The March Rebound

All the major economic reports for March are in and it’s clear that the setback in February was reversed, and then some.

Our equally weighted index of 18 U.S. economic indicators rose 1.1% in March, more than reversing February’s 0.8% drop. That pushes our composite indicator of U.S. economic activity to a new post-recession high, as the chart below shows.

Here’s how the numbers stack up individually:
Reviewing the composite and leading measures of our economic benchmarks on a rolling 12-month basis reveals that the upside momentum is slowing. That’s normal, of course. The extraordinary rebound in relative terms after the recession’s end was destined to downshift. Nonetheless, the slowing in the broad trend is a reminder that the strength that usually accompanies the early stages of post-recession periods is now history. The cycle is entering middle age.

The good news is that broad trend in the economy appears to have forward momentum. The first economic number for April suggests as much. Yesterday’s update on the ISM Manufacturing Index continues to paint an encouraging picture. As Brian Wesbury, economist at First Trust, observes:

Manufacturing continues to boom, with the ISM index coming in at 60.4 in April. The index has now been over 60 for four straight months and the four-month average of 60.9 is the strongest since 1984, when the economy was in the huge 1980s recovery.

Even so, all the usual risks are still with us, starting with questions about the power and persistence of job growth. Although private nonfarm payrolls have been growing steadily for more than a year, the pace of expansion has been modest relative to what’s required to bring down the elevated jobless rate. Based on expectations for this coming Friday’s jobs report for April, most economists are anticipating more of the same. Meanwhile, in the wake of last week’s disturbing rise in new filings for jobless benefits, anxiety about the labor market isn’t set to fade any time soon.
Yes, it appears that the expansion will roll on, but it still comes with a lot of baggage.