Weekly Economic Trends and Indicators

The Headline:

Last Friday, the Bureau of Labor Statistics (BLS) reported that nonfarm payroll employment increased by 303,000 in March. As it has been in the last few months, the monthly job gains were well above expectations. The unemployment rate was little changed at 3.8%, marking several months of fluctuating between 3.7 and 3.9%. Average hourly earnings rose about 0.3% ($34.69) while average hours increased by a modest 0.1 hour (34.4 hours).

In a separate report, the BLS reported on payroll jobs for February for metropolitan areas including the Quad Cities metro area. Total nonfarm payroll employment in the QC was an estimated 179,000 in February, which was up about 1,100 from a year ago. The local unemployment rate decreased from 5.2% in January to 4.8% in February.

The Details:

The national employment figures continue to be very strong, and this strength is causing renewed concerns about inflation. At the local level, February’s numbers represent a slight rebound from the decline in January. Employment was strongest at the national level for sectors such as health care, leisure and hospitality, government, and construction. At the local level, government employment grew the most in the last 12 months with 500 net new jobs. This includes all levels of government including public education. The leisure and hospitality sector grew by 300 net new jobs last year. The rest of the categories were essentially unchanged over the last year.

The Context:

The national labor market shows no signs of slowing down. As a result, expectations for Federal Reserve interest rate cuts have diminished slightly. As of April 9, the probability of a rate cut in May is essentially zero, and the probability of a rate cut in June decreased from about 62% to about 57% in the last week, according to the CME FedWatch Tool. Generally, however, the further into the future we look, the less the expectations have changed in response to the labor market data.

This means that the market mostly still expects about a 1 percentage point decrease in the fed funds rate by the end of the year. However, the start of the cuts may have been pushed back a meeting or two. Even so, the probabilities did not change very much. First quarter GDP and personal consumption expenditure price data coming at the end of the month will have much more of a chance to move the market.

Locally, the data from February was a bit of a sigh of relief as it reversed about half of the fairly large decrease in the 12-month net new jobs number. Manufacturing has now been essentially unchanged over the last year after a strong post-COVID rebound. Leisure and hospitality employment, as well as government, continue to lead the job growth locally as they have for several months. Interest rate sensitive sectors are still lagging the rest of the economy. Once interest rates start to moderate, these sectors may improve slightly - continuing the expansion.

Next week: Inflation update