Entering last week, traders were poised to review the latest employment data and its potential impact on the course of the Federal Reserve. Instead, last Friday saw financial regulators close Silicon Valley Bank as the Federal Deposit Insurance Corporation (FDIC) took control of the bank’s assets. All in all, Wall Street suffered through its worst week in 2023. All the benchmark indexes lost value, led by the Russell 2000, which dropped more than 8.0%. The Dow has now fallen more than 3.7% below its 2022 closing value. The yield on 10-year Treasuries dropped from around 4.0% earlier in the week to 3.7% last Friday. The dollar ended the week eking out a gain, while gold prices were buoyed by a weaker dollar and reduced expectations that the Fed will be more aggressive with its interest-rate hikes.
Last Week’s Economic News
-
There were 311,000 new jobs added in February, although the unemployment rate edged up 0.2 percentage point to 3.6%. The average monthly job gain over the past six months was 343,000. Last month, notable job gains occurred in leisure and hospitality, retail trade, government, and health care. Employment declined in information and in transportation and warehousing. The number of unemployed, at 5.9 million, edged up by 242,000 in February from the previous month. In February, the labor force participation rate was little changed at 62.5%, and the employment-population ratio held at 60.2%. These measures have shown little net change since early 2022 and remain below their pre-pandemic February 2020 levels (63.3% and 61.1%, respectively). In February, average hourly earnings rose $0.08 to $33.09. Over the past 12 months, average hourly earnings increased by 4.6%. The average workweek edged down by 0.1 hour to 34.5 hours in February.
-
In January, there were 10.8 million job openings, a decrease of a little more than 400,000 from the December amount. The number of hires and total separations in January were little changed from their respective totals in December. In January, employees were less willing to voluntarily leave their jobs, while employers were more inclined to dismiss employees. The number of quits declined by about 200,000, while the number of layoffs and discharges increased by 241,000.
-
According to the Bureau of Economic Analysis, the goods and services trade deficit was $68.3 billion in January, up $1.1 billion, or 1.6%, from the December deficit. January exports were $257.5 billion, $8.5 billion, or 3.4%, more than December exports. January imports were $325.8 billion, $9.6 billion, or 3.0%, more than December imports. Year over year, the goods and services deficit decreased $19.2 billion, or 21.9%, from January 2022.
-
The government deficit jumped to $262.4 billion in February, $223.6 billion greater than the January deficit and $45.8 billion more than the February 2022 deficit. In February, government receipts were $262.1 billion ($447.3 billion in January), while government outlays were $524.5 billion ($486.1 billion in January). Through the first five months of the fiscal year, the total government deficit sits at $722.6 billion, $247.0 billion greater than the deficit over the same period in the previous fiscal year.
-
The national average retail price for regular gasoline was $3.389 per gallon on March 6, $0.047 per gallon more than the prior week’s price, but $0.713 less than a year ago. Residential heating oil prices averaged $4.243 per gallon on March 6, $0.013 above the previous week’s price, but $0.679 per gallon less than a year ago. According to the U.S. Energy Information Administration, in 2022, the United States exported 5.97 million barrels of petroleum product per day, an increase of 7.0% compared with 2021, setting a new record for total petroleum product exports.
-
Both the number of new claims for unemployment insurance and the number of workers receiving insurance benefits increased sharply over the last reporting period. For the week ended March 4, there were 211,000 new claims for unemployment insurance, an increase of 21,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended February 25 was 1.2%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended February 25 was 1,718,000, an increase of 69,000 from the previous week’s level, which was revised down by 6,000.
Eye on the Week Ahead
The latest information on inflation is available this week with the February release of the Consumer Price Index, the Producer Price Index, and the retail sales report. Inflation rose in January after falling in the previous two months, setting up the likelihood that the Federal Reserve will initiate more interest-rate hikes over a longer period of time.
Have a nice week!
Sincerely,
Robert G. Carpenter