeper than economists’ expectations for a 2.2% decrease. This is the fifth-straight month that factory good orders declined, after posting a record high in July. However, there were some positives, as non-defense capital goods shipments were revised up to a 0.2% increase, instead of a 0.2% decline.
Trade Gap Widens 17%
The U.S. Trade deficit widened by 17% to $46.6 billion in December. This surpassed economists forecast of $38 billion and is the widest level since 2012. Exports slipped 0.8% to $194.9 billion, while imports rose 2.2% to $241.4 billion. The U.S. trade deficit is now at its highest level in two years and will continue to adversely impact GDP calculations.
Personal Spending Falls in December
In December, personal income grew at a 0.3% annual pace, slightly above economists’ expectations of a 0.2% increase. Meanwhile, personal spending dropped 0.3%, while economists’ expected a 0.2% decline. This is the biggest decline since 2009; after adjusting for inflation, consumer spending declined 0.1%. While personal spending dipped more than expected in December, consumer spending for full-year 2014 rose 2.5%, which is the biggest annual increase since 2006.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes on Monday.
Have a great weekend,