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NAM: Monday Economic Report

The unemployment rate remained near 50-year lows, even after inching up from 3.5% to 3.6%. Encouragingly, the rise in the unemployment rate stemmed from an acceleration in the labor market participation rate, up from 63.2% to 63.4%, the best reading since June 2013. Nonfarm payrolls increased by a solid 225,000 in January.

Yet, manufacturing employment fell by 12,000 workers in January, dropping for the third time in the past four months. Indeed, over that four-month time frame, hiring in the sector was essentially stagnant. That suggests that, while there have been some signs of stabilization in other indicators, manufacturing job growth has lagged that progress. We still expect to see improvements moving forward, especially considering greater trade certainty and some economic progress globally.

Along those lines, the Institute for Supply Management® reported that manufacturing activity rebounded, up from 47.8 in December to 50.9 in January, starting 2020 off on a stronger note after contracting for five straight months at the end of 2019.

New orders for manufactured goods rose 1.8% in December, skewed by significant gains for both defense aircraft and parts and ships and boats. Excluding defense sales, orders fell 0.6%. New orders for core capital goods—a proxy for capital spending in the U.S. economy—declined 0.8% in December. Nonetheless, core capital goods spending has risen 0.9% over the past 12 months, the best year-over-year reading since June.

The U.S. trade deficit increased from $43.69 billion in November to $48.88 billion in December. In 2019, the trade deficit averaged $51.40 billion each month, down somewhat from $52.31 billion in 2018 but up from $45.84 billion in 2017. It was the first annual decline since 2013.

Notably, the Census Bureau reported that petroleum exports registered an all-time high at $17.08 billion in December. The trade surplus was $82 million for petroleum, the fourth consecutive month with a positive reading.

In non-seasonally adjusted data, U.S.-manufactured goods exports were 2.9% in 2019, weakening after experiencing stronger growth in both 2017 and 2018.

Private manufacturing construction spending declined 4.1% in the latest data. Despite the softer monthly data, construction activity in the sector has risen 5.8% over the past 12 months.

Manufacturing production rose 0.2% in December but fell 1.3% over the past 12 months. The sector showed weakness overall last year. Looking at annual averages, manufacturing production declined 0.2% in 2019, pulling back from the 2.3% gain in 2018. In this week’s industrial production data, manufacturers will be looking for signs of stabilization in the sector.


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