Economic data for March pointed pretty consistently to one idea: That we’re in the spring doldrums, with yet another spurt of weak growth underway. The first major data point for April comes out Friday morning, and will provide crucial evidence of whether this is just a routine soft patch of the variety that have happened a couple of times annually throughout these four years of weak recovery, or something more troubling.
Forecasters expect the April jobs report, due out at 8:30 a.m., to provide evidence that things were not nearly as weak as the March numbers suggested. The consensus forecast is that the nation added 140,000 positions in April, though even that would be a step back from the average of 220,000 a month during the November through February period. Analysts expect the unemployment rate to be unchanged at 7.6 percent.
If that forecast, or something close to it, matched the actual numbers it would be evidence for the “soft patch” theory of the economy, a reason to take a deep breath and appreciate that no major slump is underway. A major disappointment, coupled with the other mediocre-to-bad data of the last several weeks, would suggest that the tightening of federal purse strings are starting to have an uncomfortably large impact.
The sense of uncertainty over the true underlying pace of economic growth is embedded in the Federal Reserve’s policy statement Wednesday, in which the central bank more or less acknowledged that it could either increase or decrease the rate of its bond purchases as its next change in policy.
The most recent economic data has displayed decidedly mixed signals. On Thursday, the Labor Department said that only 324,000 people filed new claims for unemployment insurance benefits last week, the lowest in five years. The Institute for Supply Management’s survey of manufacturers for April was a notch better than expected. But construction spending fell by a whopping 1.7 percent in March, and a survey by the Dallas Federal Reserve Bank of the manufacturing sector in Texas and surrounding states plummeted.
The April numbers will more fully reflect the impact of the government’s sequestration spending cuts than the March numbers did; those budget cuts may not have put downward pressure on hiring immediately, but may be more pronounced as the year progresses. In Friday’s report, pay particular attention to the breakdown of jobs added or lost in different employment categories to judge how much of a factor federal cutbacks may have been.
For example, if there is a major decline in federal government employment or uncommonly weak growth in professional and business service jobs (a category that includes many government contractors), it would be evidence that the sequester is packing a punch.
Either way, the latest numbers will give our best sense to date of whether March was a blip, or the start of a dangerous trend.