Fleet Management

Economic Watch: Employment Surges, Exports Highest in 2+ Years

August 04, 2017

By Evan Lockridge

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Employers in the U.S. continued adding a strong number of jobs in July, while separate reports show better exports and factory orders.

Overall 209,000 non-farm jobs were added during the month, according to the Labor Department. That was more than many analysts were expecting and pushed the nation’s unemployment rate down to 4.3%, matching a 16-year low hit in May. June's 222,000 gain was revised up to 231,000 while May was cut from 152,000 to 145,000.

The biggest job gains during July occurred in food services and drinking places, professional and business services, and health care.

Employment growth has averaged 184,000 per month so far this year, in line with the average monthly gain in 2016 of 187,000.

The for-hire trucking industry added 400 jobs in July and 7,900 so far this year. During July the wider transportation and warehousing sector added nearly 1,000 jobs, pulled down by the loss of 2,200 jobs in the warehousing and storage sector. In contrast, support activities for transportation increased by 1,700 jobs, while the couriers and messengers sector added 3,200.

Tightening labor markets had been putting upward pressure on wage inflation through 2015 and 2016, however, data so far this year show wage gains flattening out at around 2.5% which matches the 2016 increase and compares to increases of 2.3% and 2.1% in 2015 and 2014, respectively, according to Paul Ferley, assistant chief economist at RBC Economic Research.

“Confirmation that labor markets are approaching full employment is expected to warrant the Federal Reserve continuing to withdraw current stimulative monetary conditions,” he said. “Though tightening labor markets will eventually return wage inflation to an upward trend, in the interim, the absence of wage pressure will keep the pace of tightening gradual.”

The government report follows one on Wednesday by payroll processor ADP which showed 178,000 private sector jobs were added in July. ADP's payroll gains reported for June were revised upward to 191,000 from an originally reported 158,000 increase.

“The American job machine continues to operate in high gear,” said Mark Zandi, chief economist of Moody’s Analytics, about the ADP report. “Job gains are broad-based across industries and company sizes, with only manufacturers reducing their payrolls. At this pace of job growth, unemployment will continue to quickly decline.”

U.S. Trade Deficit Narrows, Exports Highest Since 2014

The report was released the same day as a separate one from the Commerce Department showing the U.S. trade deficit fell sharply in June, while exports hit their highest level in two and half years.

The trade gap fell 5.9% to $43.6 billion, its lowest level since last October. Exports of goods and services increased 1.2% to $194.4 billion, the highest level since December 2014.

The decline in the trade deficit in June was the combination of a $2.4 billion increase in exports of goods and services and a $396 million decline in imports.

There was broad-based strength on the export side of the ledger in June, with exports of capital goods, agricultural products, automobiles and parts, and industrial supplies and materials all posting gains during the month, according to Jay H. Bryson, global economist at Wells Fargo Securities.

“The only weakness in exports came in consumer goods, which declined by $324 million. In general, export growth has turned positive again this year after its negative run through much of 2015 and 2016,” he said. “Stronger economic growth in most of America’s trading partners is helping to boost U.S. export growth this year. That said, we are skeptical that the supercharged rates of export growth, which characterized much of the past decade, lie immediately in store.”

Factory Orders Hit 8-Month High

This follows a report from the day before showing new factory orders in the U.S. during June rebounded 3% from the month before, following two monthly declines. It was the largest monthly gain since October.

The Commerce Department said much of this was due to a revised 6.4% increase in orders for durable goods, those designed to last at least three years, following a flat performance in May. This was led by 19% hike in transportation orders. Orders for nondurable goods fell by 0.3% in June.

The experience in 2014 should make us circumspect about what to expect next month,” said Tim Quinlan, senior economist at Wells Fargo Securities. “The record surge in July of 2014 was followed by a record decline in August when durables tumbled 18.4% on the month. What aircraft gives you in one month, it can take away in the next.”

Orders for non-defense capital goods excluding aircraft, seen as a measure of business investment, were unchanged in June instead of slipping 0.1% as the department first estimated. Orders for these so-called core capital goods rose 0.8% in May.

“Our read is that core capital goods shipments are still consistent with slow but steady pace of growth in equipment spending,” Quinlan said.

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