The Jobs Machine Keeps Going
- February ADP Employment Report showed an increase of 235,000 private sector jobs.
- The U.S. International Trade Gap widened to -$56.6 billion in January.
- Mortgage Applications increased by 0.3 percent for the week ending March 2.
The U.S. continues to generate new jobs at a strong pace according to the February ADP Employment Report. According to ADP, a net of 235,000 private sector jobs were added last month. The gains were distributed across all sizes of companies. Small businesses (less than 50 employees) added 68,000 jobs for the month. Medium sized businesses (50-499 employees) added 97,000, while large businesses gained 70,000 new workers. Manufacturing employment was strong again, consistent with the recent positive readings from the ISM Manufacturing employment sub-index. Manufacturers added 14,000 net new jobs in February, as measured by ADP. Earlier this week Ford announced that they will be temporarily laying off about 2,000 workers later this year as they retool plants in Michigan for the new Ford Bronco SUV and Ranger pickup truck. The construction sector added 21,000 net new jobs in February. Resources and mining employment was up by 2,000. Trade/transportation and utilities employment increased by 44,000 for the month. Information services gave up 1,000. Financial services increased employment by 9,000. Professional and business services gained 46,000. Education/healthcare employment was up 43,000. Leisure/hospitality employment was up a strong 50,000 net new workers. This was another good labor market report and further evidence that the U.S. economy continues to show good momentum through the first quarter of 2018. Today’s ADP Report adds upside risk to our estimate of 190,000 net new nonfarm jobs added in the official BLS payroll count for February which will be released on Friday morning.
As expected, the U.S. international trade gap widened in January. The trade gap now stands at -$56.6 billion, the widest gap between imports and exports since October 2008. Imports were little changed in January as exports declined by $2.7 billion. U.S. energy exports have increased over the last year, but so far, the increase has not been enough to narrow the overall trade gap. The real (inflation adjusted) balance of trade in goods for January was more negative than the fourth quarter 2017 average, implying that, as of now, trade looks like it will be a drag on first quarter GDP growth. That could change with the February and March trade data.
Mortgage applications increased for the week ending March 2 by 0.3 percent with gains in refi apps. This data is not seasonally adjusted, so we expect to see a big gain in mortgage apps this spring. Most of the gain will be in purchase apps. We expect refi apps to cool as mortgage rates increase gradually this year. According to the Mortgage Bankers Association, the contract rate for a 30-year fixed-rate mortgage increased to 4.65 percent in early March, 29 basis points above the rate of one year ago.
Market Reaction: U.S. equity markets opened with losses after the resignation of Trump economic advisor Gary Cohn. The yield in 10-Year T-bonds is down to 2.86 percent. NYMEX crude oil is down to $61.89/barrel. Natural gas futures are up to $2.77/mmbtu.
For a PDF version of this report click here: ADP-03072018.
The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.