Economic Indicators Review: April 11, 2012

In March, job creation surprised even the most optimistic. According to the Labour Force Survey, 82.3K jobs were added. As result, the unemployment rate sank two ticks to 7.2%, its lowest mark since September of last year. The services sector rebounded after several weak months, adding 57.5K jobs on strong gains in the health care and social assistance sector and in the information, culture and recreation sector. It thus outperformed the goods sector for the first time in five months. This is not to say that employment in goods-producing industries was weak. On the contrary, the goods sector added almost 25K jobs, buoyed by manufacturing, construction and resources. Youth employment bounced back as well.

Full-time employment soared 70K for a second straight increase. Part-time employment sprang 12K, making up for the prior month's decline. Private-sector employment advanced 43K and paid employment rose 64K. Even the details behind the strong headline were very encouraging. Regionally, Quebec and Ontario posted gains of 36.4K and 46.1K, respectively.

The rebound in private-sector employment was great news. The more reliable three-month average showed that Canada created 27,000 jobs per month, for the most part in the private sector. This was well above last year’s average. Hours worked rose 0.7% annualized in Q1, consistent with soft growth. On the bright side, it was definitely better than was the case in Q4 when hours worked pulled back a tad.

United States

In March, the ISM Manufacturing Index climbed a full point to 53.4, topping consensus expectations by four ticks. The production sub-index rose to a three-month high of 58.3 while the employment sub-index jumped three full points to 56.1, its highest reading in nine months. The new-orders sub-index slipped 4 ticks to 54.5. The largest absolute move was in export orders, which receded 5.5 points to 54. Though this sub-index more than reversed its gain from the month before, at least it managed to stay well above the expansionary threshold of 50.

In a separate report, the ISM Non-manufacturing Index was a bit softer than expected. It dropped to 56 from 57.3 in February. All told, the ISM reports remained consistent with decent GDP growth in 2012Q1, which we are pegging at 2% or so annualized.

In February, factory orders rose 1.3%, more than making up for January's 1.1% decline. Still, the gains were two ticks shy of consensus. Durable goods orders rose 2.4%, overshooting the initial estimate of 2.2% in the advance report. Nondefence capital goods orders excluding aircraft rose 1.7%, which was also better than the 1.2% increase initially reported.

Total factory shipments eked up 0.1%, while shipments of non-defence capital goods ex-aircraft, a proxy for investment spending, progressed 1.4%, unchanged from the initial estimate. February's gains in factory orders are encouraging for production going forward. The increase in shipments of non-defence capital goods ex-aircraft is also positive, although it is unlikely to be enough to prevent a moderation in overall business investment spending in Q1. All in all, the report was slightly softer than expected.

The US labour market added 120,000 jobs, the worst showing in five months. The unemployment rate dipped to a 38-month low at 8.2% but that was mainly due to an increase in the number of people leaving the labour force (the part-rate fell back to 63.8%). Though most of the industries remained in hiring mode in March (59.6% reported adding to headcounts), there were nonetheless some disturbing losses in key cyclical industries. For the first time since August 2009, both the temporary help-supply and retail industries lost jobs during the month.