The April 29 week has a packed data calendar that crosses from the end of April into the first days of May, as well as an FOMC meeting on Tuesday and Wednesday. The economic data will finally be fully caught up after the partial federal government shutdown. We will have a much fuller picture of conditions in the first quarter 2019. The data is expected to show that the disruptions related to the shutdown and winter weather were short-lived. More fundamentally, the numbers should reflect that the slower pace of economic activity in late 2018 that was due to fading of fiscal stimulus, uncertainties related to trade and tariff policy – visible both in global growth and domestic conditions – and cautious tightening of monetary policy only temporarily cooled growth.
The FOMC meeting is not expected to reveal any changes in monetary policy either for interest rates or the balance sheet. The post-meeting statement should adhere to the “patient” outlook for short-term already expressed by policymakers when it is released at 14:00 ET on Wednesday. After the solid 3.2% rise in first quarter GDP, the discussion of economic conditions may get an upgrade from the prior statement on March 30. There may be a comment on the start of the winding down of balance sheet normalization in May to the effect that the Fed plans to proceed as previously announced. There will be no formal update to the Summary of Economic Projections. There should be no dissent in the vote.
Chair Jerome Powell’s press briefing at 14:30 ET on Wednesday will likely be something of a non-event. The major changes in balance sheet policy have been announced and not yet begun. He will not do more than reiterate the outlook for policy as presented in the meeting statement. He will decline to answer questions about fiscal, trade, and/or dollar policy in more than the broadest terms. If asked about the empty seats on the Board of Governors and the possible nominees, he will politely decline to opine about the President’s picks on the basis of maintaining the political independence of the central bank.
It is quite possible that by the time of the press conference that the pre-nomination of Stephen Moore will have seen the same outcome as that of Herman Cain. Moore has said he will withdraw from consideration if he becomes a “liability” to President Trump. Given the recent disclosures of his financial difficulties and profoundly misogynistic writings for The National Review and other publications – even if intended as humorous as he has said – would make it nearly unthinkable for his nomination to survive the confirmation process.
This next FOMC meeting will get the April edition of the Fed’s Senior Loan Officer Opinion Survey. We won’t know its contents until it is released in the following week, probably on Monday, May 6 at 14:00 ET. There is no official scheduled time for this report to be published, however, it is usually the Monday following the meeting at which it is presented.
What the FOMC won’t have is the contents of the April Employment Situation which will not be available until Friday, May 3 at 8:30 ET. Given the generally robust tone of other reports related to the labor market, April is likely to see solid increases in payrolls – more than enough to absorb new labor market entrants. Many businesses report difficulty in finding workers, so it would not be a surprise if the level was below the 196,000 of March. However, most Fed policymakers would say that at this stage of the long expansion, anything over 100,000 is a reasonable gain. The unemployment rate probably will hover near the 3.8% of March that seems to be the present trend. What may be more interesting is if the 7.3% of February and March for the U6 unemployment rate ekes out another decline. The last time the U6 measure was this low was in early 2001 when the headline unemployment rate was in the low 4.0%-range. Workers on the margins are returning as wages and benefits have improved and employers are more willing to take a chance on less qualified applicants and/or retired workers who find it beneficial to return to the workforce.
Prior to the government numbers, the ADP National Employment Report for April will be released at 8:15 ET on Wednesday. The past two months have shown slower job adds for private payroll, but still at a healthy pace. Contraction in the brick-and-mortar retail sector has cut into hiring at service providers, while lack of skilled workers has had an impact on hiring in construction among goods-producers.
The Challenger report on layoff intentions in April at 7:30 ET on Thursday could see the level of planned job cuts decline after taking a decided turn higher starting in September 2018. Some of it was due to the restructuring in the retail sector where the shift to on-line shopping continues to have an impact. Some of it was restructuring due to trade and tariff policy that lead to reconsideration of the best locales for production. Some of it was related to cost-cutting where businesses were turning to automation as more efficient. There was also one big announcement for civilian employees of the military as overseas operations were being phased out. In any case, businesses have probably made and announced the bulk of their plans for workforce reductions for now.
Initial jobless claims for the week ending April 27 at 8:30 ET on Thursday may feel some of the residual effects of the late timing of the Passover/Easter observances in the prior weekend. Much of the sharp increase in the prior week will likely be retraced.
The Employment Cost Index (ECI) for the first quarter at 8:30 ET on Tuesday should continue to rise on increases in wages and salaries, and benefits costs. These may be less firm than in recent quarters but should not belie that businesses are needing to offer better pay and incentives to attract and retain workers. So far wage pressures haven’t leaked into overall price stability. Nonetheless, Fed policymakers are alert to the possibility and will keep their collective eyes on price measures.
The numbers on personal income and spending for March at 8:30 ET on Monday will finally bring the FOMC up-to-date on the PCE deflator after delays related to the government shutdown. Like the CPI, the FOMC can look for increases due to higher energy costs overall, but the core should remain close to the Fed’s 2% objective. Incomes should continue their modest rise and spending may get a boost from renewed purchases in durables like motor vehicles and nondurables from higher consumer energy prices.
The Conference Board’s Consumer Confidence Index for April at 10:00 ET on Tuesday is expected to rebound from the 124.1 in March that was below the 131.4 in February. Consumers were concerned about the labor market and future business conditions in March and some of that may have been alleviated in the intervening period. In any case, even a further decline would not mean that consumers were not quite optimistic, just less so than they were in much of 2018.
Reports related to the housing market in March are the NAR’s Pending Home Sales Index (PHSI) at 10:00 ET on Tuesday and Construction Spending at 10:00 ET on Wednesday. The PHSI could pick up from the 101.9 in February as consumers liked the look of lower mortgage interest rates and moved to sign contracts before prices and interest rates rose again. Housing starts were not much changed in March, but consumers may have been active in home renovation and repair at the end of winter. Also, some commercial projects stalled by weather may have gotten a start.
Conditions in the manufacturing and service sectors at the national level in April will be revealed by the ISM indexes of manufacturing at 10:00 ET on Wednesday and non-manufacturing at 10:00 ET on Friday. Regional data available for April to date suggest that manufacturing is somewhat mixed, but that the service sector has adjusted to more sluggish economic conditions quickly and has settled into a pace of at least modest expansion. The same could be said for manufacturing, albeit with more volatility month-to-month.
The Dallas Fed’s Texas Manufacturing Outlook at 10:30 ET on Monday will complete the picture for the regional Fed surveys for the factor sector in April. Its Texas Service Sector Outlook at 10:30 on Tuesday will complete those for non-manufacturing. The MNI-ISM Chicago Business Barometer at 9:45 ET on Tuesday includes respondents from both services and manufacturing. The three may present some minor adjustments in expectations for the ISM national data.
The advance estimates for March international trade in goods only, and retail and wholesale inventories at 8:30 ET on Friday will get a bit lost behind the employment data and then the ISM Non-Manufacturing Index. They are not important to markets immediately, but they will help fill out assumptions for first quarter GDP data.
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