A look back at the April 1 week was a mix of data, some of which was disappointing, some of which was better than expected. Overall, while economic growth may have faded from the faster pace of 2018, the labor market remains robust and activity in manufacturing and services expansionary.
The Employment Situation for March turned in an above expectations headline of nonfarm payrolls up 196,000 with a net upward revision of 14,000 to the prior two months. The ADP National Employment Report for March had private payrolls up 129,000 – a relatively soft reading compared to the recent trend – but the government data showed private payrolls up 182,000. Government payrolls were up 14,000. Total nonfarm payroll growth isn’t far off the six-month moving average of 206,000 and remains well above levels that Fed policymakers consider necessary to absorb new entrants into the labor force. The unemployment rate was unchanged at 3.8% in March. Average hourly earnings were up 3.2% compared to March 2018. The report should offer some reassurance that the abruptly lower number for February was a one-off and the labor market remains tight.
Indeed, the level of initial jobless claims in the week ended March 30 was a scant 202,000, the lowest in nearly 50 years. If new hiring is a bit weaker, workers who have jobs seem relatively secure. The Challenger report for March showed layoff intentions remain elevated. However, layoff intentions mostly seem to be related continued contraction in retail, and some fresh layoffs in the energy and automotive sectors. It is also worth noting that layoff intentions do not always result in immediate job losses. Sectors like automotive tend to rely on not filling open positions and offering voluntary severance packages. Some intentions are for months out, if not years. The present strength in the labor market may well be able to absorb those who do suffer a job loss in the near term.
The ISM Manufacturing Index for March rose to 55.3 after 54.2 in February. The ISM Non-Manufacturing Index for March fell to 56.1 after 59.7. Both the indexes have been somewhat volatile as activity slowed at the end of 2018 to be followed by the partial federal government shutdown that dominated January and the impacts that lasted into February. In both sectors, the underlying trend appears to have softened, but remains at least modestly expansionary.
New orders for durable goods were down 1.6% in February, mainly due to the 4.8% decline in the transportation component that reflected a 31.1% drop for nondefense aircraft orders. Defense aircraft was up 2.5% after the Aero India air expo on February. Excluding transportation, orders edged up 0.1%.
Retail and food spending was down 0.2% in February, a decided disappointment that was mitigated by an upward revision to January to up 0.7% (previously up 0.2%). Solid sales for auto and other dealers (up 0.7%) and gasoline service stations (up 1.0%) failed to offset declines elsewhere. March could get a boost with the arrival of tax refunds and higher consumer confidence after the government shutdown.
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