The Economic News You'll Want to Know

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:

Personal Income Rises

The Commerce Department reported that personal income rose 0.3% in December. This beat economists’ predictions of a 0.2% increase. However, personal spending remained unchanged—below economists’ expectations of a 0.2% gain. December’s results were a lackluster conclusion to an otherwise good year for consumer spending; in 2015, spending rose by 2.1%, the most in a decade. Unfortunately, consumer spending has slowed recently, so downward revisions to Q4 GDP are possible.

Construction Spending Misses Estimates

Construction spending fell short of economists’ predictions in December, increasing 0.1% instead of the estimated 0.4% gain. Breaking it down, private construction decreased 0.6% for the month, while public construction increased 1.9%. Meanwhile, November construction spending was revised down to reflect a 0.6% decrease, from the previously reported 0.4% decline.
2015 was also a solid year for homebuilders and construction companies. Construction spending jumped 10.5% last year, the largest increase since 2005. While the pace has slowed this winter, hopefully the housing market will continue to boost the economy in 2016.

Initial Claims for Unemployment Rise

For the week ending January 30, the Labor Department reported that initial claims for unemployment rose to 285,000. This week’s figure was 1,000 higher than economists’ estimates. This was also an 8,000 increase from the revised 277,000 figure from the prior week. The four-week moving average also increased to 284,750.
If you look at a historical chart of the four-week moving average, you can see that layoff activity has been steadily declining since it hit a peak in early 2009. Since November, the four-week moving average has been creeping up. However, as long as it remains below 400,000, it indicates that layoff activity remains at healthy levels.

Factory Goods Orders Fall

U.S. factory orders fell 2.9% in December, more than economists’ estimates for a 2.3% drop. New orders for durable goods fell 5%, while nondurable goods slipped 0.5%. Notably, orders for non-defense capital goods fell 4.3%. November factory goods orders were also revised down to reflect a 0.7% decrease, down from the previously reported 0.2% decline. December’s decline was the worst in a year. The strong dollar, which depresses overseas demand, isn’t helping the manufacturing sector. Economists are looking for signs that factory orders have bottomed out, so we’ll have to wait and see if things improve from here on.

Unemployment Rate Dips

The Labor Department announced that the unemployment rate dipped to 4.9% in January. For the past three months, the unemployment rate had remained unchanged at 5.0%. Meanwhile, hourly earnings increased 0.5% and the average workweek increased from 34.5 hours to 34.6 hours. However, only 151,000 jobs were created in January, which was well below economists’ expectations of 185,000 new jobs. December payrolls were also revised lower by 30,000, while November payrolls were revised higher by 28,000. The national unemployment rate is officially at the lowest level in eight years. Overall, the payroll data was encouraging, but it likely won’t be enough for the Fed to consider raising key interest rates in March.

Trade Balance Widens

The trade deficit widened to $43.4 billion in December, which exceeded economists’ estimates for a deficit of $43.0 billion. During this time, exports decreased 0.3% to $181.5 billion and imports increased 0.3% to $224.9 billion. Meanwhile, November’s trade deficit was revised slightly lower, from $42.4 billion to $42.2 billion. 2015 marks the first year that exports have fallen since the recession. As to be expected, the stronger dollar is playing a major part in this, as it makes American goods more expensive for overseas buyers.

Have a great weekend,

Louis Navellier

Louis Navellier

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