The labor market is gaining strength. The number of open jobs across the economy increased to 5.63 million in January, the ninth highest level on record. The private sector is even more robust with 5.17 million job openings, the fifth highest level on record. Growing confidence in the economy and in the labor market has pushed the number of workers quitting – presumably for new, better jobs – to the highest level since 2000. Initial claims for unemployment insurance remain near historically low levels indicating business are not feeling the need to reduce labor costs. These data point to a robust labor market that is likely to result in somewhat faster wage growth as employers bid to keep or attract the best talent.
Robust economic conditions can be seen in data on the manufacturing sector. Surveys from the Philadelphia Fed and New York Fed suggest manufacturing activity in those regions is gaining momentum. The Business Outlook Survey from the Philly Fed shows 44 percent of respondents saw an increase in general business activity in March and 66 percent expect to see an increase in activity over the next six months. When asked specifically about new orders, 53.4 percent said orders had increased in the latest month and 69.6 percent said they expected orders to increase over the next six months.
New York Fed survey respondents were slightly less optimistic. General business conditions had improved for 34.4 percent of respondents, up from 32.7 percent in February while 39.4 percent saw higher new orders compared to 36.3 percent last month. Expectations for improved general business conditions and new orders six months ahead were reported by 52.7 percent of respondents. Both surveys suggest an improving outlook for manufacturing in those regions.
One area of the domestic economy that continues at modest activity levels is housing. Housing starts and permits for new starts in the future rose in February but overall levels of activity for housing construction remain well below long-run averages. Weakness is particularly evident in the single-family segment where starts ran at an annual rate of 832,000 in February, well below the 1 to 1.5 million annual rate of previous economic expansions.
AIER’s Leaders Index came in at 75 in February, well above the neutral 50 level. Most of the economic data since support those results. The economic expansion continues and the risk of a recession remains low.