7 Ways to Make Sense of the U.S. Economy

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 big Unemployment Rate Report.

Unemployment Rate Report

The Labor Department announced this morning that 295,000 jobs were added in February, which beat economists’ estimate for 235,000 jobs and marks the 12th straight monthly gain above 200,000. The unemployment rate dropped to 5.5%, the lowest rate since May 2008. The strengthening job market is a huge positive for the U.S. economy, yet wage growth continues to lag, rising just 2% in February. Since wage growth is still well below the 3.5%-4% wage growth in a healthy economy, I don’t look for the Fed to raise interest rates just yet.

Balance of Trade Report

The U.S. Trade deficit slipped by 8.3% in January to $41.8 billion, down from $45.6 billion in December. Exports dropped to $189.4 billion, while imports fell to $231.1 billion. Falling oil prices and U.S. crude production have helped keep the U.S. Trade Deficit in check. Petroleum imports dropped 23% to $17.7 billion between December and January.

Personal Income

In January, consumer spending dipped 0.2%. Economists were expecting a 0.1% decline, so this was a larger drop than expected. However, after adjusting for inflation, personal spending increased 0.3%. The Commerce Department also announced that personal income rose 0.3%, also below economists’ estimates of a 0.5% gain. Meanwhile, the personal saving rate rose to 5.5%, the highest level in over two years. Deflationary pressures and falling gasoline prices weighed on headline consumer spending. However, the fact that core consumer spending, personal income and the savings rate all rose is a good sign.

Construction Spending

The Commerce Department reported that U.S. construction spending declined 1.1% to an annual rate of $971.4 billion in January. This surprised economists, who had expected construction spending to rise 0.2%. At the same time, December construction spending was revised to reflect a 0.8% increase, double the 0.4% gain reported previously. Unseasonably cold temperatures across the country clearly depressed homebuilding activity across the country. However, spring is just around the corner, and with it I expect a rebound in construction activity.

Layoff Activity Rises Temporarily

For the week ending February 28, initial claims for unemployment rose by 7,000 to a seasonally adjusted 320,000. Economists were looking for claims to fall to 300,000. The four-week moving average rose by 10,250 to 304,750. With claims still hovering around the 300,000 mark, it shows that labor market is still improving.

Softening Global Demand Weighs on U.S. Factory Orders

The Commerce Department reported this that new orders for factory goods slipped 0.2% in January. Economists were looking for a 0.1% decrease, so this was a steeper drop than expected. December factory goods orders were revised to a 3.5% drop, which is slightly worse than the previously announced 3.4% decrease. Weakening demand from China, Europe and Japan has put a damper on U.S. factory orders, especially for nondurable goods. However, the sub-category for business investment rebounded 0.5% in January. This is a positive sign.

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,

Louis Navellier

Louis Navellier

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