The optimists got a break today. This morning’s economic updates brought encouraging news via initial jobless claims and the flash estimate of Markit’s US Manufacturing Purchasing Managers Index (PMI). The PMI report was particularly strong. It’s too soon to write off the weak numbers that have been harassing the macro profile lately, but the data du jour at least breaks the recent run of discouraging reports. In turn, it’s a bit easier to entertain the theory that a thaw in the weather will juice the business cycle in the weeks ahead.
Let’s start with the initial PMI estimate for this month. The press release’s headline says it all: “US manufacturing sector performance rebounds strongly in February.” The jump in the headline data was supported with robust gains in the sub-indexes, including a faster rate of increase for new orders and employment. According to Markit Economics, “output growth recovered strongly from January’s three-month low, suggesting manufacturers have started to shake off the disruptions caused by heavy snowfall and extreme weather conditions in parts of the US.”
The surprisingly strong rebound in the PMI data opens the door for thinking that the dramatic slide in the ISM Manufacturing Index in January isn’t as dark as it appears. We won’t know for sure until we see the February ISM report that’s scheduled for release on March 3. In the meantime, the outlook for manufacturing looks considerably brighter by way of Markit’s numbers.
There’s also marginally better news in today’s initial jobless claims release. New filings for unemployment benefits fell 3,000 to a seasonally adjusted 336,000 for the week through February 15. That’s still leaves claims bouncing around a middling level, based on recent history. But there’s a stronger signal to consider: New claims fell more than 8% last week vs. the year-earlier level, suggesting that the trend for this leading indicator is still reflecting improvement in the labor market.
There’s been a lot of debate lately about how, or if, the harsh winter weather has slowed economic activity. That debate is still very much alive, despite today’s updates. Nonetheless, it’s encouraging to see some positive numbers for a change. If the economy was truly in trouble for reasons that transcend winter’s bite, it’s likely that we’d see jobless claims rising and manufacturing slumping. Perhaps that’s coming, but not today. Instead, the opposite is true, or so today’s numbers suggest. Indeed, today’s claims report reveals an annual decline that’s considerably larger than the previous week’s tepid year-over-year drop of less than 3%.
Tomorrow’s another day, but for the moment the argument that the arrival of spring will sweep away the recent macro turbulence resonates a bit deeper.