Month: April 2019

The BEA announced that real GDP increased 3.2% in the advance estimate for 2019 Q1. Over the past few years Q1 had come in quite weak, not so this time. Inventory accumulation played a major role, increasing $31.6 billion leading to a massive $128.4 billion level. The high, and mostly unexpected, level of current inventory will lead many to cut their forecast of Q2 GDP growth.

Personal consumption expenditures were quite weak, increasing only 1.2%, with durable goods decreasing 5.3%. The year-over-year change in the PCE has been basically flat since 2016. Gross private domestic investment increased 5.1% with a large intellectual property products increase of 8.6%. Residential investment continues to decline, down 2.8% and down 7 of the last 8 quarters with the last positive reading back in Q4 of 2017.

Exports were up 3.7% and imports down 3.7%. Government expenditures for consumption and gross investment was up 2.4%.

Overall this was a strong report yet probably will not elicit any large changes in the Fed’s current policy stance.

By Thomas Cooley and Peter Rupert

The BLS announced that March payroll employment increased +196,000 and had small upward revisions to January and February, +14,000 total. Economists surveyed by the WSJ were basically on the same page, though a bit short, having forecast 175,000 new jobs.

The bulk of the gains came in service producing sectors (+170,000) with a large jump in health care and social assistance (+61,200). Retail trade shed (-31,900) jobs over the past two months, -20,200 in February and another -11,700 in March. The manufacturing sector also has been quite weak, gaining only +12,000 jobs over the first quarter of 2019.

Average weekly hours were up slightly to 34.5 and continue to fluctuate between 34.4 and 34.5.

Perhaps the most encouraging sign is that Average Hourly earnings rose 0.14% over the month and have increased 3.2% y/y. This shows that the record number of job vacancies is continuing to exert modest upward pressure on wages as employers try to fill positions. But there is little reason to worry about this fueling inflation.

The household survey showed a decline in the unemployment rate from 3.82% to 3.81%. However, the labor force fell by 224,000 and the number of employed persons fell by 201,000 and the number unemployed fell 24,000. Both the employment to population ratio and the labor force participation rate fell slightly.

Retail trade employment has flattened over the last few years while leisure and hospitality employment has continued to rise and overtook the retail trade at the beginning of 2017.

The Big Picture

The recent numbers in the labor market do little to encourage or discourage future moves by the FOMC. Inflation remains subdued, wages have begun to rise of late but nothing appears exceptionally strong or weak. Given the political pressures on the Fed to keep interest rates stable or lower them it seems unlikely that the continued tightness in the labor market will concern the FOMC enough to resume tightening rates.