If July 2009 eventually marks the official end of the Great Recession, as is commonly believed, then the recent data suggest that the spring of 2010 may be remembered as when the recovery began to feel like one. Most notably, the March employment report showed distinct signs of renewal, despite the fact that commentators were quick to point out that the 162,000 March increase was inflated by Census hiring and a bounce from the February snowstorms.
Nevertheless, taking out the 48,000 census hires and averaging the February and March figures nets a gain of 50,000 per month. The unemployment rate remained at 9.7 percent as employment gains in the household survey were more than offset by an increase in the labor force, caused in part by individuals resuming suspended job-hunting campaigns.
The final estimate of real GDP growth in the fourth quarter of 2009 came in at 5.6 percent, boosted by a rapid slowdown in the pace of inventory liquidation. Although inventory-related production kicked in 3.8 percentage points of growth in the fourth quarter, rapidly stabilizing inventories mean that the contributions from this source are nearing an end. In contrast, final sales of GDP (which exclude inventories) grew at a modest 1.7 percent pace. Within final sales, exports and business spending on equipment and software posted strong gains. Nonresidential construction spending remained the biggest drag on growth, hampered by high vacancy rates and tight credit conditions in commercial real estate. The monthly indicators are also looking up, with continued strength in manufacturing as measured by the ISM index. Orders for durable goods also continue to trend higher.
All remains quiet on the inflation front—very quiet. The core CPI (which excludes food and energy prices) ticked 0.1 percent higher in February (0.6 percent annualized). Over the past three months, the core rate registered a barely positive 0.1 percent annual rate. This compares to a 6-month annualized change of 0.8 percent and 1.3 percent over the past 12-months—a pattern which evinces rapidly evaporating inflation pressures. The Cleveland Fed’s 16 percent trimmed mean CPI and median CPI estimates—based on a more scientific approach at fathoming core inflation—are telling much the same tale. Year-over-year, headline CPI inflation ran at 2.1 percent in February.  [2010-04-05]  

On March 16, the Federal Open Market Committee announced it would hold the federal funds target rate at 0 to 1/4 percent, and that “low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” The Committee also confirmed that the end of March would see the sunset of Fed purchases of agency mortgage-backed securities and agency debt, which have been executed in the amounts of approximately $1.25 trillion and $175 billion, respectively, over the past year.  [2010-04-06]  

The CPI was flat (0.0 percent annualized rate) in February, as energy prices slipped down 6.3 percent, following a 39 percent jump in January. The core CPI edged up 0.6 percent (annualized rate) and has only ticked up 0.1 percent over the past three months. The median CPI actually posted its first annualized monthly decrease since December 1982, ticking down 0.3 percent in February, and the 16 percent trimmed-mean CPI increased a slight 0.5 percent. The Producer Price Index (PPI) for finished goods slipped down 6.5 percent (annualized rate) in February, reversing course after four consecutive increases. Much of the pattern in the overall PPI in recent months has been driven by swings in energy prices, which spiked up 82.5 percent in January only to fall 29.6 percent in February. Excluding volatile food and energy prices, the core PPI was virtually unchanged in February, rising just 0.7 percent. Recent trends in survey-based measures of inflation expectations show that short-term expectations have picked up to moderate levels since March 2009. One-year expectations range between 2.7 percent (from a survey of consumers) to 1.7 percent (from a survey of professionals. Recent longer-term inflation expectations are below or around their historical averages, showing no substantial pressure for future inflation.  [2010-04-06]  

One sign of a healthy recovery is the return of growth in credit markets. Concerns about the fragility of the budding economic recovery have been heightened somewhat by anecdotal evidence that credit availability remains anemic. The most recent data from one of the most important credit channels, commercial bank lending, adds credence to these concerns. Data through the end of the fourth quarter of 2009 show a continued decline in credit facilitated by banks. This picture of retrenchment in bank credit is essentially unchanged when you look measures of lending (total loans or commercial and industrial loans), available credit lines, credit substitutes, and securitized assets. The across-the-board decline in credit extended and credit available from banks suggests that not all of the reduction in bank lending is due to falling demand for credit.  [2010-04-05]  

