A few observations from today’s employment and trade reports
Trade continued to expand robustly through June, with only a hint of the Trump administration’s unfolding trade conflicts with China, Canada, and the European Union. According to the Commerce Department’s monthly trade report, released this morning, total imports of goods and services through the first six months of the year were up 8.6 percent from 2017. Total exports were up 9.0 percent, and the overall trade deficit was up 7.2 percent.
A conspicuous exception was imported iron and steel mill products. In March the Trump administration began imposing Section 232 duties on imported steel products, and expanded those duties in June to cover Canada, Mexico, and the European Union. As a result, imports of iron and steel mill products dropped by 19 percent from May to June, from $1.820 billion to $1.479 billion (Exhibit 8). Meanwhile, duties collected on primary metal products, which includes iron and steel, shot up to $580 million in June, from an average collection of $33 million per month through April and $157 million in May (Exhibit 1s).
The trade deficit shrank modestly in the second quarter, but it is still large by historical standards. When President Trump was touting the second quarter’s robust 4.1 percent GDP growth last week, he said, “The biggest and best results coming out of the good GDP report was that the quarterly Trade Deficit has been reduced by $52 Billion.” That was, I believe, an annualized number buried in the Bureau of Economic Analysis’ July 27 report on GDP. (See Table 3B, Line 43, p. 25.) According to the Commerce Department numbers, the second quarter deficit in goods and services trade was $135.6 billion, down from the first quarter deficit of $155.6 billion. But through the first six months of 2018, the overall trade deficit is still on track in 2018 to match or exceed last year’s total trade deficit of $552 billion.
The most impressive number in this morning’s employment report was the continued expansion of manufacturing jobs. According to the Bureau of Labor Statistics, in its Establishment Survey of employer payrolls, the net number of jobs in manufacturing grew in June by another 37,000. The U.S. economy was adding an average of 8,100 manufacturing jobs a month during President Obama’s second term, but that has accelerated to 21,100 jobs per month on average since President Trump took office. The U.S. economy has added a net 193,000 manufacturing jobs since the beginning of this year, and a nice round 400,000 since January 2017.
The average hourly earnings of all private-sector employees rose 2.7 percent in June from a year ago. This is consistent with wage growth through most of 2018, and ahead of the 2.3 percent average nominal wage growth in the last four years under Obama. If the Trump administration’s tariffs begin to feed through to higher consumer prices, the result will be downward pressure on real wages for millions of American workers.
