Labor market slows a bit at year-end
- According to the December Employment Situation report, private payrolls increased 148,000 during the month, much lower than the 250,000 ADP report and down 152,000 from November.
- The unemployment rate remained unchanged at 4.1% and the participation rate was also flat at 62.7%.
- Average wages increased 0.3% for the month and almost 2.6% for the year.
- We think the labor market will tighten a bit further in 2018 and the
unemployment rate will fall below 4%, but only briefly. Because of the substantial number of baby boomers that will reach retirement age in 2018 and 2019, the labor force participation rate will not improve much.
- We do expect to see higher wages due to the more limited supply of qualified workers.
Higher truck sales boost overall vehicle sales for December
- Total vehicle sales for December came in at a seasonally adjusted 17.85 million, slightly ahead of expectations, but lower than the record set in December 2016.
- Truck sales increased to 11.8 million units while auto sales dropped a bit to 6.1 million from 6.3 million in November.
- Both domestic and import manufacturers sold more vehicles in December with Ford and GM showing the largest gains.
- Automaker incentive spending cooled significantly to just $3,459 per vehicle, according to Edmunds. Automakers focused on high profitability rather than market share, taking a different approach from earlier in the year when incentive spending broke records and exceeded $4,000 several times. On the other hand, average transaction prices stayed historically high, along with the mix of light trucks. Light trucks' share of total sales continued a persistent trend higher and reached a record of almost 66%. Light trucks dominated sales throughout 2017 while passenger cars struggled.
Trade deficit widens in December
- The U.S trade deficit edged higher in November, widening to $50.5 billion from a revised $48.9 billion. Despite the larger than expected increase, the details were generally positive. Both imports and exports posted substantial gains. A significant increase in capital goods exports pushed total exports to their highest level since 2014.
- Imports hit an all-time high, with broad-based growth across goods categories. The goods deficit widened by $1.7 billion, while the services surplus added $80 million.
- While exports are performing well, October and November’s large deficits indicate that trade will likely be a sizable drag on fourth quarter GDP growth.
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