October 6, 2017
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…
Balance of Trade Report
On Thursday, the Commerce Department announced that the U.S. trade deficit declined 2.7% in August. Breaking it down, exports rose by 0.4% to $195.3 billion (up from $194.4 billion in July). Imports were almost unchanged, slipping 0.1% to $237.7 (down from $238.1 in July). Imports were likely strained from the effects of Hurricane Harvey on Gulf Coast shipping operations. The country's trade gap with China and the European Union decreased in August.
Despite the narrowed trade deficit, the overall deficit is still growing on an annual basis, which is not strange. The U.S. has run trade deficits since the 1970s. Deficits can be a positive indication of more financially secure U.S. consumers able to purchase imported goods more than people in other countries.
Factory Goods Orders
The Commerce Department reported on Thursday that factory goods orders jumped 1.2% in August, slightly higher than the 1.0% increase that economists forecasted and due in part to a 5.1% increase in orders for transportation equipment. Even when you exclude the strong transportation sector, factory goods orders rose 0.6% in August.
Orders for motor vehicles inched up by 0.7% after dropping 2.2% in July, and market observers expect further gains in September as communities impacted by hurricanes Harvey and Irma continue to replace vehicles.
Unemployment Rate Report
The first Friday of every month brings with it the payroll report from the month prior. The Labor Department reported that this morning that the unemployment rate declined to 4.2% in September, a 16-year low. Additionally, the number of new payroll jobs created in August has been revised higher, from 156,000 to 169,000. Average hourly earnings rose by $0.12 to $26.55. The labor force participation rate was virtually unchanged at 62.9% and has not shown much movement over the year. I should add that the U.S. did lose 33,000 jobs in September, the first monthly drop in employment in seven years.
The impacts of Hurricanes Irma and Harvey are likely key drivers of the sharp fall in employment in industries such as the "food services and drinking places" industry.
Earlier numbers from payroll processor ADP also indicate hurricane-induced weakness. ADP reported an addition of 135,000 payroll jobs in September, 43% less than the 238,000 jobs added according to ADP's revised total for August jobs.
That's all I have for you this week. I'll be in touch again next week with the latest ratings out of Portfolio Grader.