What I Saw Last Week

U.S. Construction Spending in February met my forecast with an increase of 0.1% following an unchanged level for January.

Con Spend

The February report featured a 0.7% increase in total private construction spending but a 2.1% drop in total public construction spending.

Notably, public construction spending was down in all sectors except for water supply (+1.3%). A 0.2% decline in highway and street spending and a 0.5% decline in educational spending were the biggest drags on the sector. The growth in private construction spending was led by a 1.5% jump in non-residential spending with the biggest growth drivers being power (+0.9%), commercial (+1.2%), manufacturing (+1.2%), and office (+6.5%). In aggregate, residential spending rose just 0.1%.

On a year-over-year basis, total construction spending is up 3.0%, with public construction spending up by 1.6% and private construction spending up by 3.4%.

The takeaway from the report is that construction spending growth continues to run at a relatively slow pace, which is an inhibitor of stronger overall growth.

The March Non-Farm Payroll report was a mixed bag. There was surprising weakness with only 103,000 jobs added (I had forecast a more robust 175,000) but a solid 0.3% increase in average hourly earnings. (The increase in wages left average hourly earnings up by 2.7% year-over-year.)

NF Payrolls

February non-farm payrolls revised up to 326,000 from 313,000 and the January number was revised down to 320,000 from 239,000.

The labor force participation rate was 62.9% in March, versus 63.0% in February as the civilian labor force dropped by 158,000 and the number of persons not in the labor force increasing by 323,000. The decrease in the number in the labor force reflected a 37,000 decrease in the number of persons employed and a 121,000 decrease in the number of persons unemployed over the month.

The takeaway from the report is that it was neither too hot nor too cold to provide a clear basis for the Federal Reserve to re-think its outlook for monetary policy. At the same time, I believe that it will temper the market’s concerns about the prospect of a fourth rate hike this year.

The Unemployment Rate remained at 4.1% – I had forecast it to have dropped to 4.0%.

U Rate

Persons unemployed for 27 weeks or more accounted for 20.3% of the unemployed versus 20.7% in February and the U-6 unemployment rate (which accounts for unemployed and underemployed workers) dropped to 8.0% from the February figure of 8.2%.

Consumer Credit rose by $10.6B in February, well below my forecast for $15B, after increasing an upwardly revised $15.6B (from $13.9B) in January.


The growth in February was driven almost entirely by nonrevolving credit, which was up $10.5B from January to $2.837 trillion. Revolving credit increased by $0.1B to $1.031 trillion.

Consumer credit increased at a seasonally adjusted annual rate of 3.25% in February, with revolving credit increasing at an annual rate of 0.25% and non-revolving credit increasing at an annual rate of 4.5%.

What to Watch for This Week

Inflation, as measured by the Consumer Price Index, rose by 0.2% in February and I anticipate that the March figure will show infliation risin gby 0.1% with the core rate up by 0.2%.

Consumer Sentiment in early April is likeluy to have dropped to 100.4 from the final March figure of 101.4.