by Calculated Risk on 9/11/2012 08:30:00 AM

The Department of Commerce reported:

[T]otal July exports of $183.3 billion and imports of $225.3 billion resulted in a goods and services deficit of $42.0 billion, up from $41.9 billion in June, revised. July exports were $1.9 billion less than June exports of $185.2 billion. July imports were $1.8 billion less than June imports of $227.1 billion.

June was revised down from $42.9 billion. The trade deficit was below the consensus forecast of $44.3 billion.

The first graph shows the monthly U.S. exports and imports in dollars through July 2012.

Click on graph for larger image.

Both exports and imports decreased in July. Exports are 10% above the pre-recession peak and up 3% compared to July 2011; imports are just below the pre-recession peak, and up about 1% compared to July 2011.

The second graph shows the U.S. trade deficit, with and without petroleum, through July.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $93.83 in July, down from $100.13 per barrel in June, and the lowest level since early 2011. Import oil prices will probably start increasing again in August. The trade deficit with China increased to $29.4 billion in July, up from $27.0 billion in July 2011. Once again most of the trade deficit is due to oil and China.

The trade deficit with the euro area was $10.2 billion in July, up from $7.7 billion in July 2011.

by Calculated Risk on 9/10/2012 09:11:00 PM

A couple of interesting stories ...

From the NY Times: Chinese Leader’s Absence Stokes Rumor Mills

Over the past week, the new leader, Xi Jinping, has missed at least three scheduled meetings with foreign dignitaries, including Secretary of State Hillary Rodham Clinton last Wednesday and the prime minister of Denmark on Monday. So far officials have declined to provide an explanation for his absences.

That set off furious speculation on the Internet that the 59-year-old Mr. Xi’s health, either physical or political, has taken a turn for the worse. Some diplomats say they have heard that Mr. Xi suffered a pulled muscle while swimming or playing soccer. One media report, since retracted, had it that Mr. Xi was hurt in an auto accident when a military official tried to injure or kill him in a revenge plot. A well-connected political analyst in Beijing said in an interview that Mr. Xi might have had a mild heart attack.

Whatever the actual reason, Mr. Xi’s unexplained absences are conspicuous on the eve of what is supposed to be China’s once-in-a-decade transfer of power.

I heard he was spotted standing in line waiting for the iPhone 5!

And on Apple, from Catherine Rampell at the NY Times Economix: How the iPhone 5 Could Bolster the G.D.P.

Michael Feroli, the chief United States economist at JPMorgan Chase, did a back-of-the-envelope calculation and estimated that the upcoming release of what is expected to be the iPhone 5 could add one-quarter to one-half of a percentage point to the annualized growth rate of America’s gross domestic product next quarter.

• At 8:30 AM, the Trade Balance report for July will be released. The consensus is for the U.S. trade deficit to increase to $44.3 billion in July, up from from $42.9 billion in June. Export activity to Europe will be closely watched due to economic weakness.

• At 10:00 AM, the BLS will released the Job Openings and Labor Turnover Survey for July from the BLS. This survey has been showing an increase in job openings; in June openings were up about 16% year-over-year compared to June 2011.


Another question for the September economic contest:

by Calculated Risk on 9/10/2012 06:04:00 PM

A couple more graphs based on the August employment report. The first graph below shows the number of total construction payroll jobs in the U.S. including both residential and non-residential since 1969.

Construction employment increased by only 1 thousand jobs in August, and so far is down for the year.

Unfortunately this graph is a combination of both residential and non-residential construction employment. The BLS only started breaking out residential construction employment fairly recently (residential specialty trade contractors in 2001).

Click on graph for larger image.

Construction employment appears to be moving sideways, although I expect this will change soon (and I'd expect some upward revisions to construction employment). The preliminary annual Benchmark Revision will be released on September 27, 2012.

Note: When housing was collapsing, one of the mysteries was why construction employment wasn't declining - and then finally employment started falling sharply. I think we are seeing a similar "mystery" now, and I expect BLS reported construction employment will start increasing soon.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down - although the unemployment rate for 'high school grads, no college' has increased recently.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

by Calculated Risk on 9/10/2012 02:17:00 PM

On Saturday, I wrote: I expect QE3 on Sept 13th

From the WSJ: UBS: Bernanke Will Unleash QE3 This Week

More and more market prognosticators are calling for the Fed to unveil a third round of quantitative easing this week UBS is the latest to join the fray ...

“We now anticipate an announcement of another round of quantitative easing at the FOMC meeting on Sept. 13,” UBS economists wrote in a note to clients.

The QE3 parameters will likely entail a six-month program of at least $500 billion, primarily focused on buying Treasurys, UBS predicts, while also anticipating the Fed will extend its ultra-low rate guidance into 2015.

The QE3 view isn't unanimous, from the WSJ:

One of the outliers not calling for more Fed stimulus is Nomura Securities. ... The disappointing jobs report “is not weak enough to compel the Fed to deliver anouther round of quantitative easing at next week’s meeting,” Nomura said on Friday.

I think a combination of lengthening the low rate guidance and some sort of Large Scale Asset Purchases (LSAP, aka QE3) is very likely.

by Calculated Risk on 9/10/2012 10:43:00 AM

This is an interesting piece from David Keohane at FT Alphaville: German domino theory and book-cooking

There are two fairly important bits to this story in Der Spiegel.

One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality.

From Der Spiegel (with our emphasis):

In reality, Merkel has already made up her mind. After long hesitation, she has sided with French President François Hollande and the European Commission. The report from the troika — which consists of the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB) and which departed on its fact-finding tour last week — will undoubtedly conclude that Greece can remain in the euro zone.

The change in mind-set is down to domino theory.

Where once the chancellor saw Greece as the weakest link in a chain which would be stronger without it, now she sees it as a domino which, if toppled, would put the rest of the set in danger ...

Keohane goes on to discuss domino theory and the key word: "undoubtedly". The story makes it sound like the outcome of the troika's audit is preordained.