Last week, most financial markets closed for Good Friday, although bond markets were open until noon. Stocks ended last week with mixed results, with the Dow and the Global Dow adding value, while the Russell 2000, the Nasdaq, and the S&P 500 fell. Wall Street began the week with large caps advancing. However, stocks couldn’t recover from mid-week downturns, despite a strong finish last Thursday. For the most part, stock traders were apparently cautious ahead of the jobs report, which came out last Friday. Economic news was mixed, with a rise in the services sector offset by another tumble in manufacturing. The number of jobless claims rose, while the number of job openings declined to their lowest level in nearly two years. Bond prices increased, driving yields lower. Crude oil prices advanced for the third straight week and are now back to where they began the year. Gold prices rose past $2,000.00 per ounce after advancing for the second week in a row. The dollar slipped lower.
Last Week’s Economic News
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There were 236,000 new jobs added in March compared with the average monthly gain of 334,000 over the prior six months. The unemployment rate dipped 0.1 percentage point to 3.5%. The labor force participation rate inched up to 62.6%, while the employment-population ratio rose to 60.4%. The number of unemployed persons, at 5.8 million, decreased by 97,000. In March, average hourly earnings rose by $0.09, or 0.3%, to $33.18. Over the past 12 months, average hourly earnings have increased by 4.2%, the lowest year-over-year rise since June 2021. The average workweek edged down by 0.1 hour to 34.4 hours in March. Overall, the first quarter of 2023 has shown that the pace of hiring has trended lower and annual wage growth has slowed, which could be evidence of a slowdown in the employment sector.
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Overall, the following suggests that the labor market may be cooling. According to the latest Job Openings and Labor Turnover report, the number of job openings decreased 632,000 to 9.9 million in February, the lowest since May 2021. The number of hires fell 164,000, while the number of separations dipped 80,000. Within separations, the number of quits rose by 146,000, while the number of layoffs and discharges declined 215,000.
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The March survey from purchasing managers showed that activity in the manufacturing sector advanced marginally from February. The S&P Global US Manufacturing Purchasing Managers’ Index posted 49.2 in March, up from 47.3 in February, rising for the third consecutive month, but still in contraction (readings of 50.0 or higher indicate growth). While manufacturing output increased in March, new orders fell, with survey respondents indicating that higher interest rates and inflationary pressures continued to strain customer purchasing power.
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Purchasing managers reported an increase in new business in March that helped drive a rise in overall output. According to the S&P Global, the services PMI™ rose to 52.6 in March, up from 50.6 in February, marking the sharpest increase since June 2022. In addition to an increase in demand, costs rose at the second-slowest pace since October 2020. Nevertheless, efforts to pass through higher costs to clients resulted in a steep and accelerated increase in selling prices.
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According to the Bureau of Economic Analysis, the goods and services trade deficit increased $1.9 billion in February from the previous month. Exports fell $6.9 billion, while imports declined $5.0 billion. Year to date, the goods and services deficit decreased 20.3% from the same period in 2022. Exports increased 10.8%, while imports rose 2.2%. Relative to trade in goods with select countries, the deficit with China increased $3.2 billion to $25.2 billion in February, which is the largest trade in goods deficit between the U.S. and a foreign trade partner. The next highest deficit is with the European Union at $18.1 billion. The largest trade in goods surplus is with South and Central America ($4.7 billion), followed by Hong Kong ($2.5 billion).
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The national average retail price for regular gasoline was $3.497 per gallon on April 3, $0.076 per gallon more than the prior week’s price but $0.673 less than a year ago.
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For the week ended April 1, there were 228,000 new claims for unemployment insurance, a decrease of 18,000 from the previous week’s level, which was revised up by 48,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 25 was 1.3%, unchanged from the previous week’s rate, which was revised up by 0.1 percentage point. The advance number of those receiving unemployment insurance benefits during the week ended March 25 was 1,823,000, an increase of 6,000 from the previous week’s level. This is the highest level for insured unemployment since December 11, 2021. It is important to note that the data for both initial claims and continuing claims reflects a change in the methodology used to calculate this data.
Eye on the Week Ahead
Inflation data for March is out this week with the release of several important reports. The Consumer Price Index, an inflation indicator that is familiar to most, is released this Wednesday. The CPI rose 0.4% in February, while core prices increased 0.5%. The Producer Price Index for March is also out this week. Prices at the producer level actually dipped 0.1% in February, although producer prices remain up 4.6% from a year earlier. The March figures on import and export prices are scheduled for release on Friday. Import prices fell 0.1% in February, while export prices rose 0.2%.
Have a nice week!
Sincerely,
Robert G. Carpenter