U.S. Trade Deficit Hits 6-Month High; Jobs Data Upbeat

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U.S. Trade Deficit Hits 6-Month High
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WASHINGTON -- The U.S. trade deficit widened sharply in May, as stronger U.S. demand pulled in more imports, a report from the Commerce Department showed. However, sluggish growth abroad pushed exports lower.

The trade gap swelled more than 12 percent to $45.0 billion from a revised $40.1 billion in April, the biggest month-to-month increase in two years.

While the widening of the trade gap could prompt analysts to lower their estimates of second-quarter U.S. growth, the rise in imports points to firming underlying demand in the economy.

Imports rose 1.9 percent to $232.1 billion, the highest since the record level of $234.3 billion set in March 2012.

May imports, when adjusted for inflation, were a record $167.2 billion, the department said.

In another sign of improving domestic economic conditions, U.S. private employers stepped up hiring in June and new applications for unemployment benefits fell for a second straight week last week, pointing to improving labor market conditions.

Private payrolls increased 188,000 last month, the ADP National Employment Report showed Thursday. That compared to 134,000 jobs added in May. Economists had expected a gain of 160,000 jobs.
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In a separate report, the Labor Department said initial claims for state unemployment benefits slipped 5,000 to a seasonally adjusted 343,000.

The four-week moving average of new claims, which is considered a better measure of labor market conditions, dipped 750 to 345,500.

The reports come ahead of the government's more comprehensive employment report on Friday.

"This is not really a big game changer, we don't expect any upside or downside surprise on Friday," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, N.C. "Employment should slowly, gradually build momentum."

U.S. stock index futures pared losses, while U.S. Treasuries prices rose after the data. The dollar cut losses against the yen.

Nonfarm payrolls are expected to have increased 165,000 in June, according to a Reuters survey of economists, a touch below May's tally of 175,000 jobs. That would be higher than the monthly average of 155,800 during the past three months.

The unemployment rate is expected to fall a tenth of a percentage point to 7.5 percent. The employment report could shed fresh clues on the timing of the Federal Reserve's plan to start scaling back its monetary stimulus.

Fed Chairman Ben Bernanke said last month the U.S. central bank expected to trim its bond purchases later this year and halt the program by mid-2014, as long as the economy progresses as it expects.

9 Numbers That'll Tell You How the Economy's Really Doing
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U.S. Trade Deficit Hits 6-Month High; Jobs Data Upbeat
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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