[July 9] release of the minutes of the FOMC’s June meeting provides further clues with which to assess the Fed’s reaction to the unexpectedly fast decline in the headline unemployment rate. The minutes show that there is discord among FOMC members about how fast the output gap is closing and the value of the unemployment rate in assessing the size of the output gap.
However, on balance it appears that members lean towards taking a broader view of labor market slack that includes involuntary part-time and discouraged workers. The minutes also show that the committee expects that movement of part-time workers into full-time positions will begin to dampen the decline in unemployment. (Emphasis supplied)
We believe the minutes provide further confirmation to our view that evidence from the labor market does not indicate that the Fed will tighten policy sooner than expected. (Emphasis supplied)
The three-month average of employment growth has barely stuck its head above 200,000, which is exactly where job creation has been since early-2011. Indeed, using 2011 as a template, we could simply be seeing a bit of catch-up hiring after a slow start to the year. (Emphasis supplied)
After controlling for short-term unemployment, measures of long-term unemployment may provide little information about inflation dynamics. Thus, if we are on the lookout for inflationary pressures, we should be watching short-term unemployment.
Given that underemployed workers are sequentially more connected to the labor market than the short-term unemployed, we would expect them to have a larger effect on wages. Since underemployment remains at a historically elevated level, it should not be surprising we haven’t seen much in the way of inflationary pressure as measured.
One of the headlines that came out of last week’s employment report was that the participation rate held steady. However, on a month-to-month basis it is not at all unusual to see the participation rate hold steady or even rise. The strong downward trend remains unbroken. (Emphasis supplied)
Employment in the highest-paying professional and non-professional sectors is growing much more slowly than aggregate employment. Thus, based on the mix of jobs being created, at this point we do not see a lot of wage pressure developing in aggregate.
However, productivity growth also appears to be slowing, for a combination of reasons; nonetheless, taking everything together we do not believe that last week’s report means that rate-hike expectations should have been brought forward.
States’ Contribution to Trade Deficit Improvement Varies; BMW “Pumps Up” South Carolina
The U.S. Commerce Department reported last week that the U.S. trade deficit declined in May by 5.6% to $44.4 billion. A major contributor to the continuing improvement in the U.S. trade deficit is the shift of the U.S. from being an energy importer to an energy exporter. This shift will impact the overall economy as well as infrastructure needs for many years.
The shift may, at times, have unanticipated implications for the municipal market. Last week, Bloomberg reported that muni borrower Louisiana Offshore Oil Port (LOOP) has begun planning to allow its facilities to “reverse the flow” and export oil. Since it opened in 1981, LOOP has been an important part of the U.S. energy infrastructure due to its status as the only port capable of handling Ultra Large Crude Carriers and Very Large Crude Carriers. However, all of its facilities were built only to off-load oil from ships.
State level trade data also reflects the impact of the energy shift. Texas has long been the leading State for exports from the U.S. (18% of the national total). According the U.S. Census bureau, Texas exports nearly twice the dollar value as 2nd place state California. 20% of Texas exports are petroleum products. In the last year, Texas has also been the leading contributor to the improvement in the U.S. trade deficit.
DIVER Analytics, Filter Module; DIVER Data Services; USCB
Utah and Nevada are major exporters of gold so their lagging export stats are likely due to the decline in gold prices. Florida’s share of exports has also been declining. The dollar volume of its top export categories (Gold, Civilian Aircraft) was lower 2013 vs. 2012.
West Virginia will be an interesting State to watch. The volume of its major export (coal) declined 2012 to 2013. If the trend of regulatory actions in the U.S. continues to crimp domestic consumption, more of West Virginia’s coal production could be sent abroad.
The Census export data yields sometimes surprising insights (and some methodology questions): New York’s top exports are: “Diamonds, Nonindustrial Worked” (15%); Gold (11%); Jewelry (7%). According to the Census Bureau, Washington, D.C.’s major “exports” are “Radar Apparatus” (33%) and “Bomb Mines” (30%). Over 80% of DC’s “export volume” for 2012 and 2013 went to the United Arab Emirates. Hmm.
While South Carolina has not historically been significant exporting State, its share of U.S. exports has been rising. A contributor to this increase has been cars (22%), in particular BMW’s manufactured in Greenville. A Bloomberg report this week highlighted this trend. Bloomberg noted that BMW’s presence has cultural as well as economic consequences for the region. There is now a restaurant in Greenville called the “Hanz & Franz Biergarten”, serving Fried Sauerkraut Balls and Koenigsberger Klopse. I am guessing they were quite busy this past Sunday following Germany’s World Cup victory.
Perhaps BMW’s presence will even someday allow the Southern Connector to meet its early traffic projections….
Then again, maybe the best hope is for more restaurants that serve Fleishkaese.
This week, Gregg, Mark and Pete will be in NYC on Tuesday and Mark will be in the Boston area Thursday and Friday.
