US economic data have diverged in March and early April, adding up to the likelihood of only a modest pickup in GDP Growth in Q216. The high-productivity sectors -- Manufacturing and Construction -- are mixed, while the low-productivity sector -- Services -- is strong. The strength of the low-productivity sector should boost the demand for labor, which could put some upward pressure on wage inflation. But, the attendant shift in the composition of jobs -- toward lower-paying jobs -- should work to hold down measures of wage inflation. Overall, the divergence among the sectors of the US economy should keep the Fed on hold.
The divergence showed up in the March Payrolls, where Construction and Services jobs posted strong gains while Manufacturing and Mining jobs fell.
The weakness in Manufacturing Jobs translated into a dip in March Manufacturing Output (contained in Industrial Production). This weakness apparently was picked up in today's decline in the April Phil Fed Mfg Index, as well.
a. The decline in the Phil Fed Index raises downside risk for the April Mfg ISM. The two moved in the same direction in 6 of the past 9 months.
Meanwhile, housing-related data were mixed so far in March, with Starts down but Existing Home Sales up. The decline in Housing Starts was likely payback for the boost from warm weather in January and February. Starts should rebound in April, but they may not take back all of the March drop. But, the trend is up, as demand remains strong -- which is expected to be seen in March New Home Sales, due Monday.
The +199k mm jump in March Private Services Jobs accounted for more than the +195k increase in Private Payrolls. And, demand for Services Jobs could be behind the further decline in Initial and Continuing Claims last week.
No comments:
Post a Comment