Today was a fairly brisk day for economic data, as four noteworthy reports were released. One of them contained good news, but with a heavy asterisk. The other three were either not good, period, or came in below expectations.
Readers here probably know which one the Associated Press was still carrying at its Top Business Stories page as of 2:39 p.m. Of course, as seen here (saved at my web host for future reference, fair use and discussion purposes), it was the one with good news.
ADP's December Employment Report showed that the economy added a seasonally adjusted 257,000 jobs in December, far higher than expectations averaging 195,000. Though it wasn't apparent in Christopher Rugaber's headline, the AP's economics writer at least got around to the report's main problem in Paragraph 4:
SURVEY: US BUSINESSES ADD 257,000 JOBS, MOST IN A YEAR
U.S. businesses stepped up hiring last month, led by solid gains in construction and retail, a private survey found.
Payroll processor ADP said Wednesday that companies added 257,000 jobs in December, the most in a year. Construction companies added 24,000 jobs, while retailers and shipping firms added 38,000.
The figures suggest that employers are still hiring at a healthy pace, even as overseas economic weakness and the strong dollar have hit U.S. manufacturing. Factories added just 2,000 jobs last month, ADP said.
Yet some economists were skeptical of the figure, because many companies don't drop laid-off workers from their payrolls until the end of the year. Moody's Analytics, which helps compile the data, seeks to adjust the numbers to account for the annual "purge," but isn't always able to do so fully.
As a result, December's ADP report tends to be one of the highest each year. Most economists continue to forecast that Friday's government report will show employers added about 200,000 jobs, while the unemployment rate stayed at 5 percent.
Rugaber failed to mention that one of the people who seems skeptical about whether the 257,000 figure will hold up is Mark Zandi at Moody's Analytics, whose firm is responsible for preparing the ADP report. Zandi said the following on today's ADP conference call about the aforementioned "purge" (with a mild bit of paraphrasing): "There is some noise in the December estimate. Professional services probably has the most noise, and might be overstated."
As noted earlier, the other three pieces of economic news weren't so good.
The government reported today that the seasonally adjusted international trade deficit narrowed in November to $42.4 billion. That was about 5 percent below expectations. Unfortunately, the narrowing occured because exports dropped by less than imports. That dual decline is troubling, but the AP's Martin Crutsinger either didn't understand why, or chose not to communicate why:
US TRADE DEFICIT NARROWED IN NOVEMBER
The U.S. trade deficit dropped to the lowest level in nine months in November as exports fell to a nearly four-year low.
The November deficit fell 5 percent to $42.4 billion, the Commerce Department reported Wednesday.
Exports contracted 1.6 percent to $182.2 billion, the smallest monthly total since January 2012. Imports were also down, shrinking 1.7 percent to $224.6 billion. The import declines this year reflect the big drop in global oil prices.
The problem is that both elements contracted, meaning that overall economic activity slowed. Unless there's evidence of a strong pickup in domestic production and consumption — which there isn't — today's trade news may be an early indication that economic growth, which has been singularly unimpressive in most quarters during the Obama administration, may be slowing significantly. (In a bit of a surprise, the Atlanta Fed increased its fourth-quarter GDP estimate today to a weak annualized 1.0 percent because of the trade report; but that may be because they were expecting it to come in even worse than it did.)
The Institute for Suppy Management's Non-Manufacturing Report for December came in at 55.3 percent. Though that's still a fairly strong expansion reading (above 50 percent represents expansion), it trailed expectations which were roughly a point higher, and represented the lowest reading since early 2014.
Josh Boak's AP coverage took comfort in the fact that faster deliveries held the index back. A bigger problem appears to be that the ISM survey's result for inventories was an inordinately high 64.5 percent. Perhaps in normal situations, plentiful inventories (characterized as "too high") can be seen as good news, but they're not good news now. That's because inventory-to-sales ratios are very high, meaning that sellers may have to discount goods just to get rid of them or possibly even throw some away because of obsolescence. On balance, I'd say that the faster deliveries were a reflection of "please take this stuff off our hands" sentiments.
Finally, the government's report on November Factory Orders continued an ugly string of 13 consecutive months of year-over-year declines in seasonally adjusted orders and shipments. November's orders and shipments both came at levels below those seen in November 2012, i.e., three years ago.
As the contrarians at Zero Hedge dutifully noted (one spelling error corrected):
Factory Orders are flashing deep red recessionary indicators...
Did Martin Crutsinger mention any of this in his AP coverage of the Factory Orders report? Of course not — but he did make a rather odd admission at the end of his dispatch:
Unemployment has dipped to 5 percent - a rate associated with normal economies
It looks like the AP's veteran economics writer fully recognizes that the unemployment rate doesn't reflect the good news it supposedly advertises, and knows that this economy is anything but normal. At least thanks for that, Marty.
Thus, the AP held the party line on the "all is well" economy today. The only item it kept in its Top Headlines was the one with the best news — even though, having been released at 8:15 a.m., the ADP report was the oldest item. Meanwhile, it quickly buried the others. Therefore, most subscribers and therefore more users of AP content will end today knowing that there was a good jobs-related number and little if anything else.
Cross-posted at BizzyBlog.com.