by Calculated Risk on 2/05/2015 12:40:00 PM

Note: Yesterday I wrote: Preview for January Employment Report: Taking the Under

From Goldman Sachs economist David Mericle: January Payrolls Preview

We forecast nonfarm payroll job growth of 210k in January, below the consensus forecast of 230k. Payroll employment growth exceeded 250k in each of the last four months and averaged 246k over the 12 months of 2014, a substantial pick-up from the 194k average gain in 2013. On balance, labor market indicators were softer in January, with the decline in the ISM non-manufacturing employment index the most notable sign of slower hiring. We also expect a moderately positive two-month back-revision. The January report will also include annual benchmark revisions to payroll employment, but the preliminary revisions released in September indicated very little change.
...
We expect employment gains to push the unemployment rate down to 5.5% in January from an unrounded 5.565% in December, though new population controls that will be included with the January report create some uncertainty.
...
The two-tenths decline in average hourly earnings was the major surprise of the December payrolls report. But as we argued last month, calendar distortions and an unusual pattern of holiday retail hiring likely accounted for most of the downside surprise. We therefore expect average hourly earnings to rebound this month, growing an above-trend +0.4% in January, although we see some risk of a softer January gain coupled with an upward revision to December. Average hourly earnings rose just 1.7% over the year ending in December, contributing to the soft 2.1% year-on-year increase in our wage tracker. We expect an acceleration to around 2.75% by year-end, still well below the 3-4% rate of wage growth that Fed Chair Janet Yellen has identified as normal.
emphasis added

by Calculated Risk on 2/05/2015 08:55:00 AM

The Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $46.6 billion in December, up $6.8 billion from $39.8 billion in November, revised. December exports were $194.9 billion, down $1.5 billion from November. December imports were $241.4 billion, up $5.3 billion from November.

The trade deficit was much larger than the consensus forecast of $38.0 billion.

The first graph shows the monthly U.S. exports and imports in dollars through December 2014.

Click on graph for larger image.

Imports increased and exports decreased in December.

Exports are 17% above the pre-recession peak and up 1% compared to December 2013; imports are 4% above the pre-recession peak, and up about 5% compared to December 2013. 

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

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 imports averaged $73.64 in December, down from $82.95 in November, and down from $91.33 in December 2013.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

Note: There is a lag due to shipping and long term contracts, but oil prices will really decline over the next several months - and the oil deficit will get much smaller.

The trade deficit with China increased to $28.3 billion in December, from $24.5 billion in December 2013.  The deficit with China is a large portion of the overall deficit.

The increase in the trade deficit was due to a higher volume of oil imports (volatile month-to-month), a larger deficit with China, and a larger deficit with the Euro Area ($11.7 billion in Dec 2014 compared to $8.8 billion in Dec 2013).

by Calculated Risk on 2/05/2015 08:33:00 AM

The DOL reported:

In the week ending January 31, the advance figure for seasonally adjusted initial claims was 278,000, an increase of 11,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 265,000 to 267,000. The 4-week moving average was 292,750, a decrease of 6,500 from the previous week's revised average. The previous week's average was revised up by 750 from 298,500 to 299,250.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 267,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 292,750.

This was lower than the consensus forecast of 290,000, and the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 2/04/2015 08:46:00 PM

The West Coast port slowdown is ongoing and will have an impact on the December trade report. From Reuters: Contract negotiators for U.S. West Coast ports hit snag

Shipping companies and terminal operators for 29 U.S. West Coast ports appeared to have hit a snag on Wednesday in protracted labor negotiations with the dockworkers' union, calling a news conference to publicly address the status of the talks.

The negotiations, joined in recent weeks by a federal mediator, have coincided with chronic cargo backups hampering freight traffic through waterfronts handling nearly half of U.S. maritime trade and more than 70 percent of imports from Asia.
...
The congestion has been most pronounced at Los Angeles and Long Beach, the nation's two busiest shipping hubs. During the past two days, port authorities there reported more than 20 freighters left idled at anchor, waiting for berths to open.

Also falling oil prices will have an impact on the trade deficit. Oil imports averaged $82.95 per barrel in November, and will probably be close to $70 in December (and fall further in January).

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 290 thousand from 265 thousand.

• Also at 8:30 AM, the Trade Balance report for December from the Census Bureau. The consensus is for the U.S. trade deficit to be at $38.0 billion in December from $39.0 billion in November.

by Calculated Risk on 2/04/2015 04:48:00 PM

From the ECB: Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

The Governing Council of the European Central Bank (ECB) today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic. The waiver allowed these instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfil minimum credit rating requirements. The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.

Joseph Cotterill at FT AlphaVille explains: Greece and the ECB: the first cut

Greek sovereign bonds, T-bills and government-guaranteed debt will no longer be welcome at the ECB Tower as of 11 February.

The waiver — which let in Greek debt despite its junk-rated status for as long as Greece was in a programme — has been something of a merry-go-round before, in previous points of crisis between Greece and its official creditors. Bank bonds guaranteed by the government were also due to be kicked out at the end of this month because of a two year-old decision.

This is the first cut. As Karl Whelan has explained, Greece’s use of ELA will be closely watched by the ECB’s Governing Council from this point and the screws could be turned here too in time. ELA is costlier for Greek banks to use — and is genuine lending of last resort — so it’s a lot more important for Greece’s position for this bit of plumbing to stay on.