Category Archives: Economic Indicators

February Industrial Production and Leading Indicators

KEY DATA: IP: 0%; Manufacturing: +0.5%/ LEI: +0.6%

IN A NUTSHELL: “With manufacturing taking off, the economy is moving forward solidly even if consumers don’t want to spend.”

WHAT IT MEANS: It looks like the economic laggard, manufacturing, is now the economic leader. Industrial production was flat in February, but that was entirely due to a major decline in utility production. An exceptionally warm month has a tendency to do that. Wait until you see what the March numbers look like for utilities. They will probably be off the charts. But more importantly, the nation’s manufacturers are showing renewed vigor. The Federal Reserve reported that output surged for the second consecutive month, with both durable and nondurable goods production up sharply. The economy is also being helped by the recovery in the oil and gas sector, which was up for the ninth consecutive month. Oil rig counts are still rising, despite the recent softening in prices – or maybe the prices are softening as a consequence of the rising count. Regardless, this sector is doing better.

Will we see further gains in the economy? If you believe the Conference Board’s Leading Economic Index, the answer is absolutely. This measure of future activity has posted three large gains in a row and after six consecutive increases, it is now at its highest level in more than a decade. It was also reported that the gains were spread across the economy, which is pointing to moderate economic growth ahead.

The University of Michigan’s mid-month reading on consumer confidence was up slightly from the end of February. Given all the chaos in Washington, that was a bit surprising.

When the data were broken down by Democrats, Republicans and Independents, it became clear that the political divide is a chasm. Democrats think a recession is coming while Republicans believe that happy days are here again. Independents take the middle ground, which seems to be where we really are: Not hot, not cold but not really just right.

MARKETS AND FED POLICY IMPLICATIONS: As I like to say, as consumers go, so goes the economy. Well, wrong again, or maybe not necessarily. First quarter growth is like to disappoint, as households are just not doing a lot of shopping. But that is not the full economic story. There are other segments that are starting to pick up the slack. Manufacturing is making a major recovery, led in part by renewed activity in the energy sector. When oil prices collapsed and energy companies stopped spending, the companies that supplied goods and services to that segment of the economy got hurt. Turnaround is fair play and that is happening. The huge political divide raises serious questions whether the confidence measures have any economic meaning. I think it is best to simply recognize the rise in confidence but not assume it means anything as far as spending is concerned. And that should concern investors. Inflation-adjusted income is once again flat and if consumers are not going to spend strongly, there is an upper bound to growth. Europe is recovering, but it is hard to believe earnings will soar if domestic consumption is mediocre. That has implications for stock price valuations.

February Housing Starts, January Job Openings and March Philadelphia Manufacturing Activity

KEY DATA: Starts: +3%; Permits: -6.2%/ Openings: +87,000; Hires: +137,000; Quits: +135,000/ Phila. Fed: -10.5 points

IN A NUTSHELL: “The rising number of people leaving jobs is a further sign that the labor market is really tight.”

WHAT IT MEANS: Yesterday, the Fed made its first of what will likely be several rate hikes this year. A strengthening economy, rising inflation and significant fiscal stimulus could mean a greater total increase than the members seem to indicate. So, it’s time to get back to economic fundamentals, at least until the full details of the spending and tax proposals are released. First, the housing market is getting better. Earlier this week we saw that the homebuilders’ level of confidence was the highest in twelve years. That optimism led to a solid rise in housing starts in February. The single-family portion of the market did all the heavy lifting as multi-family construction eased. There was a warning in the report. Permit requests dropped sharply and are now running behind starts. We could see a modest, short-term slowdown in construction activity.

The huge rise in payrolls over the past two months has raised the specter of a really tight labor market. Yes, that may sound strange since businesses seem to be able to find the workers they need. But given the reality of labor force growth and the likely further decline in the participation rate as we transition from boomers to Millennials, strong job growth doesn’t look sustainable. According the Bureau of Labor Statistics’ closely followed JOLTS report, job openings rose in January, though not greatly. Much more importantly, the quit rate, which is a proxy for the willingness to tell management to take this job and shove it, is back at the high of this recovery and near the peak seen in the 2000s expansion. In other words, workers are starting to believe that they no longer need a new job before they leave their old one. That’s confidence.

