This Week In The Economy: US Employment Surges In November, Escalation in EU-US Trade Tensions, OPEC Cuts Oil Production Again

Welcome to a regular snapshot-review of U.S. and international economic news that aims to 1) provide a window into the challenges and decisions facing businesses today, 2) determine the direction of economic policy — such as the speed at which central banks decide to raise interest rates, and 3) assess what the impact will be for consumers.

Surprise Surge In U.S. Employment For November

The U.S. economy added 266,000 jobs in November, far more than the +180,000 expected by most economists, and the unemployment rate was little changed at 3.5%, the U.S. Bureau of Labor Statistics reported. The private sector added 254,000 jobs while the government sector added 12,000.

Employment for September was revised up by 13,000 from +180,000 to +193,000, and the change for October was revised up by 28,000 from +128,000 to +156,000. With these revisions, employment gains in September and October combined were 41,000 more than previously reported.

Of note, manufacturing employment rose by 54,000 in November, following a decline of 43,000 in October. Within manufacturing, employment in motor vehicles and parts was up by 41,000 in November, reflecting the return of GM workers who were on strike in October.

The labor force participation rate was little changed at 63.2% in November, while average hourly earnings increased by 3.1% compared to November 2018.

US Trade Deficit Narrows In October, But Both Exports and Imports Shrinking

The U.S. deficit with its trading partners narrowed in October, however, the level of both exports and imports are on a downward trajectory.

The goods and services deficit was $47.2 billion in October, down $3.9 billion from $51.1 billion in September. October exports were $207.1 billion, $0.4 billion less than September exports. October imports were $254.3 billion, $4.3 billion less than September imports.

Exports of goods decreased $0.8 billion to $136.1 billion in October, imports of goods decreased $4.5 billion to $204.1 billion. In particular, the value of imported consumer goods plunged by $2.4 billion, while auto imports declined by $1.8 billion.

The deficit with China decreased $2.6 billion to $77.3 billion in the third quarter. Exports increased less than $0.1 billion to $42.5 billion and imports decreased $2.6 billion to $119.8 billion.

Trump Administration Threatens Trade War With Europe Over Digital Tax

The U.S. Trade Representative this week unveiled proposals for a 100% hike in tariffs on $2.4 billion worth of French imports as retaliation for France’s 3% digital services tax.

The White House said the tax unfairly targets U.S. tech giants, such as Google, Apple, Facebook, and Amazon. The Trump administration is also contemplating imposing fees or restrictions on French service companies operating in the United States.

According to the notice filed in the Federal Register Notice by the USTR, the punitive tariffs would be targeted at French luxury items like cheese, handbags, and wine.

The agency added that it is “exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey.

“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies,” it argued.

Public comments on the USTR’s proposed actions must be submitted by January 6, 2020.

Germany’s Economy Continues To Muddle Along, Held Back By Manufacturing

Economic activity in Europe’s largest economy continues to disappoint, held back by the struggles of its embattled manufacturing sector. Data released this week showed industrial production contracted by 1.7% in October, following a 0.6% decline in September. Industrial production plunged 5.3% compared to October 2018.

Production excluding energy and construction was also down by 1.7%. The production of capital goods (heavy duty equipment) fell by 4.4%.

Looking at just manufacturing activity alone, new orders for factory goods fell by 0.4% in October, and are down 5.5% from a year ago. Domestic orders decreased by 3.2% and foreign orders rose 1.5% in October from the previous month. New orders from the euro area were up 11.1%, while new orders from other countries decreased 4.1% compared to September.

OPEC Announces Additional Cut To Oil Production Levels

OPEC members met in Vienna this week for its final meeting of 2019, and announced an additional 500,000 barrels per day reduction in its collective oil production.

The group cited “critical uncertainties” that could impact demand and supply in the oil market, including “trade-related negotiations, macroeconomic developments and other factors.”

OPEC, in collaboration with major non-OPEC oil producers such as Russia, said cut in oil supply would mean a total of 1.7 million barrels per day removed from the oil market. “In addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions, leading to adjustments of more than 2.1 million barrels per day,” it said in a statement.

This additional adjustment would be effective as of 1 January 2020.

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Founder — SW4 Insights. Public policy junkie and Central Bank Watcher. Recovering journalist and former Senior Director at Hamilton Place Strategies

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Brai Odion-Esene

Brai Odion-Esene

Founder — SW4 Insights. Public policy junkie and Central Bank Watcher. Recovering journalist and former Senior Director at Hamilton Place Strategies

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