Bottom line: November’s employment data looks similar to October’s. The Bureau of Labor Statistics reported this morning that total nonfarm payroll employment grew by 199,000 jobs, generally in line with expectations. And like last month, job growth was centered on Educational and Health Services (excluding tangible services), which increased by 76,000 and in Government (excluding Postal Service), which was up by 53,100. Payrolls in the tangible-producing Accommodation and Food Services sector were up by 39.4 million. The manufacturing payrolls also increased by 28,000 but this appears to be a one-time boost due to the end of the UAW strike. Of special concern, payrolls in the Trade, Transportation and Utilities sector declined by 35,000.
Note that employment in the three growth sectors are all above their pre-pandemic level (Educational and Health Services (excluding tangible services), Government (excluding Postal Service), and Accommodation and Food Services). This raises a key question: how long can the three sectors continue to power the U.S. labor market?
The trade numbers are out and they are not good. According to the Bureau of Economic Analysis (BEA), the trade deficit grew by $3.1 billion in October, rising to $64.3 billion from $61.2 billion in September, revised. Exports were down $2.6 billion and imports were up by $0.5 billion.
In good news, the intangible trade surplus increased to $25.6 billion, up by $427 million. The surplus in Financial Services continued to grow in October but not as fast as in previous months. The deficit in Insurance Services was essentially unchanged. Much of the improvement was due to the reversal of the negative trends in the categories of Charges for the Use of Intellectual Property and Business Services. In both cases, there was an increase in the surplus in October rather than a decline in the past few months. In the other three categories of intangibles (Telecommunications, Computer & Information Services, Maintenance & Repair Services, and Personal, Cultural & Recreational Services), the surplus grew slightly.
The meager surplus in tangible services (consisting of the BEA’s Services categories of Transport, Travel, Construction, and Government Goods & Services n.i.e.) was essentially flat, down by $16 million.
I will repeat what I have said many times: there is little reason to expect a major improvement in the U.S. trade deficit. As the chart below shows, the deficit in goods trade overwhelms any surplus in intangible services, even if combined with tangible services.
This month’s release also includes the regular revision of the data for the last 6 months. The revisions have a significant impact on our understanding of what was happening regarding the trade in intangibles. Rather than showing a decline in the surplus in September, the surplus actually grew. In April and May, the increases in the surplus were much greater and the decline in the surplus in July was much more significant. And the revised data for August shows a drop in the surplus rather than a healthy increase as reported earlier. In other words, trade in intangibles was stronger in April and May, weaker in July and August, with a rebound we did not know about in September.
Insurance Services deficit increased in April and May by more than previously reported. And in June, the earlier data showed the deficit improving slightly whereas it actually got worse. The change was due to revisions in imports; export data was not significantly revised.
In Financial Services, the story is almost the opposite with the surplus growing more in May, June, and July than previously reported. This was due to revisions to both exports and imports.
The revised data for Charges for the Use of Intellectual Property shows that the surplus was better in April and May but worse in June and July. In fact, the earlier data had the surplus increasing in July, but the revised data shows a decline. The largest revision were to exports in April, May, June, and July and to imports in July, August, and September.
The revisions to the data on Business Services shows that in June the surplus did not increase as much as previously reported and in July it declined by much more than was reported earlier. Both exports and imports were revised.
As I have noted before with respect to GDP and employment data, the volatility of economic the data is worrisome. The revisions to the data on trade in intangibles are probably not hugely significant. But they do play a role in our overall understanding of the economy and we should continue to do all we can to ensure the data is as accurate as possible.
The Intangible Economy 