Economic Watch: Employers Adding Jobs, Consumers Relatively Happy

Private sector employment increased by 200,000 jobs from February to March, according to the latest National Employment Report from payroll processor ADP, while the mood of consumers has improved, with spending and incomes seeing modest gains.

ADP also revised downward total nonfarm private employment in February from 214,000 to 205,000, just two days before government employment and unemployment numbers for March are released.

This latest figure matched the average expectation of analysts polled by The Wall Street Journal.

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues on its amazing streak. The March job gain of 200,000 is consistent with average monthly job growth of the past more than four years. The only industry reducing payrolls is energy as has been the case for over a year. All indications are that the job machine will remain in high gear.”

Goods-producing employment rose by 9,000 jobs in March, up from a downwardly revised 2,000 in February. The construction industry added 17,000 jobs, which was down from February’s 24,000. Meanwhile, manufacturing added 3,000 jobs after losing 9,000 the previous month. (See graphic near the bottom of this page.)

Service-providing employment rose by 191,000 jobs in March, down from 204,000 in February. The report also indicates that professional/business services contributed 28,000 jobs, down sharply from February’s 51,000. Trade/transportation/utilities grew by 42,000, well above the 24,000 jobs added the previous month.

"The trade, transportation and utilities sector had its best month of employment gains since last June,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “Steady employment growth and accelerating wage growth in the workforce appear to be benefitting the trade segment in particular.”

Consumer Confidence Turns Around

This latest report adds to a relatively positive week so far for economic news, with indications of increases in consumer confidence as their incomes and spending habits.

On Tuesday, the private research group The Conference Board said its measure of consumer confidence rebounded this month.

Its Consumer Confidence Index, which had decreased in February, improved to 96.2, an increase from a upwardly revised reading of 94 in February.

While the Present Situation Index declined moderately from 115 to 113.5, its lowest reading since November, the Expectations Index, which tracks consumers’ expectations for the next six months, increased from 79.9 to 84.7 in March.

“Consumers’ assessment of current conditions posted a moderate decline, while expectations regarding the short-term turned more favorable as last month’s turmoil in the financial markets appears to have abated,” said Lynn Franco, director of economic indicators at The Conference Board. “On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening.”

Personal Spending, Incomes Rise Slightly

Meantime, a separate report from the Commerce Department on Monday shows modest improvements in personal spending as well as personal incomes for February.

While personal spending rose 0.1%, in line with expectations, February’s increase follows a similarly sized gain the month prior with January spending revised down from a 0.5% gain to 0.1% improvement.  

“Over the past 12 months, personal spending is up 3.8%, down one-tenth of a percentage point from the start of the year but off 1.2% from a recent peak of 5% in late-2014, said, Stifel Fixed Income Chief Economist Lindsey Piegza. "In other words, consumers are still spending albeit at a noticeably slower pace.”

She noted following the figures being issued, the Atlanta Federal Reserve revised down its estimate for first-quarter gross domestic product annual growth rate from 1.4% to 0.6%. Also the forecast for consumer spending across the first three months of the year fell from 2.5% to 1.8%.

Personal income rose by a slightly stronger than expected 0.2% in February, following a 0.5% increase in January. Year-over-year, personal income is up 4% in the second month of the year, and down from a 4.2% pace reported the month prior.

Income growth has been benefitting from solid employment gains in recent months and generally outpacing gains in personal spending since December 2015. This has contributed to the savings rate steadily rising to 5.4% in February from 5.3% in January and a recent low in November 2015 of 4.9%, according to RBC Economics.

“The consumer appears to be on still-fragile, albeit still-positive footing despite stagnant wage growth, only modest improvement in the jobs market and limited confidence surrounding the sustainability of the U.S. recovery, said Piegza. “Nevertheless, thanks in part to lower gas prices, consumers feel slightly wealthier and continue to do what they do best, spend, even if that additional cash comes amid ongoing global weakness and volatility.”