Economic Data Report

Employment – February Headline Masks Some Softness

The February jobs report came in stronger than expected with 275,000 jobs added to payrolls. Although prior month’s gains were revised downward, the average monthly gain for the past three months is still over 250,000 jobs. Job gains were widespread across industries. However, unemployment rose to a two year high of 3.9% and some softness in labor is appearing behind the headlines. Demand for temporary help has been declining for almost two years, and additions of part-time jobs are outpacing full-time employment. The ranks of the longer-term and permanently unemployed are increasing, and wage growth is beginning to slow. Job openings continue to decline and are now 16% below their number one year ago. A gradual softening of the labor market could reduce wage inflation and support a case for interest rate cuts later this year.

Inflation Proving Tough to Control

• 3.2% YOY came in higher than expected
• “Core” inflation continues to improve
• Overall inflation proving somewhat “sticky”

Results may put off rate cuts a few more months

US Inflation (CPI) – Not There Yet

The “all items” CPI index came in at 3.2% for the 12 months ending in February. Inflation remains substantially above the Fed’s target rate of 2%, and this report was a reminder that the problem of rising prices may not be as easily or quickly resolved as many had hoped. Sixty percent of the monthly increase was in gasoline and housing. The broad index has not found a new low since last summer. The “core” index (all items less food and energy) was up 3.8% but continues to show gradual improvement. Inflation is proving to be a bit stickier than expected here. The last few percentage points may be tougher to quell than had been estimated earlier this year. The overall picture is one of gradual improvement, but nothing in this report would cause the Fed to cut rates any earlier than this summer.