U.S. data from the second week of March were disharmonious with the strong February employment data of the week before. Weather, oil prices, the strong dollar, the roll out of the Affordable Care Act, amongst other factors, are retuning parts of the economy after resonant GDP growth through the middle of last year.
This is normal. There are always notes of discord. Fortunately, we now have, beneath the sometimes fragmented melody, a foundation of strong job creation. As long as job growth remains robust, the economy continues to create wealth and opportunity.
The JOLTS data from January point to ongoing job gains through the first half of 2015. The job openings rate is staying strong, at 3.4 percent of the sum of total employment and total openings. This is just above the cyclical peak of late-2006/early-2007. We see in the JOLTS data that layoffs in mining and logging, which includes oil and gas production, have increased noticeably from 14,000 in January 2014, to 26,000 in January 2015, consistent with lower oil prices and reduced oil field activity.
Initial claims for unemployment insurance decreased by 36,000 to 289,000 for the week ending March 7. Continuing claims dropped by 5,000 for the week ending February 28, to 2,418,000. With a jump in North Dakota claims we see more evidence of the impact of lower oil prices on oil producing regions in the U.S.
Business confidence ticked up in February, according to the National Federation of Independent Business’s Small Business Optimism Index. The employment component of that index remains solidly positive.
Retail sales in February were not solid, nor positive. Retail sales in February fell by 0.6 percent, the third consecutive monthly drop. Cold weather is widely cited for weak February sales, leading us to expect a March and April rebound.
Business inventories were unchanged in January, just as they were in December. Meanwhile, total business sales decreased in those two months, meaning that the overall inventory-to-sales ratio has been climbing. Stronger retail sales this spring will help to rebalance the ratio.
The University of Michigan’s Consumer Sentiment Index, soon to be renamed the Harbaugh Index (not really), slipped for the second month in March. Gasoline prices bounced off the bottom and the stock market declined early in the month.
We “impatiently” await the FOMC meeting.
For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 03-13-15.