More Better Over Here, More Worse Over There
- The February Payroll Employment Survey showed another solid gain, up 227,000 jobs for the month.
- The separate Household Survey posted an outsized increase of 428,000 jobs in February.
- The Unemployment Rate was unchanged at 8.3 percent as the labor force increased by 476,000.
- The U.S. International Trade Gap widened in in January to -$52.6 billion, under pressure from oil prices.
With today’s employment and trade data we can continue the theme of better over here and worse over there, meaning U.S. economic conditions continue to improve while international conditions remain stressed. In the February employment numbers we see strengthening U.S. labor markets, but in the January trade numbers we see the negative consequences of higher imported oil prices which will drag on current quarter GDP growth. Payroll jobs increased by 227,000 in February. December and January payroll job gains were revised upward to 233,000 and 285,000, respectively. Three months solidly above 200,000 would have been a very optimistic forecast six months ago. The unemployment rate for February stayed at 8.3 percent. Components of the household employment survey, which feed into the unemployment rate, have been behaving oddly lately. The household employment survey has shown VERY strong job growth of +428,000 in February, after gaining 847,000 in January. Normally, the payroll and the household surveys are better correlated. After limping through the fourth quarter of 2011, the labor force numbers have rebounded substantially in 2012, gaining 508,000 in January and 476,000 in February, resulting in a trend-busting increase in the labor force participation rate for February. Average hourly earnings gained 0.1 percent in February and average weekly hours were up one-tenth to 33.8. This is positive for income, but after a burst of gasoline powered consumer inflation in February we may not see much increase in real disposable income for the month. Still, household financial obligations are historically low right now and that means that consumers are able to take on some debt even in the absence of strong gains in real disposable income. By themselves, the monthly jobs numbers would imply 2012Q1 real GDP growth somewhat higher than the current near two percent forecast. If we keep getting strong jobs numbers it would be reasonable to expect upward revisions to late 2011/early 2012 GDP. But we have to work with the numbers we are given and GDP components still point to subdued growth in the current quarter.
One of those GDP components is net exports, which will likely be a drag on GDP growth for 2012Q1. The U.S. trade gap widened to -$52.6 billion in January as the value of petroleum imports increased by $1.2 billion for the month. Non-petroleum imports of goods also widened significantly, by $2.8 billion in January. This could show up as a boost to inventory accumulation in the current quarter, partially offsetting the drag from net exports. Total imports increased by $4.7 billion while total exports gained $2.6 billion. Merchandise exports to the European Union were down by $1.7 billion in January, with more losses expected.
Market Reaction:U.S. equities opened with gains. Treasury yields are up at the long end. WTI crude is up to $106.82/barrel. The dollar is up against the yen and the euro.