Stocks closed last week generally lower, with only the Nasdaq eking out a minimal gain. A rally last Friday wasn’t enough to recoup losses experienced during the week. Traders had quite a bit to digest over the past week. The Federal Reserve hiked the federal funds rate 25 basis points and gave no clear indication as to whether and when more rate increases may be coming. Regional banks continued to struggle, however bank stocks rallied late in the week to help ease investor concerns. The April jobs report was solid, but also showed the pace of hiring was slowing. Crude oil prices continued to tumble on concerns of a slowing U.S. economy and tepid Chinese demand. Gold prices rebounded from the prior week, once again moving above the $2,000.00 per ounce mark.
Last Week’s Economic News
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As expected, the Federal Open Market Committee raised the target range for the federal funds rate 25 basis points to 5.00%-5.25%. The FOMC suggested that job gains have been robust and the unemployment rate has remained low, while inflation remains elevated. Despite the failure of several banks in the last few months, the Committee indicated that the banking system was sound and resilient. In attempting to moderate rising inflation, the Committee admitted that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.” While the extent of the effects of the Committee’s actions remains uncertain, it “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
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The job sector continued to show strength in April. There were 253,000 new jobs added in April, not far off from the average monthly gain of 290,000 over the prior six months. In April, employment continued to trend up in professional and business services, health care, leisure and hospitality, and social assistance. The unemployment rate dipped 0.1 percentage point to 3.4%, while the number of unemployed persons declined by 182,000 to 5.7 million. The labor force participation rate and the employment-population ratio were unchanged in April, settling at 62.6% and 60.4%, respectively. In April, average hourly earnings rose by $0.16, or 0.5%, to $33.36. Over the past 12 months, average hourly earnings have increased by 4.4%. The average workweek was unchanged at 34.4 hours in April.
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On the last day of March, the number of job openings decreased by 384,000 to 9.6 million, according to the latest Job Openings and Labor Turnover report. The March number of job openings was 1.6 million lower than at the end of December. In March, the number of hires was little changed at 6.1 million from the previous month. The number of total separations (quits, layoffs, and discharges) changed marginally at 5.9 million. The number of quits was flat at 3.9 million, although the number of layoffs and discharges increased by 248,000 to 1.8 million.
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The manufacturing sector improved slightly in April, according to the latest S&P Global survey of purchasing managers. The S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 50.2 in April, up from 49.2 in March. This is the first reading above 50.0 in six months and the highest since October 2022. A reading above 50.0 indicates acceleration in manufacturing. Survey respondents noted a rise in new domestic orders, but not foreign new orders as exports lagged. Employment and prices rose, with producer costs and selling prices accelerating.
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The services sector expanded in April as company output, new orders, and employment all accelerated. Inflationary pressures caused input costs to rise at the fastest rate in three months, while selling prices increased at the quickest pace since August 2022. Overall, the S&P Global US Services PMI Business Activity Index registered 53.6 in April, up from 52.6 in March, marking the third consecutive month of growth for service providers.
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The goods and services trade deficit was $64.2 billion in March, down $6.4 billion, or 9.1%, from the February deficit, according to the latest data from the Census Bureau. March exports were $256.2 billion, $5.3 billion, or 2.1%, more than February exports. March imports were $320.4 billion, $1.1 billion, or 0.3%, less than February imports. Year to date, the goods and services deficit decreased $77.6 billion, or 27.6%, from the same period in 2022. Exports increased $61.4 billion, or 8.7%. Imports decreased $16.2 billion, or 1.6%.
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The national average retail price for regular gasoline was $3.600 per gallon on May 1, $0.056 per gallon less than the prior week’s price and $0.582 less than a year ago.
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For the week ended April 29, there were 242,000 new claims for unemployment insurance, an increase of 13,000 from the previous week’s level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 22 was 1.2%, 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 April 22 was 1,805,000, a decrease of 38,000 from the previous week’s level.
Eye on the Week Ahead
Inflation data for April is available this week with the releases of the Consumer Price Index and the Producer Price Index. March saw the CPI inch up 0.1%, while the PPI declined 0.5%.
Have a nice week!
Sincerely,
Robert G. Carpenter