The manufacturing sector has really made a turnaround and that appears to be continuing. The Philadelphia Fed’s current activity index did fall sharply in early March, but that was not a surprise given the huge surge posted in February. The level of the index remains extremely high despite the decline and the details were impressive. Orders are booming, backlogs are swelling, hiring is strong and workers are being worker harder and longer because firms cannot find suitable employees. Over sixty percent of the respondents to a special question said they were experiencing labor shortages. Over forty-five percent said they had to raise wages to attract skilled workers. Sounds like a tight labor market to me.

MARKETS AND FED POLICY IMPLICATIONS: Today’s key numbers centered on the labor market. The growing number of people quitting their jobs and the high percent of firms reporting they cannot find skilled workers and are having to pay up for the ones they get point to a labor market that may be hitting the wall. We are still not seeing that in the overall data, as inflation-adjusted wages are going nowhere. Until real wages start rising faster, overall consumer demand will remain moderate and the Fed will be able to sustain a slow upward path of interest rates. But the Philadelphia Fed and JOLTS report are warnings that businesses ability to hold the line on wages may finally be ebbing. As for investors, all eyes are turning toward the budget process. Today’s budget summary release is just the starting point for the discussion. We don’t have any tax changes or any infrastructure spending information. We may not know until May what the administration wants to do and then Congress has to actually pass something. Simply put, fiscal stimulus is months away.

February Producer Prices and Small Business Confidence

KEY DATA: PPI: +0.3%; Excluding Food and Energy: +0.3%/ NFIB: -0.6 point

IN A NUTSHELL: “The rise in price pressures continues and it is very likely the Fed will make a move tomorrow.”

WHAT IT MEANS: The Fed’s rate setting committee, the FOMC, is in day one of its two-day meeting and while you can never be certain what the members will do, it looks like a rate hike is coming when the statement is released tomorrow afternoon. Today’s data only reinforce that view. First, wholesale prices rose moderately in February, led by another jump in energy costs. Over the year, producer prices are have now risen by over 2% and are up by nearly that pace even excluding the volatile food and energy components, as the gains were spread across most areas. Food and services expenses posted solid increases, adding to the cost pressures. Looking down the road, sharp rises in intermediate goods costs are pointing to further increases in consumer finished goods prices and that doesn’t bode well for inflation.

Small business owners have been ecstatic about the election and their confidence has soared. But that could change. The National Federation of Independent Business’ small business index fell slightly in February. Though the index remains at a high level, the NFIB president issued this warning: “The sustainability of this surge and whether it will lead to actual economic growth depends on Washington’s ability to deliver on the agenda that small business voted for in November. If the health care and tax policy discussions continue without action, optimism will fade.” Given the chaos over the AHCA, which should be called Republicancare, and the lack of any proposal on tax reform, don’t be surprised if small business owners become a little more cautious about the future.

MARKETS AND FED POLICY IMPLICATIONS: With a rate hike potentially only 24 hours away, it is time to start recognizing that rates are really going up this year and probably faster and greater than thought. Fed Chair Yellen will have a press conference tomorrow after the meeting and might provide a small amount of guidance as to future actions. In addition, there will even be another round of the infamous and largely useless dot plots that provide “insights” into the members’ thinking. I suspect there will be a shift to as many as four increases. Coming into the year, I had forecasted three increases but a total of one percentage point. It looks like that 100 basis point forecast may occur, but through a quarter point increase every other meeting. Regardless, the markets didn’t have a full point hike factored in coming into the year and many still have the “when I see it, I will believe it” attitude when it comes to Fed actions. That is actually a rational approach given the hesitancy to raise rates we have seen from this Fed Chair. But my view is that once she gets going, and assuming the Republicans actually pass a tax and spending plan, Chair Yellen will push ahead steadily.

February Private Sector Jobs and Help Wanted OnLine

KEY DATA: ADP: +298,000; Construction: 66,000/ HWOL: -360,2000

IN A NUTSHELL: “If job gains are really heating up this much, the Fed might find itself behind the curve and having to catch up.”