The final estimate of fourth-quarter real GDP growth registered 5.6 percent, but was revised down from the second estimate of 5.9 percent. It was, nevertheless, substantially higher than the 2.2 percent pace recorded in the third quarter. Inventory investment contributed 3.8 percentage points to the growth rate, the largest since the first quarter of 1984 in the wake of the severe 1982 recession. Final sales of gross domestic product rose at moderate 1.7 percent pace, up slightly from the 1.5 percent rate posted in the third quarter, and contributing the remaining 1.8 percentage points to fourth-quarter GDP growth. Inventory-related production cannot be sustained for much longer as firms achieve a better alignment of inventory stocks to sales in 2010. Within final sales, GDP received large boosts from business spending and exports in the fourth quarter. Nonresidential construction spending remained the biggest drag on growth, hampered by high vacancy rates and tight credit conditions in commercial real estate. Manufacturing growth is showing signs of revival as the ISM index reached further into expansion territory in March. Activity in the service sector, which has so far lagged manufacturing in the recovery, is also perking up as measured by the ISM nonmanufacturing index.  [2010-04-07]  

The decline in the housing market continued but at a slower pace in February, consistent with stabilization in the sector. Existing single-family home sales fell by 1.4 percent, a marked improvement over their 6.9 percent and 16.6 percent plummets in January and December. New single-family home sales were down 2.2 percent. Year-over-year, new single-family home sales are down by 4.3 percent, while existing single family home sales are up 4.3 percent. The S&P/Case-Shiller home price indices showed home prices rose in January by less than 1 percent. This is consistent with the yearly trend which has been flat. The Federal Housing Finance Agency index, a broader measure, reported a 0.6 percent decline and a strongly negative 3.4 percent year-to-year. Nominal personal income remained unchanged in February. Compared to that time last year, personal income is up 2.0 percent. Personal consumption expenditures rose very slightly in February due to increases in nondurables and services which offset losses in durable goods consumption. Since last February, personal consumption expenditures have increased by 1.6 percent. The monthly personal savings rate is down to 3.1 percent; however, on a yearly basis the personal savings rate is above its lowest levels back in 2005. Finally, retail sales rose by 0.3 percent, leading to a year-over-year increase of 2.5 percent.   [2010-04-07]  

The Fourth District’s unemployment rate decreased 0.5 percentage point to 10.2 percent for the month of January. Unemployment rates across Fourth District counties ranged from 7.1 percent (Greene County, Pennsylvania) to 21.2 percent (Magoffin County, Kentucky), with the median county unemployment rate at 11.3 percent. Statewide unemployment rates were Ohio at 10.8 percent, Kentucky at 10.7 percent, Pennsylvania at 8.8 percent, and West Virginia at 9.3 percent. Homeowner vacancy in the Fourth District is higher than it was before the housing boom and bust, but it is currently level or falling in most regions of our district. Rental vacancy too is down in five of seven district MSAs we looked at and two of the four states. Overall this suggests that our housing stock and prices are partway through an adjustment to the new economic conditions. Our continued attention will be warranted until vacancy returns to historical norms, or the market dictates that the new, higher levels of vacancy are the norm for our region.  [2010-04-06]  

The recent Employment Report from the Bureau of Labor Statistics was the rosiest in over two years, with payroll employment increasing by 162,000 in March on broad-based gains spanning every major industry category except for financial services. March’s job gain was definitive, even when the 48,000 temporary Census hires are discounted. Although the large monthly job declines have apparently ground to a halt, substantial improvement in the labor market has yet to be seen. The unemployment rate has remained elevated but stable over the past three months at 9.7 percent, just a step below October’s peak of 10.1 percent. Labor force participation edged higher to 64.9 percent in March, up just 0.3 percentage point from the cyclical low reached in December. A concern among some economists is the possibility of another “jobless recovery.” Average weekly hours of production and nonsupervisory workers dropped to a record-low 33.1 in the second quarter of 2009 as employers made deep job cuts and reduced workers’ hours. The measure has since only inched up to 33.3 hours. Also, the share of part-time workers for economic reasons rose to 6.7 percent of total employment in the recent recession, the highest since the 1981–82 recession. Employers have a large pool of underutilized resources to tap before hiring new workers, so large employment gains may be slow in coming.  [2010-04-06]