Stocks closed generally higher last week, with only the Dow failing to post a gain. As has been the case since the end of February, investors have had to weigh the impact of the Russia-Ukraine war on the economy, particularly inflation. Adding to the list, is the Federal Reserve’s monetary policy in response to inflationary pressures. Among the market sectors, real estate, utilities, and consumer staples were the best performers. Crude oil prices fell more than $13.00 per barrel last week as worries over fuel shortages abated somewhat. Ten-year Treasury yields slipped as bond prices rose. Gold prices and the dollar also declined.
Last Week’s Economic News
· The labor sector continues to expand at an accelerated pace after adding 431,000 new jobs in March. The February total was upwardly revised from 678,000 to 750,000. The unemployment rate slid 0.2 percentage point to 3.6% in March, and the number of unemployed persons decreased by 318,000 to 6.0 million. These measures are little different from their values in February 2020 (3.5% and 5.7 million, respectively), prior to the coronavirus pandemic. The labor force participation rate inched up 0.1 percentage point to 62.4%, while the employment-population ratio increased 0.2 percentage point to 60.1%. In March, 10.0% of employed persons teleworked because of the coronavirus pandemic, down from 13.0% in the prior month, while 2.5 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, which is a decrease of 4.2 million from the February estimate. Average hourly earnings rose by $0.13 to $31.73 in March. Over the past 12 months, average hourly earnings have increased by 5.6%. The average work week fell by 0.1 hour to 34.6 hours in March.
· The personal consumption expenditures price index from the personal income and outlays report is the Federal Reserve’s preferred measure of inflation. In February, the PCE price index rose 0.6% after advancing 0.5% in January. For the 12 months ended in February, the PCE price index rose 6.4%. Over the same period, energy prices increased 25.7%, while food prices increased 8.0%. In February, personal income and disposable personal income advanced 0.5% and 0.4%, respectively. Personal consumption expenditures inched up 0.2% in February after climbing 2.7% in January.
· The third and final estimate of the fourth-quarter gross domestic product showed the economy advanced at an annualized rate of 6.9%. GDP increased 2.3% in the third quarter. The fourth-quarter advance was attributable to increases in private inventory investment, exports, personal consumption expenditures, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. Consumer prices, as measured by the personal consumption expenditures price index, increased 6.4% in the fourth quarter of 2021 compared to a 5.3% increase in the third quarter.
· According to the S&P Global U.S. Manufacturing Purchasing Managers’ Index™, March signaled a sharp improvement in operating conditions across the manufacturing sector. Output and new orders increased, although backlogs of work rose at a sharper pace, largely due to an increase in new sales. Nevertheless, survey respondents noted fewer supply bottlenecks, which allowed production to expand at a faster rate. However, costs continued to soar as the rate of price inflation quickened.
· According to the latest information from the Census Bureau, the trade in goods deficit for February dipped 0.9% to $106.6 billion. Exports of goods for February were $157.2 billion, $1.9 billion more than January exports. Imports of goods for February were $263.7 billion, $0.9 billion more than January imports.
· According to the latest report from the Bureau of Labor Statistics, on the last business day of February, the number and rate of job openings were little changed at 11.3 million and 7.0%, respectively.
· For the week ended March 26, there were 202,000 new claims for unemployment insurance, an increase of 14,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 19 was 0.9%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended March 19 was 1,307,000, a decrease of 35,000 from the previous week’s level, which was revised down by 8,000. This is the lowest level for insured unemployment since December 27, 1969, when it was 1,304,000. States and territories with the highest insured unemployment rates for the week ended March 12 were California (2.5%), Alaska (2.3%), New Jersey (2.3%), Rhode Island (2.2%), Massachusetts (2.1%), Minnesota (2.1%), New York (2.0%), Illinois (1.9%), Connecticut (1.7%), Montana (1.7%), and Pennsylvania (1.7%). The largest increases in initial claims for the week ended March 19 were in Florida (+956), Pennsylvania (+476), Oklahoma (+400), Tennessee (+328), and Connecticut (+161), while the largest decreases were in California (-5,831), Michigan (-4,876), Kentucky (-2,579), Kansas (-2,070), and Illinois (-2,053).
Eye on the Week Ahead
There’s very little in the way of economic reports this week. The latest data on the goods and services trade balance is for February. The trade deficit in January was $89.7 billion. Also out this week is the March Purchasing Managers’ Index for the services sector. February saw sales advance at their fastest rate since August 2021.
Have a nice week!
Sincerely,
Robert G. Carpenter