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:
Government Spending Weighs on Construction Activity
In November, construction spending declined 0.4%; this missed economists’ estimates of a 0.6% increase. Both the public and private sectors experienced declines. Private construction decreased by 0.2% and public construction fell 1%. At the same time, housing construction still rose 0.3%. This is the first time in seventeen months that U.S. construction spending has fallen. It appears that government spending was the main drag on total outlays. Considering that construction spending is still 10.5% higher than it was a year ago, I wouldn’t worry about the November decline just yet.
November Trade Gap Narrows
The trade deficit narrowed to $42.4 billion in November. (October’s deficit was revised to $44.6 billion, representing a wider gap than the previously reported $43.9 billion estimate.) November exports decreased $1.6 billion to $182.2 billion, while imports decreased $3.8 billion to $224.6 billion. The strong dollar is clearly putting a damper on exports. As I mentioned earlier, sluggish trade will likely deter the Fed from hiking rates this year.
Factory Goods Orders Underwhelm
On Wednesday, The Commerce Department reported a 0.2% decrease in factory orders for November. This missed economists’ projections of a 0.1% increase. Meanwhile, October factory goods orders were revised lower to reflect a 1.3% gain, down from a 1.5% increase previously. This is the third month in the past quarter that factory goods orders have fallen. The manufacturing sector is clearly another casualty of the stronger dollar.
Layoff Activity Remains Low
For the week ending January 2, initial claims for unemployment decreased 10,000 to 277,000. This exceeded economists’ projections of 273,000. The four-week moving average is now 275,750–a 1,250 decrease from last week’s moving average of 277,000. Around this time of year, week-to-week jobless claims aren’t as reliable due to seasonal employment. As result, I spend more energy looking at the four-week moving average. Given that the four-week moving average remains near multi-year lows, I was pleased with this report.
December Payrolls Rise More than Anticipated
In December, 292,000 payroll jobs were created. This was more than the consensus estimate of 230,000 jobs. As expected, the unemployment rate was unchanged at 5% and the average workweek remained unchanged at 34.5 hours. At the same time, hourly wages only rose by 0.1% in December. In my opinion, the best news is that October and November payrolls were revised up by 50,000. By some measures, 2015 exhibited the strongest job growth since 1999. While abnormally warm weather may have boosted December’s robust job growth, the positive upward revisions suggest a healthier job market. There is also evidence that more folks are entering the workforce, which is very good news.
Wholesalers Cut Inventories
In November, wholesalers reported that stockpiles contracted 0.3%. This was a steeper than-expected-drop; economists were looking for a 0.1% decline. Meanwhile, sales at wholesalers fell 1.0%, marking the largest decline since the beginning of 2015. At the current sales pace, wholesalers have enough inventory to last 1.32 months, up from 1.31 months in October. October wholesale inventories were also revised lower to reflect a 0.3% drop, down from the previously stated 0.1% decline. Unfortunately, the decline in wholesale inventories will undoubtedly weigh on fourth-quarter GDP. We’ll get a clearer picture of the total impact when the business inventories report is released next Friday.
Have a great weekend,