See this week's numbersFriday, March 10, 2017

JOBS – is it enough to move the Fed?

The official job report for February was solid. The unemployment rate declined to 4.7 percent, 235,000 jobs were added during the month, and wages increased 2.8 percent over a year ago. All signs point to the continuation of a steadily improving labor market and overall economy. Two key industries, construction and manufacturing, added a substantial number of jobs. In the manufacturing sector, the addition of 28,000 jobs was the largest monthly increase since September 2014. Construction added 58,000 jobs, the biggest gain in over a year. Both the underemployment and labor participation rates improved with the addition of 348,000 people joining the workforce. The data in this report should be all the Federal Reserve needs to justify increasing the benchmark short-term lending rate at next week’s Federal Open Market Committee meeting.

Other Key Indicators this Week:

Trade Deficit – The U.S. trade deficit widened to its largest level in almost five years. The trade gap increased by 9.6 percent to $-48.5 billion. Even as exports increased the most since December 2014, a larger-than-expected level of imports outweighed the benefit. Exports rose 0.6 percent to $192.1 billion, while imports grew 2.3 percent. The strong dollar and consumers’ appetite for foreign-made consumer goods and autos continue to put pressure on the trade gap. Exports, which subtracted 1.7 percent from overall GDP in the fourth quarter, are threatening to weigh on the economy again in the first part of 2017.

Consumer Borrowing – The amount of outstanding consumer debt rose by the smallest amount in almost five years as Americans paid off credit card balances. The overall level of debt rose $8.8 billion, compared to a gain of $14.8 billion in December. January’s rise was the smallest monthly increase since July 2012. Revolving debt, which consists mostly of credit cards, fell $3.8 billion. This was the largest decline in credit card debt since December 2012. On the other hand, non-revolving debt increased $12.6 billion. This category includes mostly student and auto loans.

Factory Orders – For all the optimism regarding strength coming from business orders and manufacturing, the reality continues to be dim. Total factory orders rose 1.2 percent, but the bulk of the increase came from defense aircraft and parts orders. When you strip out the volatile transportation component, orders rose just 0.3 percent. The level of core shipments, a proxy for much business spending, fell 0.4 percent. The pace of business orders also declined, falling 0.1 percent.

Strategically for Credit Unions:

The bond market took this week to begin adjusting for next week’s FOMC meeting. The 10-year Treasury note played catchup by moving 12 basis points higher. The two-year Treasury yield increased six basis points, bringing the curve six basis points steeper. Rates are slowly, but surely, moving higher.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.

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