Labor Market Conditions Index
The unemployment rate was down 2 tenths in March to a level of 4.5 percent. The economy is at full employment but it isn’t giving much of a lift to the labor market conditions index which is barely holding above zero at only 0.4 in March.
Job openings rose a sharp 2.1 percent in February to a level of 5.743 million which is the highest level since July of last year and the fourth highest of the expansion. Hires totaled 5.314 million which is one of the best months of the expansion though it is down from January by 2.0 percent. On a yearly basis, openings are up 3.2 percent in contrast to a 2.4 percent decline for hires. The gap between openings and hiring first opened up about two year ago, this signals that employers are having a hard time finding people with the right skills for the position. At 429,000 the current spread between openings and hirings is the widest it’s been since September of last year. Other readings include a one tenth decline in the quits rate to a level of 2.1 percent, as subdued reading pointing to lack of movement between jobs and lack of wage pull for employees. The separations rate also fell down one tenth to 3.5 percent. This is a mixed report that shows lack of movement and lack of hiring pointing to slack in the labor market. Openings however are proving hard to fill and point to an economy with full employment.
Purchase applications for home mortgages rose on a seasonally adjusted basis 3 percent in the week of April 7th. Applications for refinancing remained unchanged. On an unadjusted basis the purchase index rose 5 percent and was up 3 percent from the level it was last year. The refinancing share of mortgage activity declined again by another percentage point to a level of 41.6 percent, this is the level this sector has been at since September 2008.
Initial jobless claims continue to slide, coming in at 234,000 in the week of April 8th; this is belwo economists’ predictions of 243,000 for initial jobless claims. The four week average is at 247,250, down 3,000 for the second straight weekly decline. Continuing clams are also low, dropping 7,000 in the lagging data for the week of April 1st to a level of 2.028 million. These readings are low and favorable; they are consistent with the JOLTS report signaling strong demand for labor.
After cooling in the months of February and March, the consumer sentiment index is showing new strength in April. The preliminary April index is up 1.1 points to a level of 98.0 beating economist expectations by one full point. Strength is centered in the current assessment, up 2 points to 115.2 which is a 17-year high. This is a positive indication for April consumer spending. Expectation also rose higher, up 4 tenths to 86.9 signaling confidence in jobs outlook. Despite these strengths, the inflation expectations component is very subdued, unchanged at 2.5 percent for the one year outlook and also unchanged for the five year outlook which was at a level of 2.4 percent. The 17-year high on the current conditions index, is a reminder that high confidence readings have yet to translate to economic strength, as consumer spending is still weak and GDP still soft.
Consumer Price Index
Consumer prices fell a very sharp and unexpected 0.3 percent in March. The core rate which excludes food and energy fell 0.1 percent which was also unexpected. Energy prices fell 3.2 percent in the month and gasoline was down 6.2 percent. Excluding just energy, prices still remain in the negative column at minus 0.1 percent. A special negative in the month of March’s report was the communications component which fell a very steep 3.5 percent. Other categories are also weak including apparel, down 0.7 percent, and transportation where prices fell 1.4 percent. Housing and medical, two centers of price traction, managed only a 0.1 percent gain. ON a yearly basis rates also moved lower, to 2.4 percent overall for a sharp 3 tenths decline and to 2.0 percent for the core which is also fell 2 tenths lower. The core rate was expected to increase rather than decrease. The lack of price traction points to softness in overall demand for consumer goods and services. Though demand in labor right now is very strong, wage improvement has only been marginal. This report will likely push back expectations for Federal Reserve rate hikes.