There were several important reports on the U.S. economy released this morning. First, the services sector purchasing managers' index (PMI) from Markit Economics lifted to 51.3 in March, the first activity increase in five months and a welcome rebound following the roughly two-and-a-half-year low hit in February. Under the hood, measures of services sector output and employment both firmed but new work expanded at the slowest pace in more than six years and managers’ overall level of optimism slid to a recovery low. Survey respondents also said that new business growth in the services sector was held back by “uncertainty about the economic outlook and cautious spending patterns among clients.” Markit's chief economist Chris Williamson added that “Firms are worried about a potential weakening of demand both at home and abroad in the face of various headwinds. As such, the data support the cautious approach to policy tightening currently advocated by Fed Chair Janet Yellen.” Similarly, the Institute for Supply Management’s (ISM’s) non-manufacturing index, also released this morning, lifted to 54.5 in March, a better rebound than expected from the 24-month low hit in February, and the 74th consecutive month of activity expansion (>50 reading) in this sector. Measures of production, new orders, employment, and exports improved last month, and all twelve non-manufacturing industries reported growth in March. One surveyed manager even said that “Nationally, business seems stronger than a year ago in Q1. Internal volume is better than expected and vendors report stronger Q1 than expected.”
Elsewhere, the latest job openings and labor turnover survey (JOLTS) from the Bureau of Labor Statistics, one of Fed Chair Janet Yellen’s favorite labor market indicators, showed that the number of job openings in America continues to hover near record levels. Specifically, there were 5.445 million U.S. job openings in February (lagged), a slight decrease from January’s upward-revised print but still relatively close to the all-time high hit last July. The number of unemployed workers per job opening rose to 1.51 in February, the highest reading since August, but total hires jumped to 5.422 million, the best print since 2006. The ratio of quits to layoffs and discharges rose to 1.72 in February, the 2nd-best reading of the recovery and an encouraging sign which highlights American workers’ increased willingness to give up their current job security for better employment opportunities. Moreover, the quits rate has historically been a leading indicator of wage inflation.
Sources: Econoday, Twitter, Bloomberg, U.S. Department of Labor, Markit Economics, ISM, FRBSLPost author: Charles Couch