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Economic Data Matches Forecasts



Overview: Over the past week, the major economic data contained no significant surprises. Highly anticipated reports on the labor market and inflation were right on target overall, and mortgage rates ended the week just slightly higher.

 

The monthly Employment Report released on Friday revealed results that were very close to expectations. After significantly larger increases over the prior two months, the economy added just 236,000 jobs in March, the smallest monthly gain since December 2020. Particular strength was seen in leisure, hospitality, healthcare, and business services. The unemployment rate inched down from 3.6% to 3.5%. Average hourly earnings, an indicator of wage growth, were 4.2% higher than a year ago, down sharply from 4.6% last month. While this remained far above the levels seen prior to the pandemic, it was the lowest annual rate of increase since June 2021. This report was consistent with other recent data suggesting that the extreme tightness in the labor market finally may be easing.


The latest major inflation data also came in very close to expectations and had little lasting impact. The Core Consumer Price Index (CPI) is a carefully watched inflation indicator that excludes the volatile food and energy components. Core CPI in March was 5.6% higher than a year ago, up from an annual rate of increase of 5.5% last month. Shelter (housing) costs again were responsible for the largest portion of the increase. One interesting exception was that used vehicle prices fell 0.9% from the prior month and were 11% lower than a year ago.


The minutes from the March 22 Federal Reserve meeting released on Wednesday emphasized that more work needs to be done to fight inflation, which officials described as “much too high.” However, they also acknowledged that the recent issues in the banking industry will slow economic growth and reduce inflationary pressures. Since it will be very difficult to predict the magnitude of the impact of the bank troubles, many officials expressed a desire to leave the Fed’s options open to react to evolving economic conditions rather than providing precise guidance about future monetary policy. Investors are split about whether the Fed will raise the federal funds rate another 25 basis points at the next meeting on May 3.


 

Job Gains (thousands)




 
Week Ahead

April 14 — Retail Sales report

April 18 — New Residential Construction report (also known as Housing Starts)

April 20 — Existing-Home Sales report


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