Comerica Economic Weekly

True to form, March came in like a lion and went out like a lamb, at least in terms of economic data. Now we get to see whether or not April is in fact the cruelest month. So far, it looks like April will be a kind month for economic data as the U.S economy thaws out from one of the worst winters on record in many areas.

Labor data is now added to the growing list of improving indicators that point to a spring thaw. U.S. payroll employment increased by 192,000 jobs in March. January payroll gains were revised up to 144,000, and February was revised up to 197,000. The unemployment rate did its usual confounding thing in March and remained unchanged at 6.7 percent. The household employment series, which feeds into the unemployment rate, was strong in March, gaining 476,000 jobs. However, the civilian labor force increased by 503,000 workers, keeping the unemployment rate unchanged. Over the last year, average hourly earnings are up a tame 2.1 percent, exerting little inflationary pressure. The average workweek increased by 0.2 hours in March. Combined with a solid payroll gains, the increase in the workweek implies solid production numbers for the month.

The U.S. international trade gap widened more than expected to -$42.3 billion in February. It now looks like trade will be a small-to-moderate drag on real GDP growth for the recently completed first quarter. Added to an expected drag from inventories, weak federal government spending and weather-suppressed consumer spending, the first quarter is shaping up to be a clunker.

The ISM Manufacturing Index for March moved up to 53.7, indicating solid overall manufacturing conditions. The customers’ inventories sub-index was weak, slipping to 42.0. This is consistent with the expected correction from the large run-up in inventories that we saw in the second half of 2013. The March ISM Non-Manufacturing Index increased to 53.1, up from February’s 51.6. Also notable was the contraction in the inventories sub-index for non-manufacturing, down to 48.0.

March auto sales were a nice surprise, rebounding strongly from a 15.4 million unit rate in February, to a 16.4 million unit rate in March. The light truck component was strong for the month, with positive implications for residential construction going forward.

Overall construction spending for February was still under the weather, gaining just 0.1 percent for the month. Total public construction projects, including transportation infrastructure, gained 0.1 percent in February. Private nonresidential was up 1.2 percent and private residential construction spending declined by 0.8 percent. There is quite a wide statistical confidence interval around construction spending estimates, so one-month movements are not the most reliable of indicators. We expect to see gains in both private residential and private nonresidential construction spending over the course of this year.

Initial claims for unemployment insurance increased by 16,000 for the week ending March 29, to hit 326,000. Continuing claims notched up 22,000 to hit 2,836,000 for the week ending March 22.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 04-04-14.

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