Economic Data Tracker – 
Strong March jobs report bolsters the case for a soft landing 

Economic Data Tracker

April 5, 2024

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions. Download the entire weekly edition to view timely charts and data providing a comprehensive picture of how incoming economic data affects our economic outlook.

Trend watch

The calendar might say spring, but Mother Nature played an April Fool’s joke on parts of the U.S. as more than 2,200 flights were delayed in the past few days due to harsh winter weather. That knocked weekly air passenger counts to 17.4 million, or down 3.2% from the prior week, which is extremely rare during what should be one of the peak weeks of spring break. Additionally, a massive 7.2 earthquake hit Taiwan yesterday, and smaller tremor hit New Jersey on Friday that was reportedly felt from Massachusetts to Washington, D.C.

The trends for most of the other activity-based indicators continued to move in the same direction they had been (slides 5 and 6), which is generally positive. 

What’s new this week

  • Strong job growth and lower unemployment rate bolster soft landing (slide 7).
  • Most labor metrics slower than 2023, but not weak (slide 8).
  • Wages down from their peak, remain well-above pre-pandemic pace (slide 9).
  • Purchasing managers index (PMI): Gradual improvement continues (slide 10).
  • Job openings and hiring up in February, while quit rate back at prior trend (slide 11). 
  • CEO Economic Outlook Survey jumped to 7-quarter high (slide 12). 

Our take

Most of the incoming data continued to improve generally. For instance, the four main purchasing managers indices – two for manufacturing and two for services – are all expanding for the first time since November 2022.

That was punctuated by a strong March jobs report. The labor market remains undeniably resilient as evidenced by very few outright weak points in the March report. The “weakest” point was the uneven industry contribution as two-thirds of the jobs came from just three major segments (education/health services, government, and leisure & hospitality) and five segments hired very few workers (under 3,000).

Still, as we illustrate on slide 8, the gradual cooling trend within the labor market remains intact as most labor metrics are weaker on a year-over-year basis.

But the economy isn’t weak. Case in point, the U.S. economy is still creating roughly 65,000 more jobs per month compared to the pre-pandemic pace and the unemployment rate remains well below 5%, which is widely viewed as full employment. In fact, it has remained under 4% for 26 months (and counting) – the longest stretch since the late 1960s.

Moreover, the combination of more Americans with jobs and higher wages – coupled with cooler inflation generally – goes a long way to bolster consumer finances. It is among the biggest reasons why the U.S. has continued to sidestep a recession.

That said, avoiding a recession isn’t necessarily stronger growth. Mirroring the cooler labor metrics, overall growth will be slower than last year. Specifically, we anticipate 1.9% year-over-year growth for gross domestic product (GDP) in 2024, which is below the pre-pandemic pace of 2.4% and the 2.5% growth last year.

Furthermore, the reasons for slower growth remain in place – tight policy, elevated borrowing costs, and slower activity (lower unit growth) – still pose risks to the economy. Those reasons are why recession risks are still higher than in an average year. And that’s not to mention the recent jump in crude oil prices, higher shipping costs because of issues with the Panama Canal and Suez Canal/Red Sea, the Baltimore port shutdown, etc.

However, these issues complicate the view of the economy generally and muddle the timing for the Federal Reserve (Fed) to cut interest rates. Yet, it also validates their recent mantra of patience.

We maintain our view that the Fed will reduce rates in the summer, which would ease financing pressures on consumers and businesses alike. But simply reducing interest rates slightly wouldn’t be accommodative monetary policy. In other words, lowering the Fed funds target rate to say 5% would still be restrictive. That is much of the reason why the Fed doesn’t have to wait until inflation moves all the way down to its 2% target, along with considerable lags between when the Fed raises/lowers interest rates and when it fully impacts the economy. 

Bottom line

The U.S. economy remains resilient and should sidestep a recession. After several months of crosscurrents, most economic data has steadily improved in recent weeks, including another strong jobs report. However, the cumulative impact of higher rates will continue to weigh on economic growth.