THE BASIS POINT

U.S. ECONOMIC TRENDS: Recap/Preview

Rundown of data/trends last week and next week.

Next up is WeeklyBasis, rate market outlook in plain English.

RECAP APRIL 2-6 STATS/TRENDS

U.S. Manufacturing Streak Holds: The Institute for Supply Management index of manufacturing activity was 53.4 for March, up 1 from February, and 50 is dividing line between expansion and contraction. This is the 32nd month of (albeit modest) expansion and there was a nice jump in the employment reading (TABLE). And here’s a roundup of non-U.S. manufacturing figures from last weekend which showed particular weakness in Europe, offsetting better U.S. data.

Upbeat Services Industry Outlook: In addition to measuring manufacturing, the Institute for Supply Management also has a survey that measures services industry activity in areas like Real Estate, Transportation, Hotel/Restaurant, Construction, Entertainment, Utilities, etc. It’s also on a long up-trend. Fifty is dividing line between expansion and contraction, and March’s index reading of 56 was down from February’s 57.3 but was still the 27th straight increasing month (TABLE).

ADP Jobs Report Steady: ADP is a private payroll provider that processes payrolls for about 23 million employees throughout the U.S. Their March jobs report showed 209k new private payrolls in the U.S., slightly below expectations. February showed +216k new private jobs, January +173k and December was a blowout +325k.

Jobless Claims Lowest Since April 2008: Claims for unemployment insurance were 357,000 for week ended March 31 (seasonally adjusted), down 6,000 from previous week’s 363,000 and the lowest since April 2008 (CHARTS). The 4-week moving average was 361,750, down 4,250 from previous week. Good news: slowing job losses. Bad news: job gains stumbled (see next section).

Awful March Jobs Report: The March BLS jobs report showed the economy added 120k new nonfarm jobs, way below expectations of 200-230k and way below average monthly increase of 246k over the prior 3mo. Unemployment ticked down to 8.2% but that was more from unemployed people giving up job searches and leaving the work force than it is from people being hired. An awful report. But one ok note: of the 8.8m net jobs lost between the official recession start date of January 2008 and February 2010, 41% have been recovered (CHARTS).

PREVIEW APRIL 9-13 STATS/TRENDS

Next week’s economic calendar includes Fed speeches, bond auctions, inflation data, and earnings season kickoff. Highlights below with rate impacts.

Any QE Signals In 8 Speeches By Fed Officials?: Fed Chair Ben Bernanke speaks Monday on and Friday, plus 6 other Fed officials speak including St. Louis Fed president James Bullard and Philadelphia Fed president Charles Plosser on the economic outlook. Last week, minutes from the March 13 FOMC meeting caused a rate spike because the minutes indicated no more Fed rate stimulus unless the economy falters seriously. Rate market participants will parse every word of next week’s speeches to see if the Fed is again getting worried enough to provide more stimulus.

Bond Auctions: There are $66b in new Treasury securities being auctioned to market as follows: $32b 3yr Notes Tuesday, $21b 10yr Notes Wednesday, $13b 30yr Bonds Thursday. Demand for this bimonthly supply sets the bond trading mood, including mortgage bonds (MBS) that dictate rates. If Treasury demand is strong, MBS usually is too and it helps rates. The reverse is also true.

Producer & Consumer Inflation Likely To Remain Flat: March producer (PPI) and consumer (CPI) inflation reports are Thursday and Friday. They’ve been tame, which helps keep rates low. In February Monthly PPI was 0.4% total and 0.2% ex-Food/Energy. Monthly CPI was 0.4% total and 0.1% ex-Food/Energy. February’s annual PPI was 3.3% total and 3.0% ex-Food/Energy. Annual CPI was 2.9% total and 2.2% ex-Food/Energy. The Fed watches “Core” numbers that exclude Food/Energy, and those numbers are likely to remain flat for March. If so, rates wouldn’t rise.

Earnings Season Begins: Stocks had rough ride last week, closing Monday April 2 at 1419, then sliding 1.48% to close the week at 1398. The April 2 level was the highest since hitting 1425 in May 2008. Earnings season begins slowly next week but still a decent feel for various sectors: Alcoa, Progressive, Google, Rite-Aid, JP Morgan, Wells Fargo. Friday’s jobs report bodes ill for stocks and better for bonds (rates down) to open Monday. Follow earnings realtime.

RATE OUTLOOK

Don’t miss WeeklyBasis, short and sweet outlook on next week’s rate and stock markets.

And catch up on top on the web’s best mortgage/housing stories last week.