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Economic Watch: Trucking Helps Boost Overall Employment, Factory Activity Up

November 4, 2016

By Evan Lockridge

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Employers continued adding jobs in the U.S. during October, according to a new Labor Department report, and trucking was one of many industries that helped push the number higher.

Total nonfarm employment rose 161,000, pushing the nation’s unemployment rate down a tenth of a percentage point to 4.9%. 

While the number of job additions was just short of Wall Street expectations, the department also revised upward its estimates for August and September, adding a combined 44,000 jobs. Overall employment continued to trend up in health care, professional and business services, and in financial activities, according to the department.

In for-hire trucking, there was a net gain of 3,000 jobs from the month before while the wider transportation and warehouse sector added 7,500 jobs. Trucking numbers for September were revised higher from a first-reported 3,600 jobs loss to an 1,800 increase, marking the fourth month of trucking job gains.

The bottom line is that employment gains remain modest, according to Stifel Fixed Income Chief Economist Lindsey Piegza.

“For the Federal Reserve, a gain of 161,000 is hardly a green light for a December [interest] rate hike, nor does it, however, pull the plug on a plan to further remove accommodation just five weeks from now with a second-round hike of 25 basis points [.25%],” she said. “In other words, this morning’s report simply leaves Open Market Committee members, and market participants alike, questioning the true direction and health of the U.S. labor market.”

Piegza noted that with 79 consecutive months of positive job creation, the hawks will argue the labor market is at or near full employment, albeit with the pace of hiring slowing dramatically since the first interest rate hike in ten years last December.

“Coupled with minimal wage pressures, the doves will argue lingering weakness in fundamentals,” she said. “According to this week’s November FOMC statement, the Fed is looking for just ‘some’ further improvement. This morning’s employment report, however, arguably fails to meet even this new, lowered threshold of progress.  After all, more of the same is hardly positive headway.”

Factory Orders, Shipments Increase Again

The employment report follows one a day earlier from the Commerce Department that showed factory orders in the U.S. during September rose 0.3%, the third straight monthly gain. It was helped by a 0.9% increase in orders for nondurable goods as orders for durable goods fell 0.3%.

The August level of factory orders revised upward showing a 0.4% improvement compared to the first reported 0.2% increase.

Shipments of factory orders, up six of the last seven months, increased 0.8%, following a 0.2% August hike, marking the biggest jump since June 2015.

Inventories of factory-made goods fell just slightly following two consecutive monthly increases with the inventories-to-shipments ratio at 1.34, down from 1.35 in August.

Overall, the report indicates that the manufacturing sector, which makes up about 12% of the U.S. economy, continues to improve slowly after being pounded by high inventories, the collapse in oil drilling brought on by lower crude prices, and the value of the U.S. dollar against foreign currencies, which makes U.S.-produced goods more expensive overseas. However, a separate Commerce Department report shows that the U.S. trade balance improved in September.

On a down note, orders for nondefense capital goods excluding aircraft, an indicator of business investment, fell 1.3% rather than 1.2% as the department said in a preliminary report. Shipments of such goods increased 0.4% in September, better than the first estimate of a 0.3% rise.

Despite this there is optimism manufacturing will continue improving with a report for October showing continuing gains

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