Strong March Data Foreshadow the Strength of Recovery in the Coming Months
- Nonfarm payroll employment surged by 916,000 in March, though total employment remained 5.5 percent below the pre-pandemic peak seen in February 2020, according to the Bureau of Labor Statistics. Total job gains were revised up by 156,000 over the last two months. March job gains were widespread amongst most industries, with the largest contributors being leisure & hospitality (+280,000), private and state/local government educational services (+190,000), and construction (+110,000). Despite the strong gain, leisure & hospitality employment remained 18.5 percent below the February 2020 peak. Residential construction employment (including specialty trade contractors) increased by 37,000, the largest increase since August 2020. The unemployment rate fell two-tenths to 6.0 percent, and the labor force participation rate ticked up slightly to 61.5 percent.
- The Conference Board Consumer Confidence Index jumped 19.3 points in March to 109.7, the largest monthly increase in almost 18 years, and the highest level since March 2020. The index for consumer confidence in the present situation and the index for consumer expectations rose sharply, with the latter rising to the highest level since July 2019.
- Light vehicle sales grew 13.0 percent in March to a seasonally adjusted annualized rate of 18.0 million, the largest increase since May 2020 and the highest level since August 2015, according to Autodata.
- The ISM Manufacturing Index rose 3.9 points in March to 64.7, the highest reading since December 1983 (any reading above 50 indicates expansion). The indices for new orders, production, and employment all increased, with the employment index rising to the highest level in just over three years.
- The National Association of REALTORS® Pending Home Sales Index, which records contract signings of existing homes and typically leads closings by one to two months, fell 10.6 percent in February to 110.3. Sales fell in every region, with the South experiencing the largest decline.
- S&P CoreLogic Case-Shiller National Home Price Index (not seasonally adjusted) rose 11.2 percent from a year ago in January, an acceleration of eight-tenths, and the fastest pace of annual growth in 15 years. The FHFA Purchase-Only House Price Index, reported on a seasonally adjusted basis, increased 12.0 percent from a year ago in January, an acceleration of six-tenths and the fastest pace of annual growth since the series began in 1992.
- Private residential construction spending declined 0.2 percent in February, according to the Census Bureau. Construction spending on new single-family edged up 0.1 percent, while new multifamily construction spending fell 1.4 percent. Spending on improvements dropped 0.2 percent.
The strength in March data likely reflected the continued reopening of COVID-restricted economic activity as vaccinations progressed, as well as a rebound from weather-driven weakness in February. The recent round of stimulus checks likely began to have an effect toward the end of March and will add to consumer spending power over the coming months. While employment gains in March were higher than we had previously forecast, a significant acceleration was still expected. We anticipate continued strong employment gains in the coming months as further restrictions are lifted allowing leisure/hospitality and other COVID-sensitive industries to continue their recoveries. Accelerating job growth in March was also accompanied by a jump in consumer confidence and in light vehicle sales. This strength in March data supports our outlook of accelerating growth but suggests that some of the improvement we expected to occur over the second quarter may have happened sooner. Consistent with an accelerating recovery, measures of the manufacturing sector also showed strength in March, supporting our outlook for solid business fixed investment in coming quarters.
In housing, pending home sales fell sharply in February, and private residential construction spending fell in February for the first time since May 2020; however, these declines were likely in part due to the severe weather, and are expected to rebound in the coming months. While there is upside to pending home sales, the lack of available homes for sale continued to lead to a surge in home price appreciation, with multiple measures of home price growth accelerating strongly in January.
Economic and Strategic Research Group
April 2, 2021
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