The U.S. trade deficit narrowed to $43 billion in February, a decrease of 3.4 percent from the revised $44.5 billion in January, largely due to a steep decline in crude oil imports, according to the U.S. Department of Commerce. February exports rose 0.8 percent to $186 billion, while total imports were relatively unchanged at $228.9 billion.
“The number of barrels of crude oil imported into the U.S. in February was the smallest since 1996,” Bloomberg News reports. “Apart from oil purchases, sustained spending by U.S. consumers and businesses will probably boost imports this year. Demand for American-made goods in markets such as China and Latin America also may keep growing, cushioning the crisis in Europe and limiting the trade gap.”
The goods deficit for the month fell to $60.2 billion, a $1.5 billion decrease from January, while the services surplus remained flat at $17.3 billion. Goods exports increased by $1.3 billion to $132.2 billion, led by gains in industrial supplies and materials, and goods imports edged down $0.1 billion to $192.4 billion, also led by declining demand for overseas industrial supplies. The U.S. imported $19.65 billion of foreign oil in February, down from $24.53 billion in January.
“The trade deficit has been volatile in recent months, mostly due to swings in oil,” MarketWatch explains. “The U.S. petroleum deficit narrowed sharply in December, then rebounded in January. It retreated again in February, as the quantity of U.S. oil imports dropped to the lowest level since March 1996. The U.S. has been producing more oil and natural gas through new techniques such as fracking.”
Demand Rises for Factory Goods
New orders for U.S. manufactured goods rose 3 percent in February, following a revised 1 percent decrease in January, primarily due to stronger demand for motor vehicles and aircraft, according to the U.S. Department of Commerce. The value of new orders increased $14.5 billion to a total of $492 billion for the month. Excluding the transportation category, orders rose by just 0.3 percent.
New orders in the often volatile transportation category, up two of the last three months, surged 21.8 percent to $74.5 billion, while primary metals demand rose 2 percent to $29.3 billion. However, some goods categories posted declines: orders for fabricated metal products fell 3.9 percent to $28.4 billion, machinery dropped 2.5 percent to $34.7 billion, and computers and electronic products declined 0.5 percent to $20.2 billion.
Orders for core capital goods excluding aircraft and defense equipment, which serve as a key indicator for future business spending, fell 3.2 percent in February, suggesting that companies may be worried about the long-term effects of federal spending cuts.
“Still, the decline followed a 6.7 percent surge in January, the largest in nearly three years. Analysts said that when averaging the two months, business investment orders showed a solid increase for the January-March quarter,” the Associated Press notes. “Many expect the gains to resume this spring, helped by a stronger job market that has kept consumers spending.”
What Small Businesses Want from Washington This Year
Small businesses are feeling the crunch due to several federal policies they claim are making it harder to conduct business, according to a recent survey by the U.S. Chamber of Commerce.
According to the quarterly survey, small businesses want more certainty in government policy, with 86 percent of respondents saying they prefer certainty, compared to 5 percent looking for assistance from Washington. Further, 79 percent of respondents said they think the American economy is on the wrong track, with 86 percent of businesses disapproving of the performance of the Senate Democrats (majority party) and 46 percent disapproving of the House Republicans’ (majority party) performance.
Over a quarter of small businesses (27 percent) said they lost employees in the last year. Additionally, 71 percent say the health care law makes it harder to hire new employees, leading to 32 percent saying they will reduce hiring and 31 percent saying they’ll cut back employee hours.
Small businesses overwhelmingly supported immigration reform (66 percent), tax reform (79 percent), and more energy policy reform (80 percent), saying current policies are hindering their ability to do business.
Unemployment Rate Inches Down
Although the U.S. labor market added 88,000 non-farm jobs in March, the national unemployment rate continued to drop, edging down to 7.6 percent, according to the U.S. Department of Labor. The improvement, however, was driven by more Americans dropping out of the labor force rather than increased hiring.
“The labor force participation rate has not been this low – 63.3 percent – since 1979, a time when women were less likely to be working,” the New York Times explains. “Baby boomer retirements may account for part of the slide, but pessimism about job prospects in a mediocre economy still seems to be playing a large role, economists say.”
Private-sector job growth was anemic last month, falling far short of expectations. Economists polled by MarketWatch had forecast 190,000 new jobs to be created in March. The U.S. economy added an average of 220,000 jobs a month from November to February.
The largest employment gains last month were in professional and business services, which added 51,000 jobs. Meanwhile, the construction industry gained 18,000 new jobs, but manufacturing employment remained relatively unchanged.
“No need to panic. Still, the report left economists cautioning not to read too much into one month’s numbers,” CNN Money notes. “While the dour news was unexpected and has tempered some economists’ views on the labor market’s health, many still expect hiring to continue at a steady clip for the rest of the year.”
Sequestration Slashes Science and R&D Funding
Automatic spending cuts triggered by the sequester deadline last month are resulting in deep cuts to U.S. science and R&D spending, which could negatively affect the country’s global competitiveness.
Recent estimates from the American Association for the Advancement of Science (AAAS) indicate that federal research spending this year will reach its lowest level since 2002. In total, government-backed R&D spending will drop from $140.6 billion to $130.9 billion this year, a 6.9 percent decrease.
“Overall, the picture for FY 2013 is not dramatically different from earlier AAAS estimates of how federal R&D would fare under sequestration for the remainder of this fiscal year,” the report explains. “There were a few surprises, however, as some agencies took greater hits than others.”
Military defense research is forecast to drop 9.3 percent this year, transportation will see budgets cut by 6.9 percent, energy research will decrease 5.5 percent, and NASA research funding will decline 4 percent.
“[I]n the past few years, federal R&D has already declined by about 10 percent. We peaked at about $155 billion dollars in 2010…before sequestration, we were down about 10 percent from that high-water mark,” Matt Hourihan, director of AAAS’s R&D budget and policy program, told NPR. “So we have already seen quite a bit of belt tightening on the part of federal science agencies and research institutions who are trying to plan their own project trajectories.”