 | Initial Claims and the Employment Report Tomorrow |
|
| Posted Under: Data Watch • Employment |
|
More good news for the labor market. Weekly initial claims for state unemployment benefits fell 6,000 to 357,000. This continues a three year run of consistent improvement in the labor market (see chart). Weekly claims are now at their lowest level since April 2008. The 4-week moving average for claims fell to 362,000, also the lowest level in four years. More news from the labor market is due tomorrow, Good Friday, when the Bureau of Labor Statistics will release the March Employment Report. First Trust expects 223,000 new private sector jobs, which is slightly higher than the consensus expectation of a 215,000 gain. If we are correct, this would be the 25th month in a row of positive private sector job growth and the fourth consecutive month of job gains over 200,000 a month, something that has not happened since 1999. You read that correctly, the first four-consecutive-month-period of 200,000, or more, private sector job gains since 1999. While we will watch for the numbers tomorrow, because the financial markets are closed in observation of Good Friday and Easter, we will not be producing our Data Watch until Monday. Have a blessed weekend.
|
|
| | The ISM non-manufacturing composite index fell to 56.0 in March |
|
| Posted Under: Data Watch • ISM Non-Manufacturing |
|
Implications: The service sector continues to grow. The ISM services index came in lower than expectations, but remains well above 50 (which signals expansion). The sector has now been above 50 for 27 straight months and is growing at a rapid rate. The business activity index, which has an even stronger correlation with real GDP growth than the overall index, fell in March, but remains at a strong 58.9 and continues in an upward trend. The employment index rose to 56.7 in March. This gain is consistent with other employment measures for a good employment report on Friday. On the inflation front, the prices paid index fell to a still elevated 63.9 after rising to 68.4 last month. These reports signal continued inflation pressure and make it harder for the Federal Reserve to justify the very loose stance of monetary policy. On the jobs front, the ADP Employment index, a measure of private sector payrolls, increased 209,000 in March. The official Labor Department report arrives Friday morning. We anticipate a nonfarm gain of 210,000 and a private sector increase of 223,000. (First Trust will be closed on Good Friday, so we won’t be writing on the employment numbers until Monday.) In other recent news, autos and light trucks were sold at a 14.4 million annual rate in March, slightly less than the consensus expected pace of 14.6 million, but still the second highest month since May of 2008. Sales were down 4.8% from February, but are still up 10% from a year ago.
Click here for a PDF version.
|
|
| | The ISM manufacturing index rose to 53.4 in March |
|
| Posted Under: Data Watch • ISM |
|
Implications: Manufacturing came in better than expected in March and remains solidly above 50, signaling continued expansion in the factory sector. The ISM manufacturing index has now remained above 50 for 32 straight months and just in case you still think a double-dip is possible, the new orders index, although lower than last month, came in at a healthy 54.5 suggesting more growth in production ahead. The employment index rose to 56.1, the highest level since June last year, confirming other positive news on the labor market. Inventories, after shrinking for five straight months, were unchanged in March. The reluctance of manufacturers to accumulate inventories may hold back GDP in the short term, but we view this reluctance as temporary and indicative of better future growth. On the inflation front, the prices paid index fell slightly to a still elevated 61.0 in March. Monetary policy is very loose. As a result, this index should move higher in the year ahead. In other news this morning, construction declined 1.1% in February (-2.2% including revisions to prior months). The drop was due to public construction, primarily bridges and public colleges, and commercial construction, led by power plants. Despite the decline in February, we expect gains for the year ahead. Residential construction is up 5.6% from a year ago, while commercial construction is up 14.5%. State and local government construction is down from a year ago, but only 0.5%.
Click here for a printable version.
|
|
| | Supremes Hear No Limiting Principle |
|
| Posted Under: Monday Morning Outlook |
|
|
Those who followed last week’s Supreme Court arguments on President Obama’s health care law got a primer in Constitutional Law. The scope of the three-day hearings was breathtaking. While legal issues dominated the conversation, economics also came into play. The question: Is the market for health insurance so unique that the federal government can penalize someone for not buying it.
This is no small matter. The federal government has never before required citizens to buy a private good or service. If the Federal Government could force people to buy something, as Justice Kennedy said, it would “fundamentally change the relationship between the individual and the government.” If it can make us buy health insurance, what Constitutional principle prevents it from making us buy anything else?
The government argued that “not buying” health insurance foists costs on everyone else because the system ends up taking care of people anyway. In other words, those of us who do buy insurance end up paying more because others ride for free.
The problem is that this argument could be made about many types of activities. Eating broccoli can be good for you, not eating it could mean you are less healthy, which in turn foists costs on others. Everyone dies so everyone needs a burial plot or some other arrangement. Can the government force you to buy broccoli or burial plots?
The Obama Administration says that health insurance is different, and a mandate is Constitutional. But is there really a natural barrier (a “limiting principle”) that would prevent the government from going further down the mandate road?
From an economic point of view…no limiting principle exists. Every marketplace is governed by the laws of supply, demand and price. And these factors are determined by people who choose to “be in” or “not to be in” a particular market.
What about education? Could the federal government require all parents to buy prepaid college tuition for their kids? Many people don’t save for their kids’ education and then have their schooling subsidized (grants, subsidized loans, etc.) by those who do save, and who therefore pay full freight.
The advocates of the law say that everyone will eventually need health care, so making us buy insurance just changes the timing of the payment and prevents people without insurance from imposing costs on others. But, on average, those who would be forced to buy insurance by the new law are younger and healthier and therefore don’t drive up costs anyway.
In the end, no limiting principle was articulated for the Court and our best guess is that the individual mandate and directly-related insurance provisions are stripped from the law. But, it also seems possible that the whole thing could get struck down because the mandate was so important to the law.
If the mandate is allowed, a 200+ year history of Constitutional limits on the economic power of the federal government is gone. For some, that would be like eating broccoli at every meal for the rest of our lives.
Click here for a printable version.
|
|
|
These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
|
|
Archive
Tags
|