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Beige Book March 7
Persistent labor market. Price increases in all districts
Economy expanded at modest to moderate pace in January February
Employment grew up moderate pace, worker demand brisk
A few districts saw modest wage increases after tax cuts
wage growth picked up to moderate pace in many districts
Contacts across US saw persistent labor market tightnessPrices increased in all districts
4 districts all marked increase in steel prices
Consumer spending mixed, auto sales fell or were flat
Production increases broad-based across manufacturingUS initial jobless claims rose by 21k in current week to 231K versus 220K estimate.
Cntinuing claims 1870K va 1919K last week, continuing claims revised to 1934K from 1931K reported last week
4-week moving average was 222.5K, an increase of 2K from the previous week’s unrevised average of 220.5K.Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal
The largest increases in initial claims for the week ending February 24 were in Massachusetts (+3,809), Rhode Island (+933), Oregon (+706), Kansas (+424), and Vermont (+330),
The largest decreases were in California (-9,158), Pennsylvania (-1,971), New Jersey (-1,474), New York (-1,384), and Texas (-1,347).February non-farm payrolls 313K vs 205K expected, Prior 200K
Unemployment rate vs +4.0% expected
Wages:
Average hourly earnings 2.6% y/y vs 2.8% exp
Average hourly earnings 0.1% m/m vs +0.2% m/m exp
Prior avg hourly earnings revised to 2.8% from 2.9%
Prior avg hourly earnings unrevised at 0.3%
Hours worked 34.5 compared to 34.4 expected
Prior hours worked revised to 34.4 vs 34.3 priorFed’s Evans on CNBC
Wage growth was a little on the weak side
I’m looking forward to stronger wage growth in the future
I think we’re on a good pathBig Day With Momentum Up All Day…
The S&P 500 closed up 1.7% at 2,786.41.
The DJIA closed up 1.8% at 25,334.84.
The Nasdaq closed up 1.8% at 7,560.81.The S&P 500 sectors were ALL positive. Best performing sectors were financials up 2.3%, industrials 2.1%, and energy up 1.9%. The laggard was utilities up 0.1%.
Where Fed officials might be more concerned is the possible downside risk to longer-term growth from tariffs, especially in retaliation. As a tariff acts like an adverse shock to productivity with declining profits and investment. This in turn could fore a lower pace of potential growth.
That would have implications for the amount of air in the economy and the odds that the real equilibrium interest rate (r*) would rise over time. The Atlanta Fed President Bostic spoke of these risks in a speech last week, while both Dallas Fed President Kaplan and Fed Governor Brainard both broached it but said it was too soon to tell. Brainard noted that protectionism represented more a source of uncertainty than an explicit downside risk to her current outlook.
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