{"id":1685,"date":"2020-03-06T10:29:09","date_gmt":"2020-03-06T15:29:09","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1685"},"modified":"2020-03-06T10:29:09","modified_gmt":"2020-03-06T15:29:09","slug":"february-employment-report-and-january-trade-deficit","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1685","title":{"rendered":"February Employment Report and January Trade Deficit"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Payrolls: +273,000; Private: 228,000;\nRevisions: +85,000; Unemployment Rate: 3.5% (down 0.1 point); Wages: +0.3%;\nOver-Year: 3.0%\/ Trade Deficit: $3.3 billion narrower<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cA solid economy, warm weather and lots of\ngovernment hiring are keeping job gains elevated, but that could change quickly\nif the corona virus becomes widespread.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The economy is in good shape and nothing\nshows that more than robust job gain we got in February.<\/em><\/strong>  Payrolls rose much more than expected<\/em><\/strong>,\npowered by huge increases in a wide range of sectors, but many may have been weather-related.  For example, construction, real estate and\nrestaurants together added 107,000 new workers. \n<\/em><\/strong>Those gains don\u2019t include related industries such as finance and\narchitecture, which also hired very strongly. \nUndoubtedly, those increases were hyped by the unseasonably mild winter\nthat allowed people to get out\/eat out and buy homes.  Other strength was seen in medical care,\nsocial assistance and, very surprisingly, manufacturing.  Finally, governments are hiring like crazy\nbut much of that may be for the census.  <\/em><\/strong><\/p>\n\n\n\n

On the unemployment front, the rate ticked down,\ndriven by a decline in the labor force.<\/em><\/strong>  That\nhappens periodically,<\/em><\/strong> so don\u2019t be surprised if the rate moves back up\nin March.  The labor market is tight, but\nthat is not translating into strong wage gains. \nHourly wages were up solidly over the month, but you would expect much\nmore than the 3% rise over the year. <\/em><\/strong><\/p>\n\n\n\n

The trade deficit narrowed sharply in January.<\/em><\/strong> Both imports and exports\nfell, which is not the way you want to see the deficit decline.  The large fall off in imports wasn\u2019t due\nsimply to declining oil prices.  Indeed,\nthe largest drop was in nonmonetary gold. \nDon\u2019t ask me why.  Energy\nand nonmonetary gold accounted for seventy percent of the import decline.<\/em><\/strong>  There were also reductions in demand for\ncapital goods and vehicles but increases in food and consumer products.  Exports were also down, but by much less.<\/em><\/strong>  We sold more farm product vehicles and\nconsumer products, which was good news. <\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  That\nwas then but this is now. <\/em><\/strong> The\ndata will not likely start reflecting the impact of the coronavirus until we\nstart get the March numbers, at the earliest. \nAnd those will likely reflect the issues we are seeing outside the U.S.<\/em><\/strong>\nThe\njobs and trade data are two reports that could see major virus-related impacts.<\/em><\/strong>  For example, traffic at West Coast ports is\ndown sharply<\/em><\/strong> and that should lead to continued declines in imports \u2013 a\npositive for growth.  But as\nthe coronavirus effects expand in the U.S., we should start seeing the effects\non hiring and income.  <\/em><\/strong>And then\nthere is the seasonal adjustment factor to consider.  If I am correct in my argument that the mild\nwinter has hyped the payroll increases, then as we move through the spring,\nthose gains will be backed out.  And if\nthe census hiring is boosting the government numbers, those people will start\ndropping off the rolls in the summer. \nSo, when you add it up, the weather, the census and the coronavirus look\nlike they could create some really dismal job numbers in the spring and\nsummer.  So don\u2019t get too excited about\nthe current condition of the economy, as the past is not likely to be prologue.<\/em><\/strong>  Investors understand that and will be\nbuffeted by the U.S. news on the coronavirus. \n<\/em><\/strong>The volatility is not expected to end anytime soon.  And then there is the Fed.  I like to say the markets are efficient but\nnot necessarily rational but I haven\u2019t in the past argued that the Fed decision-making\nhas a large element of irrationality in it as well.  Unfortunately, you cannot rule that out right\nnow.  After this week, who knows what\nthey will do and when they will do it. \nThe best guess is that once the effects of the coronavirus start\nhitting the economic data, and I assume they will, the Fed members will have to\nconclude that they need more rate cuts. <\/em><\/strong> Why they think that going from one percent to\nzero will do anything other than send the message that the sky is falling is\nbeyond me, but as I just noted, there seems to be an element of irrationality\n(or panic) in the Fed\u2019s thinking right now. \n <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Payrolls: +273,000; Private: 228,000; Revisions: +85,000; Unemployment Rate: 3.5% (down 0.1 point); Wages: +0.3%; Over-Year: 3.0%\/ Trade Deficit: $3.3 billion narrower IN A NUTSHELL:  \u201cA solid economy, warm weather and lots of government hiring are keeping job gains elevated, but that could change quickly if the corona virus becomes widespread.\u201d WHAT IT MEANS:  … Continue reading February Employment Report and January Trade Deficit<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1685","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1685","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1685"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1685\/revisions"}],"predecessor-version":[{"id":1686,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1685\/revisions\/1686"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}