Tuesday, April 7, 2015

April Employment Report Will Be Key to Fed (excerpt)

Until the March report, the past few monthly employment reports indicated that the economy was performing better than suggested by other economic indicators. Turns out that not only was March weak with a nonfarm payroll gain of only 126,000 but January’s advance was revised down by 38,000 to 201,000 and February’s was lowered by 31,000 to 264,000.

Those are the first back-to-back downward revisions since February/March 2011 (based on first-reported data). Downward revisions tend to occur when the economy is contracting. They are rare during expansions. Since 2011, there have been only 9 downward revisions but 41 upwards revisions. If the weather is to blame for the latest reductions, that’s not a problem.

It’s hard to find much positive news in the March report. The household employment survey found that full-time jobs rose 190,000 to a new cyclical high, while part-time positions fell 170,000. That’s good, but total household employment rose just 34,000 during March. The labor force fell 96,000.

Bad weather seems to have had some impact on depressing employment during the first three months of the year. But so did the strong dollar, weak oil prices, and slow economic activity abroad. The dollar may be starting to stabilize, and the price of oil may be bottoming. Economic activity seems to be improving in the Eurozone.

In any event, I expect that April’s employment report should show a spring rebound. If so, then the Fed would remain on course for one-and-done for this year, if not in June then in September.

Today's Morning Briefing: Forecasting Jobs & the Weather. (1) March employment changes outlook for Fed’s liftoff again. (2) Both “one-and-done” and “none-and-done” more likely again. (3) Earned Income Proxy froze in March. (4) Was it a worse winter than normal? (5) Green shoots. (6) Unusual downward revisions in payrolls. (7) Globalization reduces reliability of Phillips Curve. (8) Not much wage inflation in US or Japan. (9) Deal or no deal with Iran? (10) English vs. Farsi. (11) Saudis raising their price. (12) Oil still gushing in US. (13) “Effie Gray” (+). (More for subscribers.)

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