Medicare Agent News: Economic Deceleration

Tuesday, April 4, 2023

Economic Deceleration

By Nicholas Jasinski | Tuesday, April 4

Less Great. Worries about a slowing U.S. economy snapped a four-day winning streaking for the S&P 500 today. The latest manufacturing and job openings data were to blame.

Released this morning, the February Job Openings and Labor Turnover Survey, or JOLTS, showed a sharp decline in job openings. Economists were forecasting 10.45 million job openings on the last business day of February, which would have been nearly 400,000 fewer than in January.

Instead, the data showed a much-larger drop to 9.93 million, with declines across industries. That compares with about 12 million job openings at the March 2022 peak and is the lowest reading since May of 2021. For context, the pre-pandemic record high in job openings was around 7.5 million.

The Federal Reserve and investors alike have been hoping for a looser job market that puts less upward pressure on inflation and allows companies to hire the workers they need to grow. But they'd both like to see a smooth and gradual return to balance, not dramatic deterioration.

"On the one hand, there are almost 10 million job openings. But there used to be 12 million," wrote Richard Farr, chief market strategist at Merion Capital Group, today. "On the one hand, there are 1.67 jobs per unemployed person. But there used to be 2.0."

We'll get our next major read on the U.S. labor market this Friday morning with the release of March employment data.

There was continued discussion of yesterday's Manufacturing Purchasing Managers’ Index for March from the Institute for Supply Management. The consensus call had been for a 47.5 reading, about even with the February data.

Instead, the manufacturing PMI dropped to 46.3—its lowest since May 2020 and the fourth-consecutive readings below 50, indicating contraction in the manufacturing sector.

Elsewhere, recent days' indicators of construction spending, auto sales, real estate transactions, and other interest-rate sensitive activities have painted a picture of a decelerating economy.

The Atlanta Fed's GDPNow model is now forecasting that U.S. real gross domestic product expanded at a 1.7% annual rate in the first quarter. That's not shabby growth, but it's down from an estimate of around 3.5% just a few weeks ago.

For indexes on a winning streak, the less-rosy economic picture was enough to prompt some selling. The S&P 500 and the Dow Jones Industrial Average each slid 0.6% while the Nasdaq Composite lost 0.5%. Defensive utilities stocks were the day's best performers, while the economically sensitive industrials, energy, and materials stocks fell the most.

Yields declined as investors sought safety in bonds and gold enjoyed a big rally. More on that below.