Looks like winter hiring slowdown about to end

INDICATOR » March Supply Managers’ Non-Manufacturing Survey and Conference Board’s Employment Trends Index KEY DATA » ISM (Non-Man.): -0.4 point; Orders: +1.1 points; Employment: +0.2 point/ Employment Trends: -0.1 percent IN A NUTSHELL » “Strong service sector hiring indicates the winter slowdown may be ending.” WHAT IT MEANS » There is little doubt that the winter froze a lot of activity in the economy, but not all of it. While the Insti- tute for Supply Management’s non-manufacturing index may have eased a touch in March, the details of the report were pretty good. Hiring improved and the index is at a solid level. Only two industries, mining and information, declined. Strong order growth points to further payroll gains. Both exports and imports boomed. Backlogs are building and when order books fill, hiring and production levels generally increase.

The increase in the Supply Managers’ hiring component has to raise some eyebrows after the weak March jobs report. So what is happening? The Conference Board’s Employment Trends In- dex drop in March was not significant. In other words, there may have been a softening in hiring, but it was modest. Interestingly, the first quarter flattening of the index was not a whole lot different than what occurred at the end of 2013 and early 2014. And we all know what happened when the weather heated up in the spring of 2014.

There has been a lot of doom and gloom stories since the employment report was released but one number seems to have slipped past the nattering nabobs of negativity: Vehicle sales broke the 17 million sales pace in March. The average monthly sales rate for the first quarter was 16.6 million units annualized, hardly a level consistent with a faltering economy. It more likely indicates how much the wicked winter whipped up on the economy. MARKETS AND FED POLICY IMPLICATIONS » People, chill. Even in the strongest periods of economic growth we get payroll gains that disappoint. As an economist, all I can do is warn that we are due for one and I did that. It is hard to know how bad the report will be but we always, and I repeat always, get a month or two of outliers. Really good jobs reports usually follow those bad reports and everyone quickly forgets the previous report. So stop react- ing as if the latest report is only one that matters. Consumers would not be out there buying vehicles if conditions were falling apart. While the energy companies are reporting declines in rigs and hiring and just about everything else, production remains strong and inventories keep building. Maybe the price decline is being used, at least in part, to make the changes the industry should have been making. It is not as if executives haven’t blamed factors other than their decisions for corrections they were forced to make. But clearly, the energy industry adjustments are slowing growth and that is happening before the full impact of the price decline on consumer demand hits the economy. Janet Yellen said that could happen as a warning that weak economic numbers had to be taken in context. Right now, they are not being viewed in that manner by the markets but are probably being seen that way by Fed members.