US private payrolls increase in February; trade deficit widens moderately in January

US PRIVATE payrolls increased more than expected in February, pointing to continued labour market strength, while the country’s trade deficit widened moderately in January.

Private employment increased by 242,000 jobs last month, the ADP National Employment report showed on Wednesday (Mar 8). Data for January was revised higher, to show 119,000 jobs added instead of 106,000 as previously reported. Economists polled by Reuters had forecast private employment would increase by 200,000.

Federal Reserve chair Jerome Powell told lawmakers on Tuesday that the US central bank would likely need to raise interest rates more than expected. He also opened the door to a half-point rate hike this month to combat inflation, following a recent raft of strong economic data.

Job growth was robust in January, with the unemployment rate falling to more than a 53-½-year low of 3.4 per cent. Consumer spending rebounded strongly and inflation picked up in January.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the Labor Department’s Bureau of Labor Statistics’ (BLS) more comprehensive and closely watched employment report for February on Friday. It has not been a reliable gauge in forecasting private payrolls in the BLS employment report.

The ADP initially reported that 106,000 private jobs were created in January, a fraction of the 443,000 surge in private payrolls estimated by the BLS.

“More broadly, in the several months since the ADP data started being released with a new methodology, the first prints have not reliably predicted the first prints of the related BLS data,” said Daniel Silver, an economist at JPMorgan in New York.

According to a Reuters survey of economists, private payrolls likely increased by 213,000 jobs in February. Total non-farm payrolls are forecast to have risen by 203,000 jobs last month, after surging by 517,000 in January.

Meanwhile, the trade deficit rose as both imports and exports increased strongly.

The trade deficit increased 1.6 per cent to US$68.3 billion, the Commerce Department said on Wednesday. Data for December was revised to show the trade gap widening to US$67.2 billion instead of US$67.4 billion as previously reported. Economists polled by Reuters had forecast the trade deficit rising to US$68.9 billion.

Part of the widening in the trade gap likely reflects renewed increases in the prices of goods and commodities.

Imports increased 3 per cent to US$325.8 billion, with goods surging 3.7 per cent to US$267.9 billion. Imports of motor vehicles, parts and engines were the highest on record.

Consumer goods imports rose US$4.1 billion, lifted by increases in cellphones and other household goods as well as pharmaceutical preparations, toys, games and sporting goods. Capital goods imports increased by US$1.4 billion, reflecting rises in electric apparatus and telecommunications equipment.

Imports of services edged up US$0.1 billion to US$57.9 billion, mostly driven by travel. Transport services fell.

Exports shot up 3.4 per cent to US$257.5 billion. Goods exports jumped 6.0 per cent to US$177.8 billion. Exports of capital goods were the highest on record, as were those of consumer goods, motor vehicles, parts and engines.

But exports of services fell US$1.6 billion to US$79.7 billion, pulled down by declines in travel and transport. Exports of other business services increased.

Adjusting for inflation, the goods trade deficit increased 3.6 per cent to US$101.8 billion in January. A smaller trade deficit was one of the contributors to the economy’s 2.7 per cent annualised growth rate in the fourth quarter.

The Atlanta Federal Reserve is currently forecasting first-quarter gross domestic product increasing at a 2 per cent pace. REUTERS