US trade deficit hits 10-year high
Productivity up 2.3% in Q3; private hiring slows
WASHINGTON, Dec 6, (Agencies): The US trade deficit jumped to a 10-year high in October as soybean exports dropped further and imports of consumer goods rose to a record high, suggesting the Trump administration’s tariff-related measures to shrink the trade gap likely have been ineffective.
Other data on Thursday showed private employers hired fewer workers than expected in November, pointing to a moderation in the pace of job growth. That was reinforced by another report showing a small decline in the number of Americans filing claims for unemployment benefits last week.
The reports added to weak housing and business spending on equipment data in signaling a slowdown in economic growth. Concerns over the health of the economy have roiled financial markets in recent days.
The Commerce Department said the trade deficit increased 1.7 percent to $55.5 billion, the highest level since October 2008. The trade gap has now widened for five straight months. Data for September was revised to show the deficit rising to $54.6 billion instead of the previously reported $54.0 billion.
The politically sensitive goods trade deficit with China surged 7.1 percent to a record $43.1 billion in October.
The United States is locked in a bitter trade war with China. Washington has imposed tariffs on $250 billion worth of Chinese imports to force concessions on a list of demands that would change the terms of trade between the two countries.
China has responded with import tariffs on US goods, including soybeans.
In this file photo taken on Sept 29, 2018, the ship Hammersmith Bridge which has just arrived from Shanghai in China, unloads Chinese shipping containers at the Port of Long Beach, in Los Angeles County.The US trade deficit hit a 10-year high in October as Americans used a stronger dollar to snap up record imports, the government
reported on Dec 6. (AFP)
President Donald Trump has long railed against China’s trade surplus with the United States, and accuses Beijing of not playing fairly on trade.
In addition to the duties on Chinese goods, Washington has slapped tariffs on steel and aluminum imports into the United States this year. On Saturday, Trump and Chinese President Xi Jinping agreed to hold off on imposing more tariffs for 90 days while they negotiate a deal to end the trade dispute.
Economists polled by Reuters had forecast the overall trade deficit rising to $55.0 billion in October. When adjusted for inflation, the goods trade deficit increased to $87.9 billion in October from $87.2 billion in September. The so-called real trade deficit is above the average for the third quarter.
Trade subtracted 1.91 percentage points from GDP growth in the JulySeptember quarter. Growth estimates for the fourth quarter are around a 2.8 percent annualized rate. The economy grew at a 3.5 percent pace in the third quarter.
US Treasury yields held at lower levels after the release of the data. US stock index futures were trading lower and the dollar was weaker against a basket of currencies.
In October, exports of goods and services slipped 0.1 percent to $211.0 billion. Soybean exports, which have been targeted by China in the trade dispute, dropped $0.8 billion. Exports of civilian aircraft and engines also fell.
But exports of petroleum and consumer goods were the highest on record. A strong dollar is probably restraining overall export growth.
Imports of goods and services rose 0.2 percent to $266.5 billion, an alltime high. Consumer goods imports increased by $2.0 billion to a record high of $57.4 billion, boosted by a $1.5 billion jump in imports of pharmaceutical preparations.
Motor vehicle imports were the highest on record in October, as were imports of other goods.
Imports are being driven by strong domestic demand as well as the strong dollar, which is making the prices of imported goods cheaper, likely offsetting the impact of tariffs.
Separately on Thursday, the ADP National Employment Report showed private payrolls rose by 179,000 jobs in November after a downwardly revised 225,000 increase in October.
Economists polled by Reuters had forecast private payrolls advancing 195,000 last month following a previously reported 227,000 increase in October.
The ADP report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment report for November, which is scheduled for release on Friday.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 200,000 in November after surging by 250,000 in October. The unemployment rate is forecast holding steady at near a 49-year low of 3.7 percent.
Though the ADP report has a spotty record predicting the private payrolls component of the government’s employment report, job growth could be slowing.
In a third report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 231,000 for the week ended Dec 1.
Economists had forecast claims falling to 225,000 in the latest week. Claims had risen for three straight weeks, touching an eight-month high of 235,000 during the week ended Nov 24.
While difficulties adjusting the data around holidays such as Thanksgiving Day could have boosted applications, the trend in claims has softened. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out weekto-week volatility, rose 4,250 to 228,000 last week, the highest level since April.
US productivity grew at an annual rate of 2.3% in the July-September quarter, slower than the previous quarter but still an improvement over the weak annual gains of the past decade. Labor costs rose at a modest pace in the third quarter.
The third quarter gain in productivity was revised up slightly from an initial estimate a month ago of a 2.2% gain, the Labor Department said Thursday. It marks a more modest advance than the second quarter’s 3% annual rate of increase. Labor costs were up at a 0.9% annual rate in the third quarter following a decline at a 2.8% rate in the second quarter.
Productivity, the amount of output per hour of work, has been weak throughout the current expansion.
It rose last year by just 1.1%. Over the past decade, productivity has hovered at an average annual rate of 1.3%, just about half the 2.1 percent gains in the seven decades starting in 1947. The period from 2000 to 2007 saw even stronger annual gains of 2.7 percent, a burst that was credited to efficiency improvements achieved with the introduction of high-tech computers and other devices to the workplace.
Finding a solution to the slowdown in productivity growth is one of the key economic challenges facing the country. Rising productivity is critical to boosting standards of living because productivity gains allow companies to pay workers more without having to increase the cost of their products, which can be inflationary.
The Trump administration will find it difficult to achieve its goal of sustained GDP growth of 3% or better each year without significant improvements in productivity. An economy’s potential for growth is determined by an expansion in the labor force, which is determined largely by birth rates and immigration, as well as the growth in productivity.
The government reported last week that the economy’s total output, as measured by the gross domestic product, rose at an annual rate of 3.5% in the third quarter, a strong reading but down from the second quarter’s sizzling 4.2% GDP advance.