January International Trade, February ADP, March UI Claims

                              Trade Gap Widens as Exports Cool, Labor Data Is Positive

  • The U.S. International Trade Gap widened in January to -$44.4 billion as exports cooled.
  • Private Nonfarm Employment increased by 198,000 jobs in February according to the ADP survey.
  • Initial Claims for Unemployment Insurance fell by 7,000 for the week ending March 2, to 340,000.

The U.S. international trade gap widened in January to -$44.4 billion. The monthly trade data has been lurching about in recent months. This random behavior becomes noticeable in a low growth economy. We just saw that in the 2012Q4 GDP data where an initial small negative reading on fourth quarter real GDP growth was revised to a small positive, in large part because of a narrowing of the trade gap in December. The longer-term trends in trade are more meaningful, especially regarding energy and the global economic cycle. We do see a decrease in real (price adjusted) petroleum imports through 2011 and 2012, and an upward trend in real petroleum exports through 2012. With more domestically produced oil and natural gas, we will see the energy component of international trade working in our favor in the years ahead. Also, because of very low domestic energy prices, we will see more energy intensive manufacturing in the U.S., resulting in a shift in the balance of trade in some manufactured goods in the years ahead. There are some inflation implications too. A superabundance of domestic energy plus a reshoring of some manufacturing means that we will be marginally less vulnerable to import price inflation in the years ahead. Merchandise exports to the Euro Area remain weak, still declining on a year-over-year basis. Pacific Rim trade looks more promising. Exports to Pacific Rim countries have been flat over most of 2011 and 2012, but recent data is showing an improving trend. Right now trade looks like it will be a small drag on 2013Q1 real GDP growth.

Labor data looks positive ahead of tomorrow’s official BLS employment report for February. The unofficial ADP Employment Report for February showed a net gain of 198,000 private nonfarm jobs added to the U.S. economy. If we expect to see a loss of about 9,000 government sector jobs for the month, that would put the total payroll job gain at about 189,000 for the month. That could be enough to bring the unemployment rate down to 7.8 percent. We will see the official numbers tomorrow morning. Also, initial claims for unemployment insurance fell by 7,000 for the week ending March 2, to hit 340,000. This is not coincident with the payroll jobs data for February. That data was collected over the week beginning February 11. However, it does add weight to the notion that hiring is holding up even as fiscal tightening increases. That would be very good news if it proves to be true.

Market Reaction: U.S. equity prices are up. Treasury yields are up. NYMEX crude oil is up to $91.53/barrel. The dollar is up against the yen and down against the euro.


Click here for the PDF version of the Comerica Economic Alert: Int Trade 030713.

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