Both trucking and the wider economy added jobs in July, according to new Commerce Department figures, while separate reports show the U.S. trade deficit grew in June to a one-year high and new factory orders fell again.

A total of 255,000 non-farm jobs were added in the U.S., far better than many economists were expecting, while the unemployment rate held steady at 4.9%.

For-hire trucking contributed 1,700 of these job additions, but it was not enough to outweigh the 6,300 trucking job losses in June and is the first increase since January. The broader transportation and warehousing sector in July saw 11,700 job additions.

Overall June payrolls were revised up from 287,000 to 292,000 and May payrolls were revised higher from 11,000 to 24,000, resulting in a net revision gain of 18,000 more jobs. Also, the three-month average increased from 147,000 to 190,000 in July. That's a sizable improvement although still a net loss of momentum from a near 300,00 pace at the start of the year, according to Stifel Fixed Income Chief Economist Lindsey Piegza.

“Another strong employment report this morning, reigniting optimism that the U.S. labor market and by extension the U.S. economy is back on track," Piegza said. "It is difficult, however, to draw such a positive conclusion from just two payroll reports with an average pace of hiring still below 200k and following a minimal rise in second quarter growth suggesting the economy averaged 1% growth across the first six months of the year,” she said.

According to Piegza, given the unevenness of the data and still-present imbalance in the economy across sectors with a relatively solid consumer and markedly weak business investment, Federal Reserve policy makers are likely to wait for further information regarding the longer-term trajectory of overall economic activity.  

“After all, the recent surge in payrolls at the end of second quarter and start of the third quarter does not align with lackluster, sub-trend growth and three consecutive quarters of negative corporate investment,” she said. “The question at this point remains, which data point is more telling of the underlying momentum in the economy; an average 1% GDP or an average [increase] of 200,000 payrolls? Until the Fed can answer with confidence, caution will remain the name of the game.”

The jobs report also showed the civilian labor force increased by 407,000 in July following a 414,000 increase the month prior, pulling the participation rate higher by one-tenth to 62.8%.

Average hourly earnings rose 0.3% in July, and are up 2.6% over the past 12 months, on par with the annual growth rate reported last month.

U.S. Trade Deficit Grows

Meantime, a separate Commerce Department report shows the U.S. trade deficit increasing in June, hitting a one-year high of $44.5 billion.

A key contributor was the petroleum component where the deficit rose to $5.3 billion from $2.9 billion in May with oil imports rising by 19.4%, with gains in both oil import prices and energy import volumes

Deterioration in the June 2016 trade deficit was in line with what the federal government estimated in compiling the second-quarter 2016 gross domestic product (GDP) report that was released last week, according to RBC Economics. Despite the rise in the June trade deficit, the second-quarter GDP report indicated that net exports added to growth in the quarter, with the volume of exports rising by 1.4% and imports falling by 0.4%.

“Our expectation is that the strong U.S. dollar and modest strengthening in business investment will have more of an upward effect on import growth during the second half of 2016,” said Paul Ferley, assistant chief economist at RBC. “We expect that this will result in net exports subtracting from growth, as was the case through 2015, however, projected strengthening in investment spending should provide an offset along with continued growth in consumer spending.”

Factory Orders Decline Again

Both reports follow a full report from the Commerce Department on Thursday showing new factory orders in the U.S. fell for the second straight month in June.

The decline of 1.5% follows a May downwardly revised drop of 1.2%, however shipments of factory made goods moved 0.7% higher after a 0.1% increase in May. Transportation orders posted the biggest decline in June, falling 10.5%. Excluding the sector, which can be volatile, orders were up 0.4%.

On the plus side, a measure of business investment, new factory orders for nondefense good minus aircraft, increased 0.4% in June, rather than the 0.2% level that was in the earlier preliminary report. Shipments of the so-called “core capital goods” still declined, but the downturn for June was 0.2% rather than the originally report 0.4% drop and still a negative for GDP calculations.

Inventories of factory-made goods fell 0.1%, the thirteenth drop in the past 14 months as the inventory to shipments ratio edged down to 1.35

About the author
Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

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