WHAT IT MEANS: A strong employment number on Friday could cement a Fed rate hike next Wednesday and it looks like that could happen. ADP’s estimate of February private sector job gains was off the charts, or at least well above anyone’s expectations. The rise was led by a surge in construction jobs that was the second largest since the report was first released fifteen years ago. The only time there was a greater increase was at the peak of the home construction boom and we know that is not happening right now. The incredibly warm February weather across much of the nation may have played a major role in this outsized estimate. There was also a huge rise in manufacturing payrolls. That doesn’t seem to be weather driven, but the gain was the third highest in this measure’s history. Why the sudden surge in hiring, especially given the shortage of workers, is unclear.   It raises questions about whether this is the start of a greater hiring trend or just a seasonal adjustment anomaly. Regardless, it is really nice to see.

Another reason that I am cautious about the ADP report was the large decline in the number of online ads, as reported by the Conference Board. The level was the lowest in almost five years and every major state reported a drop. There are a number of divergent reasons for the nearly steady decline that has been going on for fifteen months. First, labor demand may simply be slowing, as the economy hasn’t grown particularly robustly. The second is that firms are recognizing that in this labor shortage environment, they cannot fill a lot of the openings so they are cutting back on their advertising. Actually, a combination of the two could be occurring. That would argue for slow job gains. Alternatively, firms may actually be finding workers all those workers they are saying they cannot find and filling the openings. That would argue for strong job increases. We may not know for a few months which explanation reflects reality.

The Labor Department released revised productivity data for the final quarter of 2016 and it was depressing. Productivity increased in 2016 by the slowest pace since 2011. It is hard to grow rapidly, especially with businesses having so much trouble finding “qualified” workers, if firms cannot get a lot more out of current workers. Indeed, if we do get a surge in payrolls this quarter, as the other data imply, productivity will likely start of the year on a down note.

MARKETS AND FED POLICY IMPLICATIONS: Friday we will get the February payroll and unemployment government data and they should be good. Every once in a while, ADP and the Labor Department differ significantly in their estimates of private job gains, so it is unclear how big a number we will get. But if the employment increase exceeds 200,000 and wages rise solidly, as expected, a Fed rate hike should be assumed. I never say “done deal” when it comes to the Fed, but a strong report would get us pretty close to one. And it would reinforce the warning that I have been making that rates could rise faster and go higher than the markets currently anticipate.

I am headed out on my annual father/son Phillies spring training trip, so I will not be around for what may be a fun morning on Friday. Buckle up, everyone. The only roller coaster I will be riding will be in Islands of Adventure.

February Non-Manufacturing Activity

KEY DATA: ISM (Non-Manufacturing): +1.1 points; Activity: +3.3 points; Orders: +2.6 points

IN A NUTSHELL: “With all components of the economy on the rise, the question for the Fed is this: What are you waiting for?”

WHAT IT MEANS: We’re hitting on just about all cylinders. Wednesday, the Institute for Supply Management reported that manufacturing activity accelerated in February and today it was announced that the rest of the economy picked up steam as well. Business activity improved, led by rising demand for not only for domestic firms but for those involved in both importing and exporting. The improving world economic situation is helping drive additional sales to other countries. It’s funny how economics works that way. Employment growth was a little faster and is likely to increase more as backlogs are building. About the only negative in the report was a large increase in the percentage that think inventories are too high. Stocks are building and demand will have to remain strong or firms will look to ease up on additional production.

Yesterday, a report was released that should have really opened eyes at the Fed. The weekly unemployment claims number came in at 223,000, the lowest since April 1973. Let me put that in perspective. The labor force back then was 89 million compared to about 160 million today. Adjusting for the size of the labor force, the number of claims would have to currently be 400,000 in order for the two to be comparable. Simply put, this labor market is really tight.

