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View Count: 59 |  Publish Date: April 03, 2014
Slowdown in exports comes as surprise
Posted: Thursday, April 3, 2014, 10:29 AM
INDICATOR: February Trade Deficit, March Layoffs and Jobless Claims
KEY DATA: Deficit: $42.3 billion ($3 billion wider); Layoffs: down 7,436; Claims: up 16,000
IN A NUTSHELL: A surprise slowdown in exports may have widened the trade deficit but the labor market is getting better anyway.
WHAT IT MEANS: A narrowing trade deficit helped growth in the second half of 2013 but that uplifting trend may not continue. The trade deficit widened in February as exports lagged while imports picked up a little. On the export side, we sold a lot more consumer goods but that was about all. Shipments to the rest of the world of capital goods and industrial supplies were down. However, the industrial supply category includes nonmonetary gold and oil, and declines in those goods accounted for the overall fall in foreign sales. That might represent a reduced inflow of dollars, but it doesn’t tell me much about future activity. On the import side, large declines in computer and communications related equipment largely offset increases in consumer goods and especially vehicles. It was nice to see we are buying more vehicles, and indeed the March sales pace was a robust 16.4 million units annualized. As for the computer and communications equipment cut back, it may be temporary as sales were up decently over the year. The inflation adjusted trade deficit looks like it will widen in the first quarter and that could lead to a weaker growth rate than we saw in the fourth quarter.More coverage ADP report finds the spring jobs thaw is on
On the labor front, the news was actually pretty decent. Jobless claims jumped but they are volatile and the four-week average is still pretty low, especially when you adjust it for the size of the labor force. That claims should trend down further is supported by the Challenger, Gray and Christmas report on layoffs. The number was down sharply from February and from February 2013. The 3-month total was the lowest first quarter number since the first quarter of 1995! That says an awful lot about the tightening of the labor market.
MARKETS AND FED POLICY IMPLICATIONS: Don’t be surprised if the trade deficit widens further. The U.S. economy is growing and once we through off the winter-induced lethargy, the pace should accelerate, possibly sharply. That would pull in a lot more imports and with Europe and China not growing as fast as we would like them to, it is hard to see how the deficit will be reduced. Yes, growing domestic energy supplies will help, but more consumer and business demand will hurt. The prospects for a surge in consumer spending are improving as the labor market is getting better and wage gains should pick up. Tomorrow we get the March employment report so we will know better about the labor market. I expect not tomorrow’s report to be strong and we should see job gains rise and the unemployment rate decline fairly consistently for the rest of the year. How investors reconcile that is unclear as better growth should mean higher profits but rising labor costs imply slower earnings increases. As for the Fed, I don’t know what Yellen uses as indicators of labor market tightness, but mine are showing conditions firming.
Joel L. Naroff is the co-author, with veteran journalist Ron Scherer, of Big Picture Economics: How to Navigate the New Global Economy. Release date is April 21, 2014. #post2 .pw-icon.ra1-pw-icon-reddit {background: url() 0px 0px no-repeat !important;width: 60px !important;height: 20px !important;margin-right:8px;}#post2 .pw-icon.ra1-pw-icon-email {background: url() 0px 0px no-repeat !important;width: 71px !important;height: 28px !important;}0 comments

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Time: 15:49  |  News Code: 393258  |  Site: philly.com
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