This year, the Chinese year of the horse, is off to a largely optimistic start. Consumers are feeling more confident, the United States oil boom continues apace, America is exporting more and importing less, employers are adding (some) jobs, mortgage applications are up, chatter suggests Congress may step up with extended unemployment insurance for those who lost their benefits over the holidays and the Federal Reserve’s stimulus will continue or be reduced gradually in coming months — all good news that suggests no big fiscal shocks appear to be headed our way in the short term.
Let’s get after it, and find some horse sense in this week’s economic indicators.
Here’s an indicator we haven’t discussed much, but it’s an important one. Thanks in part to a healing North American automotive industry and the continent’s recent oil boom, the amount of goods and services imported to America has leveled off, while exports have grown 17 percent from the pre-recession peak. This has resulted in a trade deficit that’s looking healthier than it has since the late 1990s, and suggests further improvements in homegrown manufacturing.
From the Department of Commerce report, “Total November exports of $194.9 billion and imports of $229.1 billion resulted in a goods and services deficit of $34.3 billion, down from $39.3 billion in October, revised.”
The Big Taper
It’s always a party when the Federal Reserve Board of Governors gets together, and the most recent meeting was no exception. In their latest pre-Christmas soiree, most of the gang “agreed that the cumulative improvement in labor market conditions and the likelihood that the improvement would be sustained indicated that the Committee could appropriately begin to slow the pace of its asset purchases…”
This caution bodes well for financial markets that fear the Fed will move too quickly to curtail its asset purchases — The Big Taper — undermining and possibly reversing the economy’s recent improvements.
After ADP’s rosy report showing an increase of 238,000 private sector jobs from November to December (read that report HERE) we’ve got this week’s data from the Bureau of Labor Statistics showing disappointing job growth with a few caveats.
The number of unemployed persons declined by 490,000 and the unemployment rate has dipped to 6.7 percent, but payroll edged up only 74,000 — far shy of expectations.
Even though these poor numbers are major economic headline today, it’s important to note that November’s figures were revised up by approximately 40,000 jobs and the extreme cold weather likely had a significant impact on the construction sector.
ADP’s premature, optimistic numbers reflect general strength in the economy even if they didn’t translate into actual job growth in December. If everything continues moving forward with no major weather setbacks, expect January’s figures to help make up the difference.