This Week's State Of The Economy - What Is Ahead? - 05 April 2024

By: Taro Chellaram /Wells Fargo Economics & Financial Report/Apr 09, 2024

This Week's State Of The Economy - What Is Ahead? - 05 April 2024

Another upside surprise in the books. Nonfarm payrolls expanded 303K in March, surpassing all estimates submitted to Bloomberg. Modest upward revisions to the prior two months of data sweeten the outturn and point to a labor market in full bloom.

Digging into the industry details, healthcare (+81K), government (+71K) and leisure & hospitality (+49K) saw solid additions. With this report, jobs in the leisure & hospitality sector finally surpassed their pre-pandemic level, which corroborated the increase in the employment component of the ISM services index in March. As the service sector continues to staff up to meet robust demand, service firms have little incentive to show restraint on pricing.

The household survey's separate measurement of employment also showed a robust gain of 498K in March, which far outstripped the 29K decline in the number of unemployed and led the labor force to expand by 469K. Consequently, the unemployment rate ticked down 0.1 percentage points to 3.8%. The labor force's improvement coincides with labor demand stabilizing at an elevated level and quits moving sideways at a low level. The greater pool of available workers amid cooled employee churn points to subsiding wage growth in the months ahead. Average hourly earnings picked up 0.3% in March, but slipped 0.2 percentage points on a year-over-year basis to 4.1%.

The continued strength in hiring suggests less urgency for policymakers at the Federal Reserve to lower the target range of the fed funds rate. Recent comments from FOMC members have homed in on the jobs market's underlying momentum as justification to wait and allow for more inflation data. The progress in goods disinflation attributable to the normalization in supply chains in the wake of the pandemic has largely run its course, implying softer demand, especially for services, will be needed to pull consumer price inflation down to the 2% target on a sustainable basis. Yet with continued tightness in the labor market supporting solid wage growth, demand is showing few signs of weakness.

Before the payroll report, markets had priced in a roughly 60% chance of the FOMC cutting its target range by 25 bps in June. That probability is sitting closer to 53% at the time of this writing. With expectations for the start of policy easing being pushed back later into the year, elevated borrowing costs will continue to weigh on interest-rate sensitive sectors of the economy. Construction spending slipped 0.3% in February, marking the second straight month of decline. Broad-based retrenchment in nonresidential construction outweighed the steady climb in single-family home building. We suspect investment in nonresidential structures will contract in the coming quarters as commercial construction project starts have slowed to a crawl amid tight credit conditions.

The factory sector also remains in the doldrums. In February, manufacturing production was down nearly half-a-percentage-point on a year-ago basis. Despite the contraction in output, the ISM manufacturing index unexpectedly broke into expansionary territory in March for the first time in 16 months. Improving expectations for new orders in the second half of the year helped lift overall sentiment. While it is encouraging to see the ISM back above 50, we remain cautious on the trajectory of industrial production until we have more clarity on the timing of monetary policy easing.




This Week's State Of The Economy - What Is Ahead? - 20 May 2022

U.S. retail sales topped expectations in April, while industrial production also grew more rapidly than economists expected. Data on housing starts, home sales and homebuilder sentiment, however, showed tentative signs of cooling.

How Long Can US Businesses Remain Shut Down?

The sudden stop in economic activity caused by the COVID-19 pandemic means that many businesses will need to rely on their cash reserves to survive the next few months.

This Week's State Of The Economy - What Is Ahead? - 03 April 2020

Efforts to contain the virus are leading to millions of job losses and it’s likely only a matter of time before a majority of economic data reveal unprecedented declines.

This Week's State Of The Economy - What Is Ahead? - 09 December 2022

Various price metrics released this week showed some continued signs of inflation cooling, but gradually rather than rapidly.

This Week's State Of The Economy - What Is Ahead? - 06 December 2019

The latest hiring data are an encouraging sign that the U.S. economy is withstanding the global slowdown and continued trade-related uncertainty.

This Week's State Of The Economy - What Is Ahead? - 02 April 2021

Increased vaccinations and an improving public health position led to an easing of restrictions and pickup in activity across the country in March.

This Week's State Of The Economy - What Is Ahead? - 28 February 2020

The COVID-19 coronavirus hammered financial markets this week and rapidly raised the perceived likelihood and magnitude of additional Fed accommodation.

This Week's State Of The Economy - What Is Ahead? - 15 November 2024

The Consumer Price Index (CPI) rose 0.24% in October, the largest unrounded monthly uptick since April. This bump brought the 12-month rate to 2.6%, the first annual acceleration since inflation’s hot streak in Q1.

This Week's State Of The Economy - What Is Ahead? - 25 June 2021

Supply chain bottlenecks continue to cause pain-in-the-necks. In spite of all the difficulties, the Economic whizzes in the WF Economics team have upgraded their forecast for full-year 2021 U.S.

This Week's State Of The Economy - What Is Ahead? - 23 October 2020

A recent strong report from the National Association of Homebuilders set the tone for another round of strong housing data. The NAHB index rose two points to a record high 85.


Instagram

@ tcgcrealestate

Subscribe Now! IT's Free

Stay up to date with all news coming straight in your mailbox.

Copyright © 2025 TC Global Commercial. All rights reserved.