Deller's two cents:
Positive way to start the new year, nearly all positive economic news this week for the national economy.
Economic Week in Review: New year begins with accelerated job growth
January 06, 2012
The U.S. economy kicked off 2012 with encouraging employment numbers resulting in the lowest unemployment rate since February 2009. Combined with economic reports that beat analysts' expectations in the areas of construction spending, manufacturing, and factory orders, the first week of 2012 showed signs of hope for the long-struggling economy. For the week ended January 6, the S&P 500 Index rose 1.6% to 1,278 while the yield on the 10-year U.S. Treasury note rose 9 basis points to 1.98%.
Job growth exceeds expectations
The U.S. economy added a net 200,000 jobs for December, causing the unemployment rate to fall to 8.5%, the lowest level in nearly three years. The rate has dropped for four consecutive months. The private sector added 212,000 new jobs, while government job rolls shrunk by 12,000. Public-sector job numbers have decreased for 17 of the past 19 months.
"The news on the labor market this morning was positive across the board. Not only were the numbers strong, but the fall in the unemployment rate wasn't heavily influenced by the 'discouraged-worker effect,' as in previous months. If sustained, this pace of job creation could encourage aggregate demand by consumers and businesses, and thus speed up the recovery to more normal rates in 2012," said Vanguard senior economist Roger Aliaga-Díaz.
Goods-producing industries led the way by adding 48,000 new jobs for the month, while the construction and manufacturing industries reported increases of 17,000 and 23,000 new jobs respectively.
The U.S. Department of Labor also reported a 0.2% increase in hourly earnings.
Factory orders climb
New orders for manufactured goods were up 1.8% for November. Excluding transportation, new orders increased 0.3%. Much of the overall increase was concentrated in aviation as aircraft manufacturer Boeing reported a large order.
Flooding in Thailand, which disrupted manufacturing supply chains, caused a number of industries, including electronics and automobiles, to report downturns for the month.
Nonmanufacturing index shows slight increase
The Institute for Supply Management's (ISM) nonmanufacturing index recorded a slight increase for December, marking its first monthly gain since August. The index rose from 52.0 to 52.6-less than analysts had predicted, but a rebound from its 2011 low in November.
Index readings above 50 signify growth with higher readings indicating more broad-based growth.
Construction spending on the rise
Construction spending rose 1.2% for November, significantly beating analysts' expectations. The increase was largely attributed to a 1.7% increase in public construction. Construction spending continued an upward trend that began in April 2011 and has increased in six of the past eight months.
Builders began construction on more new homes in November than in any of the previous 19 months. The figures were reflected in the 2% monthly increase in private residential construction spending. Spending on residential improvements increased 2.6% for the month and was 4.1% higher year-over-year.
U.S. manufacturing climbs
U.S. manufacturing closed 2011 on an up note as the ISM Manufacturing Index rose from 52.7 to 53.9 in December.
The increase marks the index's highest reading since June 2011. New orders for December increased to their highest level since April 2011. ISM's manufacturing employment index also climbed for December, from 51.8 to 55.1, representing only the second increase in six months.
The economic week ahead
A light week of economic reports is scheduled for release in the second week of the new year. On Monday, the Federal Reserve will issue its November report on consumer credit. The U.S. Department of Commerce will release the latest economic data in the areas of retail sales and business inventories (Thursday) and international trade (Friday).
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Steven C. Deller
Professor and Community Development Economist
Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension
Madison, WI 53706
608-263-6251
"I started out with nothing and I still have most of it left."
Seasick Steve
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