March Activity Comes Into Focus This Week
March Jobs Report Expected to be Strong
Without any consequential Fed Speak this week, and little on the legislative calendar that impacts the economy, and with the Treasury taking a hiatus from issuing debt the next two weeks the market can focus on some early tallies on March economic activity. The reports will be headlined by the jobs release on Friday where a solid gain of 630 thousand new jobs is expected and with the unemployment rate dipping from 6.2% to 6.0%. The Fed will also have its eyes on the underemployment rate as a broader read on the labor market and that is expected to remain near February’s 11.1%. It was as low as 6.8% in December 2019 and the Fed will want to see it return close to that level before declaring victory. The March ISM Manufacturing Index is due on Thursday and that is expected to post a new record high of 61.0. That’s an obvious indication that the manufacturing sector is hitting on all cylinders but it’s only about 10% of the economy It was obvious early on in the pandemic cycle that the manufacturing sector was weathering the worst of it better than the more face-to-face services sector. Thankfully, with the increasing rates of vaccinations and falling virus cases the services sector is expected to see solid gains this year which is why GDP estimates remain near 6.0% – 7.0% for 2021.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||0.20%|
|6 Mo LIBOR||0.19%|
|12 Mo LIBOR||0.28%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Mar 30||S&P CoreLogic CS 20-City(YoY)||Jan||11.50%||11.35%||10.10%|
|Mar 30||Consumer Confidence||Mar||96.0||96.8||91.3|
|Mar 31||ADP Employment Chg.||Mar||525k||550k||117k|
|Mar 31||Pending Home Sales (MoM)||Feb||-2.6%||-2.9%||-2.8%|
|Apr 1||ISM Manufacturing||Mar||61.0||61.4||60.8|
|Apr 2||Change in Nonfarm Payrolls||Mar||628k||635k||379k|
|Apr 2||Unemployment Rate||Mar||6.0%||6.0%||6.2%|
|Apr 2||Underemployment Rate||Mar||11.1%||11.1%||11.1%|
|Apr 2||Labor Force Participation||Mar||61.4%||61.4%||61.4%|
Top 5 Events for the Week
March 29— April 2, 2021
1. March Employment Report—Friday
The February Employment Report provided some relief in that it posted a solid gain of 379 thousand jobs after disappointing results in both December and January. For March, the median expectation is for an even better gain of 635 thousand jobs with the unemployment rate dropping from 6.2% to 6.0%. However, nearly 9.5 million remain jobless a year after the pandemic hit and that speaks to the long and grinding nature that will be this recovery. Speaking to that, the broader underemployment rate is still in double-digits at 11.1%. It was as low as 6.8% in December 2019 and that is what the Fed will be looking to get back to before hailing the recovery as complete.
2.March ISM Manufacturing—Thursday
In addition to the employment numbers we get another big March economic report in the form of the ISM Manufacturing Index on Thursday. Combined with the jobs report on Friday and the ISM Services next week these three reports will give us a good read on March activity. The ISM Manufacturing Index is expected to be a record high of 61.4 versus 60.8 in February indicating the manufacturing sector is expected to remain in solid expansionary territory which has been the case since June. The February reading tied the highest print over the last half dozen years so the expected number in March would nose just over that.
3. March Consumer Confidence—Tuesday
With two-thirds of the economy consumption-based it’s always important to look at the confidence of the consumer for tells on future spending and hence GDP. While there was a predictable dip at the early stages of the pandemic it never fell to levels of the Great Recession as shown below, perhaps due to stimulus benefits and furloughed workers hopes for a quick return to work. For March, confidence is expected to be up a bunch at 96.8 versus 91.3 in February. Confidence levels are obviously well off pre-pandemic highs in the 130’s and off the 102 reading in September which speaks to the impact that the fourth quarter increase in virus cases and lockdowns had on confidence readings. The expected rebound in March, however, reflects gathering optimism about vaccinations and the third round of stimulus checks. The expected bounce in confidence points to increased consumer consumption in the months ahead.
4. January S&P CoreLogic CS 20-City Home Price Change (YoY)—Tuesday
Tomorrow we’ll get another report on the housing sector in the form of the S&P CoreLogic 20-City Home Price Change. The report is for January and is expected to show home prices appreciated 11.35% YoY versus 10.10% YoY in December. These rates of appreciation are impressive but still pale in comparison to the rates hit in the housing bubble of the mid-2000’s. Back then annual appreciation topped out at 17.12% in August 2004 before starting a long, slow slide to –19.1% annual price declines in January 2009. So, while present gain are in double-digit territory they still aren’t quite as bubbly as the housing crisis and that is a good thing and should allow for solid housing activity in the months ahead.
5. February Pending Home Sales—Wednesday
Another housing market indicator comes out on Wednesday in the form of Pending Home Sales. The reason we like this report is that it’s based on contract signings versus closings as in the existing home sales report and thus provides a timelier look at activity. This is especially important when mortgage rates are moving as they were in February with the 30-year average mortgage rate increasing from 2.84% to 3.25%. It has remained near that 3.25% level throughout March. In any event, February sales are expected to decline –2.9% month-over-month and that follows a decline of –2.8% in January when rates were stable. If the expectation of a decline comes to pass it will mark the fourth decline in the past six months. The combination of increasing home prices, limited inventory, and rising mortgage rates may be having a modest impact on the market.
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