Macroeconomic data has teased us for several months with the hope of a new spring, and the month of March has aptly enough delivered on that promise. Much of the nation has substantially eased lockdown restrictions as the pace of vaccinations pick up pace, and the near-term trajectory of the U.S. economy is on substantially firmer footing. Despite the encouraging pace of the economic recovery, the U.S. still has fraught days ahead as we recover from the depths of the pandemic. The Astor Economic Index saw its second month of improvement and remains in the territory of above average growth.
Non-farm payrolls added a very strong 916,000 jobs in March, well above Bloomberg consensus expectations of 660,000. Unemployment ticked down to 6%. There is increased evidence for a strong demand for labor, with gains enjoyed by a large segment of industries, including construction and leisure and hospitality. Job openings also indicate increased demand, with Indeed.com job openings 16% above levels pre-pandemic and U.S. JOLTs available positions at a 7.37 million, although churn from firings remain elevated. In sum, the labor market seems on pace for a durable recovery as industries reopen and are coupled with a burgeoning fiscal stimulus.
Purchasing manager indexes have continued their blockbuster run, with ISM manufacturing and services PMIs printing at 64.7 and 63.7 respectively, improving m/m and well above consensus estimates (61.5/59.0). The services reading was the highest on record and was led by new orders and business activity. Manufacturing prices paid rose to 85.6. Elsewhere on the inflation front, the producer price index printed at a strong 1% m/m, led by a spike in gasoline prices but also helped along by services costs. The price pressures seen to date have been largely expected as constrained supply meets greatly increased demand; as we have said before, the real question is whether higher inflation readings prove to be persistent or transitory, and how they test the Fed’s reaction function.
In aggregate, the outlook for the U.S. economy looks increasingly sunny. Of course, much can happen in the span of a month, and the pandemic is far from having run its course. We will be looking for further retracement of labor market losses in the weeks ahead, as well as signs of a broader global recovery (particularly in Mexico and Canada, the U.S.’s two largest export markets) that would provide a more stable foundation for further gains.
The Astor Economic Index® is designed to track the varying levels of growth within the U.S. economy by analyzing current trends against historical data. The Astor Economic Index® is not an investable product. When investing, there are multiple factors to consider. The Astor Economic Index® should not be used as the sole determining factor for your investment decisions. The Index is based on retroactive data points and may be subject to hindsight bias. There is no guarantee the Index will produce the same results in the future. The Astor Economic Index® is a tool created and used by Astor. All conclusions are those of Astor and are subject to change.