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:
Unemployment Rate Report
In October, 271,000 new payroll jobs were created. This came well above economists’ expectations of 180,000 new payroll jobs. Meanwhile, the August payroll numbers were revised higher by 17,000, and the September results were revised down by 5,000. The unemployment rate fell to a seven-year low of 5.0%, down from 5.1% in September. Hourly wages in October increased by $0.09 to $25.50 per hour, a solid 0.36% increase. Labor force participation remained at a 38-year low of 64.5%, while the average workweek remained at 34.5 hours. The October payroll report brought us the strongest monthly job growth this year, so far. In addition, the increase in hourly wages makes it much more likely that the Fed will raise key interest rates at its December Federal Open Market Committee meeting.
In September, spending on construction jumped 0.6% to $1.09 trillion. This followed an unrevised 0.7% gain in August. Breaking it down, private construction spending rose 0.6% in September; private residential construction increased 1.9%. Meanwhile, public construction spending rose 0.7%. Over the past 12 months, construction spending has increased 14.1%. This report demonstrates how the housing recovery continues to drive the U.S. economy. U.S. construction spending is now at the highest level since March 2008, having risen each month this year.
Factory Goods Orders
In September, new orders for U.S. factory goods fell 1.0%. This was a slightly steeper-than-expected drop; economists were expecting a 0.9% decline. August factory goods orders were revised lower to reflect a 2.1% drop. Notably, automobile orders pulled back 1.5% in September, following a 2.1% drop in August. As orders fell, factories cut their inventory by 0.4% last month. This is the second month in a row that factory goods orders have fallen. Clearly, the strong dollar and the slowing energy sector are weighing on U.S. factory activity.
Balance of Trade Report
In September, the U.S. trade gap narrowed dramatically to $40.8 billion. In other words, the trade deficit narrowed 15% from August’s revised figure of $48.0 billion. This was a larger drop than expected; economists had expected a trade deficit of $43.0 billion. The biggest factor was a 16% surge in exports. Meanwhile, imports fell just 1.8%. Interestingly, the U.S. trade gap is now at a seven-month low. Along with exporting more in September, the U.S. imported less foreign fuel. However, with the strong dollar still making U.S. exports more expensive for other countries, the trade gap will likely widen again.
Initial Claims for Unemployment
For the week ending October 31, jobless claims increased by 16,000 to a 276,000 annual rate. This was a larger increase than expected, as economists were forecasting a 264,000 annual rate. Meanwhile, the more stable four-week moving average decreased 4,000 to a 259,250 annual rate. The key takeaway from this report is that the four-week moving average is now at the lowest reading since December 1973. Layoff activity remains at multi-decade lows.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,