3/26/2015
By Jennifer Coombs

Initial jobless claims fell sharply in the week ended March 21^st, but unfortunately these numbers aren’t likely to raise the bar for the March employment report. For the week, new claims fell by 9,000 to 282,000 which in turn drove down the 4-week average by 7,750 to 297,000. This is great news except for the fact that this time a month ago, the number was slightly better. It is worth noting that last week was the sample week for the March employment report, and the sample-to-sample comparison for March and February was not favorable. Continuing claims for the week ended March 14^th moved slightly lower by 6,000 to 2.416 million and were slightly lower compared to the February sample week. However, the 4-week average at 2.422 million is still 22,000 claims higher than the sample week from February. There aren’t really any special factors that would skew the numbers in this week’s report, but the report points to stronger labor market conditions, but weaker improving conditions.

Following Markit’s flash release on the manufacturing sector, the firm provided data to gauge economic health across the services space. For the month of March, Markit’s preliminary reading shows that although the manufacturing sector is sputtering the services sector remains quite strong in the United States. The March flash reading of the services sector purchasing managers index (PMI) is up for the second month in a row, and is now at a 6-month high of 58.6, up from the 57.1 final reading in February and the 54.2 final reading in January. The report cites particular improvement in economic conditions, strengthening consumer confidence, new product launches, and higher employment. New orders are at a 6-month high and backlogs are now at a 5-month high. One big tick in the negative column, however, is the downgrade in expectations: the percentage of managers that believe their business will rise over the next 12 months came in at the lowest level since June 2012. We note that the downgrade in expectations was likely due to the rough start in 2015, although as other reports have shown, the weakness was clearly centered on lower exports and a slowdown in manufacturing. The services sector is very lightly exposed to the export market, which makes it much healthier than manufacturing and could also help to offset currency-related weakness in next quarter’s earnings.

Jennifer Coombs
Wall Street Strategies

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