There’s a mildly improving case for thinking that the recent slowdown in economic growth really was a temporary affair due to a harsh winter rather than a deeper cyclical problem. Yes, that’s an assessment that’s still evolving and so it’s premature to say anything definitive at this point. The outlook, as always, is subject to change, depending on what we see in the incoming data. But the limited set of March numbers published to date look encouraging.
The evidence for an acceleration in growth is still weak, but at least there’s no smoking gun for arguing that macro momentum is fading. Even when we look at February, the business cycle betrayed no obvious signs of stress. Indeed, the first round of February data shows minimal signs of recession risk.
Given what we know for March at this stage, it’s getting easier to assume that we’ll see the macro trend stay on a course of moderate growth for the near term. We’ll know more once we have a full set of March numbers. Meantime, here’s a quick review of how several indicators compare through last month:
Private non-farm payrolls
The private sector added 192,000 jobs to payrolls in March, which ranks as the highest monthly gain since last November’s 272,000 increase. On a year-over-year basis, private payrolls grew roughly 2%, or in line with the annual pace in recent history. Meanwhile, the Labor Department reports that the number of job openings is trending higher again, according to the government’s so-called JOLTS report (Job Openings and Labor Turnover Survey). Although the latest JOLTS data is available only through February, the revival (in concert with the firmer payrolls report for last month) implies that the labor market will remain in a growth mode for the foreseeable future. That’s also the message in the recent decline in the four-week moving average of initial jobless claims.
The ISM Manufacturing Composite Index in March strengthened a bit to 53.7, reflecting moderate growth. The benchmark rose to its highest level so far this year. Numbers above the neutral 50 mark indicate expansion.
The services sector continued to expand in March, based on the 53.1 reading for the ISM Non-Manufacturing Composite Index. Although the latest reading is a bit softer that what we’ve seen in recent history, the March trend increased over February’s 51.6 estimate.
Consumer spending appears to be picking up, according to the latest weekly reports published a few days ago from Redbook and the International Council of Shopping Centers. The upbeat news suggests that next week’s monthly report on retail sales for March will look encouraging too.