NAM Monday Economic Report – April 6, 2015

The jobs report was the most important indicator of this week. It gives us a strong filter to the core of the economy and helps to clarify true economic direction after receiving contradictory signs during the week. Economists polled by Bloomberg were anticipating an increase of 245,000 jobs following the February increase of 295,000. Total nonfarm payroll employment increased by a mere 126,000 in March, a dramatic slowdown in hiring. The unemployment rate remained unchanged at 5.5 percent. Analysts have pointed to the poor late-winter weather in the Northeast and a decline in employment in oil-related industries as oil prices decline.

The previous 12 months have seen an increase of 200,000 jobs per month, making March’s report a particular disappointment. It is made worse by the fact that the decline was unexpected. The U.S. market has a large sensitivity to missed expectations. Contradictory indicators and a surprising jobs report shows the U.S. economy is not back to full speed.

Unfortunately, glum news is coming at us from all directions. Analysts this week appear to have run out of synonyms for “bad” and consulted the thesaurus for more options, describing the U.S. economic activity as crumbling and jobs as being slaughtered. Momentary bright spots emerged in consumer confidence and new factory orders. However, those positive indicators were dampened at the end of the week with the March jobs report.

The Dallas Fed Manufacturing Outlook Survey released on March 30 showed pessimism, with forecast worsening in the General Business Activity Index to the lowest level since 2011. New order growth rates remained negative for the fifth month in a row.

Consumers obviously didn’t get the memo from the Dallas Fed. Published on Tuesday, the Confidence Board’s Consumer Confidence Index shows contrarian optimism this month after a dip in February. Ignoring the outlook for tepid business conditions, consumers felt more upbeat about employment and income prospects. This also ended up being a poor indicator for the jobs report later in the week.

Wednesday’s ISM Purchasing Managers Index fell for a fourth consecutive month to 51.5 percent, further pointing to languorous manufacturing activity in the United States. Index results under 50 percent indicate manufacturing contraction. If consumers had waited a day to read the ISM report, they might be much less glib, as the ISM wage and hiring indexes were not much better, showing little prospects for expansion.

Thursday continued last week’s roller coaster ride with the unexpected positive news of a 0.2 percent rise in the Department of Commerce report of new orders for manufactured goods. Economists, a notoriously skeptical bunch, had expected factory orders to slip 0.5 percent, as factory orders have been shellacked by the stronger dollar and weaker global demand. This month, orders excluding transportation rose 0.8 percent, the largest in eight months. Shipments of factory goods rose 0.7 percent after four straight months of declines as the effect of the West Coast port impasse dissipates.

Christopher Reed
Senior Economist
Honeywell Aerospace