Trade, Jobs and Fiscal Tightening in a Gadgetized and Medicated Economy
- The U.S. International Trade gap widened in November to $48.7 billion as consumers bought gadgets.
- The JOLTS data for November shows stable hiring and separation rates for November.
- The NFIB Index of Small Business Optimism improved slightly in December after a big drop in November.
The U.S. international trade gap widened more than expected in November to $48.7 billion, pushed out by an increase in cell phone and pharmaceutical imports. The total value of imports surged by $8.4 billion while exports increased by $1.7 billion. The increase in exports was driven by automotive vehicles and parts. After adjusting for inflation, the real trade gap in goods widened in November, suggesting that trade will likely be a small drag on real GDP for the fourth quarter of 2012. The broader story behind the monthly trade data is that international trade is not now an accelerator for the U.S. economy. Since November 2011 gross imports and exports are little improved. This underscores the importance of domestic consumption and investment in powering the U.S. economy in 2013. Domestic consumption, in turn is driven by income growth, credit availability and to a smaller extent, changes in the personal saving rate. Just over half of U.S. personal income comes from wages and salaries, so job growth is a key factor. Another timely factor to consider is the impact of taxes. The recent increase in federal taxes to the majority of U.S. households will reduce real disposable personal income (income after inflation and taxes) in the range of three percent (annualized) in the current first quarter of 2012. This potential drag to spending will likely be softened by an increased use of credit and a dip in the personal saving rate. Fortunately, households in the U.S. have deleveraged significantly over the past few years and credit availability to households is improving. Long story short…with international trade idling, U.S. growth in early 2013 will come from domestic consumption and investment. Consumption will be hurt by higher taxes, but a re-leveraging consumer will find a way to keep spending.
The Job Opening and Labor Turnover Survey (JOLTS) for November shows unchanged hiring and separation rates from October. The job openings rate (openings per employee) essentially flat lined in 2012 at 2.7 percent, after improving through 2010 and 2011. The unemployment rate also flat lined at the end of 2012 at 7.8 percent. So we can say that labor market conditions did improve a bit as payroll employment picked up in the fall following a weak summer, but there was still not strong momentum in hiring at the end of last year. The National Federation of Independent Businesses’ Small Business Optimism Index improved slightly in December after a big drop in November, coincident with the flat hiring rate and lackluster trade data.
Market Reaction: U.S. equity prices are down. Treasury yields are up at the long end of the yield curve. NYMEX crude oil is down to $93.25/barrel. The dollar is up against the yen and down against the euro.
Click here for a PDF version of the Comerica Economic Alert: Int Trade 01113.