The labor market continued to create jobs in April. Here are the five things we learned from U.S. economic data released during the week ending May 3.
Hiring accelerated while the unemployment rate fell to a 50-year low in April. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 263,000 workers during the month. This was the most jobs added since January and was above the average 213,000 monthly gain over the past year. Private employer payrolls expanded by 236,000, split by 202,000 jobs in the service sector and 34,000 in the goods-producing side of the economy. Industries with sizable payroll gains included professional/business services (+76,000), health care/social assistance (+52,600), leisure/hospitality (+34,000), and construction (+33,000). Hourly earnings averaged $27.77 (+3.2 percent versus April 2018) while mean weekly earnings have risen 2.9 percent over the past year to $955.29.
The separate household survey finds the unemployment falling to its lowest point since December 1969 at 3.6 percent. Some of the drop in the unemployment rate reflects the impact of the labor force shrinking by 490,000 people. The typical length of unemployment narrowed by 2/10ths of a week to 9.4 weeks (April 2018: 9.8 weeks) while the count of “involuntary” part-time workers grew by 155,000 to 4.654 million (April 2018: 4.952 million). Finally, the broadest measure of labor underutilization—the U-6 series—remained at its post-recession low of 7.3 percent.
Personal spending enjoyed a spurt in March. Real personal consumption expenditures (PCE) rose 0.9 percent during the month, following smaller 0.3 percent and 0.1 percent increases in January and February, respectively. The Bureau of Economic Analysis indicates spending on goods jumped 1.4 percent, led by strong gains for both durable (+2.9 percent) and nondurable (+0.8 percent) goods, while services spending had a more modest 0.3 percent bump. Without controlling for prices, nominal PCE swelled 0.9 percent. The higher expenditures occurred despite a modest increase in nominal personal income (+0.1 percent). Nominal disposable income was unchanged for the month while, after adjusted for price variations, real disposable income contracted 0.2 percent. As a result, the savings rate narrowed by 8/10ths of a percentage point to +6.5 percent. Over the past year, real personal spending has risen 2.9 percent while real disposable income has grown 2.3 percent. The PCE deflator (a measure of inflation) had grown 2.0 percent over the past year, while the core measure (which nets out energy and food) had increased 1.8 percent. The latter was below the Federal Reserve’s two-percent interest rate target.
With inflation tracking below the target, the Fed held firm (as expected). The policy statement released following the week’s Federal Open Market Committee (FOMC) noted the U.S. economy “rose at a solid rate” and that the labor market “remains strong.” But it also warned that core inflation had “declined and [was] running below two percent.” As a result, the FOMC voting members voted unanimously to keep the fed funds target at a range between 2.25 and 2.50 percent. The statement also emphasized that it would “patient” before it makes a move to raise or lower the short-term interest rate target in the future.
Purchasing managers signal a slightly slower growth rate in economic activity in April. The Institute for Supply Management’s PMI, the headline index from its Manufacturing Report on Business, lost 2.5 points during the month to a reading of 52.8. Even though this was the PMI’s lowest reading since October 2016, this was the 32nd straight month in which the measure indicated an expanding manufacturing sector. Three of the five PMI lost ground from their March readings: new orders, employment, and production. Showing improvements were indicators measuring inventories and supplier deliveries. Thirteen of 18 manufacturing industries expanded during the month, led by textiles and electrical equipment/appliances.
The ISM’s measure for activity in the nonmanufacturing side of the economy pulled back by 6/10ths of a point to 55.5, the NMI’s lowest reading since August 2017 but its 111th month above a reading of 50.0. Just a single component of the NMI improved from its March reading—business activity/production—while the other three declined in April: employment, supplier deliveries, and new orders. Fifteen of 18 tracked nonmanufacturing industries grew during April, led by transportation/warehousing, professional/scientific/technical services, and construction. The press release noted that survey respondents were “still mostly optimistic about overall business conditions, but concerns remain about employment resources.”
Meanwhile, factory orders rebounded in March. The Census Bureau reports that new orders for manufactured goods jumped 1.9 percent during the month to a seasonally adjusted $508.2 billion, following a 0.3 percent drop in February and holding steady in January. Orders for transportation goods rose 7.0 percent, boosted by gains for civilian aircraft (+31.0 percent), defense aircraft (+17.7 percent), and motor vehicles (+1.5 percent). Net of transportation goods, new factory orders increased a still-robust 0.8 percent, following a 0.3 percent gain in February. Durable goods orders jumped 2.6 percent while nondurable goods rose 1.1 percent. Less favorable was data on new orders for nondefense, non-aircraft capital goods—a proxy for business investment—which held steady in March after gains of 1.0 percent and 0.3 percent in January and February, respectively.
Other U.S. economic data released over the past week:
– Jobless Claims (week ending April 27, 2019, First-Time Claims, seasonally adjusted): 230,000 Unchanged vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 212,500 (-3.1% vs. the same week a year earlier).
– Conference Board Consumer Confidence (April 2019, Index (1985=100), seasonally adjusted): 129.2 (vs. March 2019: 124.2.
– Construction Spending (March 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.282 trillion (-0.9% vs. vs. February 2019, -0.8% vs. March 2018).
– Pending Home Sales (March 2019, Index (2001=100), seasonally adjusted): 105.8 (+3.8% vs. February 2019, -1.2% vs. March 2018).
– Case-Shiller Home Price Index (February 2019, 20-City Index, seasonally adjusted): +0.2% vs. January 2019, +3.0% vs. February 2018.
– Productivity (2019Q1, Labor Productivity, seasonally adjusted): +3.6% vs. 2018Q4, +2.4% vs. 2018Q1.
– Agricultural Prices (March 2019, Prices Received by Farmer): +2.8% vs. February 2019, -3.4% vs. March 2018
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What We Learned About the U.S. Economy Last Week 