Jobs report, Fed highlight economic news
US factory activity rises, service sector is strong
Economic reports this week will be highlighted by the monthly employment tally, which will reveal whether surprisingly strong gains the first two months of 2017 can be sustained even with a low jobless rate and fewer available workers. The releases also include minutes of the Federal Reserve’s mid-March meeting, which featured an interest rate increase and readings of activity in both the manufacturing and service sectors.
In February, U.S. factory activity expanded at the fastest pace in 21⁄2 years, driven largely by the oil sector’s recovery and an improving global economy. Regional manufacturing surveys in the New York and Philadelphia areas signaled additional gains in March, said Nosimilarly mura economist Lewis Alexander. But he suspects the industry may be due for a modest pullback. Economists estimate the Institute for Supply Management reported Monday that its index of manufacturing activity dipped last month but still showed healthy expansion.
ISM’s survey of the service sector has been elevated, and for a longer period. Recently, though, retail sales have been sluggish, partly because of delays in tax refunds, and construction spending declined. Economists estimate ISM will announce Wednesday that its index of nonmanufacturing activity also continued to record solid growth, but at a slightly slower pace.
The Fed’s expected decision to lift its benchmark interest rate at a March 1415 meeting marked just the third increase in a decade but the second in three months. Yet its statement and forecasts were so uneventful — it stuck to its estimate of two more rate increases this year and three in 2018 — that they spurred a market rally.
Many economists expected the Fed to step up its projection to four rate increases in at least one of the two years after recent remarks by Fed policmakers. Fed Chair Janet Yellen said rates will rise faster than in the past to temper inflation amid improved consumer and business sentiment and the fading of prior headwinds to growth.
Yet she told reporters after the meeting that the contours of President Donald Trump’s proposed fiscal stimulus are uncertain and that stronger business confidence has not yet translated to higher spending. Minutes of the mid-March meeting could reveal why Fed policymakers are adhering to a measured view of the economy and rate increases.
Payroll growth has soundly beat expectations this year, with employers adding 238,000 jobs in January and 235,000 in February despite a low 4.7 percent unemployment rate that’s spelling fewer available workers. Some analysts say unseasonably warm winter weather boosted hiring the first two months of 2017, especially in construction, and that will likely mean fewer additions in March. Economists expect the Labor Department to report Friday that employers added 174,000 jobs last month.