Here is the summary for this week’s Monday Economic Report:
In a slow economic news week, the stock market’s ascent became one of the top headlines. The Dow Jones Industrial Average (DJIA) passed 15,000 for the first time, a feat that was even more impressive after the depths of the decline during the financial crisis. The DJIA had previously peaked at 14,164.53 on October 11, 2007, before plummeting to a low of 6,547.05 on March 9, 2009. It has slowly moved higher since then, closing last week at 15,118.49. As impressive as the DJIA records might be, there is also a debate about whether the stock market’s all-time highs are warranted given some of the current economy’s weaknesses. Historically low interest rates have helped to push equity values higher, with Americans looking for more attractive yields for their dollars. Regardless of the debate, rising equity values should help to generate more wealth and consumer optimism, and manufacturers hope this means greater spending.
Retail sales data for April will be released this morning, and the consensus estimate is for spending to be flat. This would be consistent with slower growth in personal spending and the reduction in wholesale sales in March. Moreover, while consumer credit rose 3.4 percent in March, much of the higher figure stemmed from increased student loan borrowing. Auto loans were also higher, but revolving credit lines—which include credit cards—declined for the month and were essentially flat over the past year. This suggests some reluctance to take on more debt to support increased consumer spending, which, to the extent that it means smarter personal finance habits, is perhaps a good thing.
The other big story from last week was a bit of a carryover from the previous one. Manufacturers have slowed down the pace of job postings and hirings, with the Job Openings and Labor Turnover Survey (JOLTS) data showing reductions in March. This follows news of stagnant net job growth in April’s employment numbers. Slowing domestic and global sales and challenges related to higher taxes and reduced government spending have stymied manufacturing growth, as we have seen in a number of economic indicators. Net hiring has been slow to pick up, even as we have seen modest improvements in manufacturing activity since the end of last year. Moreover, manufacturing job separations—including layoffs, quits and retirements—were at an all-time low in March, suggesting that the challenges manufacturers face regarding employment have more to do with a hesitancy to hire and less to do with cyclical factors that might induce layoffs.
This week will be an important one as we look at the overall health of the manufacturing sector. Industrial production for April will be released on Wednesday, with the expectation for very slow growth for the month. Any growth would be welcome news, especially given that manufacturing production declined by 0.1 percent in March. In addition to industrial production, regional surveys will assess the sector’s activity in both the New York and Philadelphia Federal Reserve Bank districts. Beyond production, the housing market will also be a focus, with starts and permits data released on Thursday. In March, housing starts surpassed 1 million for the first time since 2008, and manufacturers will continue to look for slow but steady improvement in this vital sector, which has helped lift the overall economy of late. Other economic releases this week include new data on consumer confidence, consumer and producer prices, leading indicators, small business optimism and state employment.
Chad Moutray is the chief economist, National Association of Manufacturers.