Have a great week,
Gregg L. Bienstock Esq. & Michael Craft
CLICK HERE to Subscribe to the Weekly Commentary
Another View of Employment Data & Contributing (or Worsening) the US Trade Deficit
July 14, 2014
This week we take a look at some employment data and offer insights from our friends at Connolly Insights. We then take a closer look at the US trade deficit and GDP contributors (and detractors).
Employment – Not the First Friday
Just before the July 4th weekend, the BLS released the county level employment data for the month of May. Below is some insight into this data. Let’s start with some baseline and “glass half-full” observations. For the period May 2013 to May 2014, we saw Job Growth in 1,993 counties (of the 3,215 for which data is reported). Growth is any color other than red – meaning no job growth in counties colored red. While the headline numbers may sound good the details matter.
DIVER Analytics, Map Module; BLS
Staying with employment data, while there has been Job Growth in almost 2,000 counties, I wanted to repeat an analysis we did last month that highlighted a combination of data points viewed as more indicative of improving employment conditions: Labor Force, Number of People Employed and Number of People Unemployed. Using the same timeframe (one year), I found there were (only) 1,165 counties that saw an increase in their Labor Force, an increase in the number of People Employed and a decrease in the number of People Unemployed (less than last month). I encourage Analytics subscribers to use the Filter module to go deeper.
In case you wanted to take me to task with the recent First Friday data (released Thursday July 3), I offer you the executive summary from Connelly Insight’s, July 9 piece, “U.S. Labor Market: Is a Rate Increase Looming?” by Brian Pellegrini, CFA. The summary bullets below are supported by excellent work by Brian. If you are interested in learning more or obtaining a copy of the complete report please visit http://www.connollyinsight.com.
States’ Contribution to Trade Deficit Improvement Varies; BMW “Pumps Up” South Carolina
The U.S. Commerce Department reported last week that the U.S. trade deficit declined in May by 5.6% to $44.4 billion. A major contributor to the continuing improvement in the U.S. trade deficit is the shift of the U.S. from being an energy importer to an energy exporter. This shift will impact the overall economy as well as infrastructure needs for many years.
The shift may, at times, have unanticipated implications for the municipal market. Last week, Bloomberg reported that muni borrower Louisiana Offshore Oil Port (LOOP) has begun planning to allow its facilities to “reverse the flow” and export oil. Since it opened in 1981, LOOP has been an important part of the U.S. energy infrastructure due to its status as the only port capable of handling Ultra Large Crude Carriers and Very Large Crude Carriers. However, all of its facilities were built only to off-load oil from ships.
State level trade data also reflects the impact of the energy shift. Texas has long been the leading State for exports from the U.S. (18% of the national total). According the U.S. Census bureau, Texas exports nearly twice the dollar value as 2nd place state California. 20% of Texas exports are petroleum products. In the last year, Texas has also been the leading contributor to the improvement in the U.S. trade deficit.
DIVER Analytics, Filter Module; DIVER Data Services; USCB
Utah and Nevada are major exporters of gold so their lagging export stats are likely due to the decline in gold prices. Florida’s share of exports has also been declining. The dollar volume of its top export categories (Gold, Civilian Aircraft) was lower 2013 vs. 2012.
West Virginia will be an interesting State to watch. The volume of its major export (coal) declined 2012 to 2013. If the trend of regulatory actions in the U.S. continues to crimp domestic consumption, more of West Virginia’s coal production could be sent abroad.
The Census export data yields sometimes surprising insights (and some methodology questions): New York’s top exports are: “Diamonds, Nonindustrial Worked” (15%); Gold (11%); Jewelry (7%). According to the Census Bureau, Washington, D.C.’s major “exports” are “Radar Apparatus” (33%) and “Bomb Mines” (30%). Over 80% of DC’s “export volume” for 2012 and 2013 went to the United Arab Emirates. Hmm.
While South Carolina has not historically been significant exporting State, its share of U.S. exports has been rising. A contributor to this increase has been cars (22%), in particular BMW’s manufactured in Greenville. A Bloomberg report this week highlighted this trend. Bloomberg noted that BMW’s presence has cultural as well as economic consequences for the region. There is now a restaurant in Greenville called the “Hanz & Franz Biergarten”, serving Fried Sauerkraut Balls and Koenigsberger Klopse. I am guessing they were quite busy this past Sunday following Germany’s World Cup victory.
Perhaps BMW’s presence will even someday allow the Southern Connector to meet its early traffic projections….
Then again, maybe the best hope is for more restaurants that serve Fleishkaese.
This week, Gregg, Mark and Pete will be in NYC on Tuesday and Mark will be in the Boston area Thursday and Friday.
Have a great week,
Gregg L. Bienstock Esq. & Michael Craft
CLICK HERE to Subscribe to the Weekly Commentary