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The ISM® (Institute for Supply Management®) Services PMI® declined to 52.6% in February from 53.4% in January. Economic activity has grown in the services sector for fourteen consecutive months. A Services PMI® above 49%, over time, is generally considered to show growth in the overall economy. The services sector has registered growth in 44 of the last 45 months, the only contraction since June 2020 was December 2022’s 49.2% reading. Fourteen industries reported growth while three industries reported contraction. The 0.8 percentage point drop was attributed to faster supplier deliveries and the Employment Index moving to contraction. Supplier delivery times registered 48.9%, down from 52.4% in January. Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases. The index moved to contraction — indicating that supplier delivery performance was faster, this follows a month in expansion or slower delivery. Employment activity contracted for the second time in three months, preceding six consecutive months of expansion. The Employment Index registered 48.0%, down 2.5 percentage points from January. New orders were up as ISM®’s New Orders Index registered 56.1%, up 1.1 percentage points over previous month. The New Orders Index showed expansion for the fourteenth consecutive month. Thirteen industries reporting an increase in new orders while one reported a decrease. The ISM® Services Backlog of Orders Index registered a 1.1 percentage point decrease to 50.3%. Five industries reported an increase in order backlogs, while five industries reported a decrease.
Federal Reserve Chair Jerome Powell in his prepared statement to the House Financial Services Committee stayed consistent with the messaging the FOMC’s has been asserting since the beginning of the year. Powell said – “The economic outlook is uncertain, and ongoing progress toward our 2% objective for inflation is not assured. Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%”. Powell in his testimony to the Committee stated – “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year”. However, sticking with the FOMC cautious messaging Powell also indicated that the Fed is looking for affirmation that inflation is under control stating – “The committee would like to see more data that confirms and make us more confident that inflation is moving sustainably down to 2%.” Separately Powell was pressed about the glut of empty office buildings and the risk posed to the banking industry. “I think it’s manageable. We’ve been working hard to manage it for some time now,” Powell said.
The U.S. Bureau of Labor Statistics reported 275,000 jobs were added as the unemployment rate increased by 0.2 percentage point to 3.9% in February, marking the first increase since October ’23. December and January payrolls were both revised down combining to show 167,000 less jobs. The number of unemployed workers increased by 334,000 to 6.5M. A year earlier, the unemployment rate was 3.6%, and the number of unemployed was 6.0M. Job gains occurred in health care (+67,000), government (+52,000), food services and drinking places (+42,000), social assistance (+24,000), construction (+23,000), and transportation and warehousing (+20,000). Among the unemployed, the number of permanent job losers increased (+174,000) to a seasonally adjusted 1.730M, and the number of reentrants to the labor force increased (+112,000) to 1.946M. The labor force participation was unchanged for the third consecutive month at 62.5%, leaving it still below the pre-pandemic level of 63.4%. Average hourly earnings grew 0.1%. At $34.57 average hourly earnings are up 4.3% from a year ago.
Tuesday March 12 – CPI (MoM) (February)
Thursday March 14 – PPI (MoM) (February)
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