WASHINGTON: The US trade deficit narrowed sharply in March as exports increased to a record high amid a surge in deliveries of commercial aircraft and soybeans, bolstering the economy’s outlook heading into the second quarter.
While other data on Thursday showed a modest increase in new applications for jobless benefits last week, the number of Americans receiving unemployment aid fell to its lowest level since 1973, pointing to tightening labour market conditions.
Wage growth is also rising, with hourly compensation accelerating in the first quarter. Strengthening wage growth should put upward pressure on inflation and keep the Federal Reserve on a gradual path of monetary policy tightening.
“The good news is that we are exporting more, but with the labour markets incredibly tight, labour costs are accelerating as well,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “The rise in labour costs will undoubtedly factor into policymakers’ thinking when they meet again in June.”
The Commerce Department said the trade deficit tumbled 15.2 per cent to a six-month low of $49.0 billion in March. The trade gap widened to $57.7 billion in February, which was the highest level since October 2008. March’s decline ended six straight monthly increases in the trade deficit. The politically sensitive goods trade gap with China dropped 11.6 per cent to $25.9 billion, which will probably do little to ease tensions between the United States and China.
In a separate report, the Labour Department said initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 211,000 for the week ended April 28. Another report from the Labour Department showed hourly worker compensation accelerated at a 3.4 per cent rate in the first quarter after rising at a 2.4 per cent pace in the October-December period.
“The tight labour market is putting some upward pressure on wages, and this should continue as we look for the unemployment rate to trend lower,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.
— Reuters
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