MARKETS AND FED POLICY IMPLICATIONS: Due to calendar oddities and when the labor market data are collected, the employment report was delayed a week. That is actually too bad. There will only be four days between when we get the numbers and when the FOMC starts its two-day meeting. The Fed will not be able to react to the report. It is clear the economy is moving forward and may be picking up steam. Consumer confidence is very high, spending is decent, just about all sectors, including energy, are growing and the Fed’s dual mandate has essentially being met. There is every reason for the FOMC to announce its first rate hike of the year on March 15th. But what happens if the jobs report is weak? The January job gains were outsized and these data can be pretty volatile, especially in winter months. The Fed should look past one report and probably will, but this has been a group of decision makers who panicked at any sign of economic trouble in the past. That said, the messages being sent by Fed members have all been similar: A rate hike is coming and a half-decent employment report, which is the consensus right now, should be enough. Going into this year, few were predicting a March increase. I had the following meeting, in May. But the general belief was that it wouldn’t happen until June. A March increase creates the possibility that we could have more than the Fed’s implied three rate hikes, especially if the Republicans stop acting like disorganized Democrats and start actually passing something that has to do with the economy – or at least proposing something. As I keep saying, highly stimulative fiscal policy, especially in a labor shortage economy, is likely to cause the Fed to be more aggressive than most people think. Investors seem totally clueless or unconcerned by that possibility.  

January Income and Spending and February Manufacturing Activity

KEY DATA: Consumption: +0.2%; Income: +0.3%; Prices: +0.4%/ ISM (Manufacturing): +1.7 points; Orders: +4.7 points

IN A NUTSHELL: “It’s nice that manufacturing is accelerating, but it is worrisome that rising prices are wiping out household income gains.”

WHAT IT MEANS: If the consumer is going to lead the way, and household spending kept the economy afloat last year, then incomes better start growing faster because inflation is on the rise. Consumer spending was solid in January as households bought lots of soft-goods but not a lot of durables or services. Indeed, the only category reporting an increase was nondurables and that was due to increasing prices. Actually, the big story in this report was not the jump in spending but the sharp rise in consumer costs. The acceleration in inflation totally wiped out the rise in consumption and that raises questions about the ability of households to keep holding up the economy. Yes, incomes did increase nicely but spending power declined. We need wages and salaries, which rose moderately, to show bigger gains going forward. For the Fed, its preferred measure of inflation is now just a small tick away from its target. The Personal Consumption Expenditure deflator was up 1.9% over the year.

Manufacturers are going to watch the situation with the consumer carefully. The sector has been recovery very nicely and the Institute for Supply Management’s reported that activity accelerated again in February. This was the sixth consecutive month the headline index rose. Demand was strong, production increased and orders swelled. Hiring is still solid but not quite as strong as it had been.

Separately, the U.S. Census Department reported that construction activity fell in January as a large drop in public sector overcame a moderate rise in the private sector.

MARKETS AND FED POLICY IMPLICATIONS: The Fed is meeting in two weeks and we now have everything in position for a rate hike. The Beige Book summary of economic activity indicated that the labor shortages are getting worse and causing wages in some areas to rise faster. The members will be discussing that when they start the meeting on March 14th. Adding to the Fed’s concerns is that inflation is now at its target on likely to go through it in the next month or two. So, its two mandates, full employment and stable (i.e., target) inflation are being met. While last night’s presidential address didn’t provide any usable details about policy, it is clear the President is intent on pushing his agenda of tax cuts and spending increases. To whatever extent that happens, growth should accelerate by year’s end. So, the Fed has no reason to stand pat. Yes, rising prices are curtailing consumer spending power, but the labor market tightness offset some of that. More importantly, the Fed knows it has a long way to go before it hits a neutral or long-term rate and it needs to get going on that process before inflation becomes an issue. Will we get a rate hike in two weeks? The members are trying to get the word out that it is now a real possibility. I had been expecting the move at the following meeting in May, but now I think it is a toss up. Regardless, rates are going up and if the expansionary fiscal policy does get passed, look for them to rise faster than the market currently expects. I a sticking with my 100 basis points – one percentage point – increase this year.

January New Home Sales and February Consumer Confidence

KEY DATA: Sales: +3.7%; Over-Year: +5.5%; Prices: +7.5% / Confidence: -2.2 points

IN A NUTSHELL: “Consumers are confident and are buying homes, but builders are not getting their share of that demand.”

WHAT IT MEANS: The economy is solid, consumer confidence is high and growth in the United States and around the world is improving. That is a mess every new president should hope for. Today’s data only add to the belief that while conditions are not booming along, they are accelerating. New home sales rose moderately in January. Still, the level of demand remains less than most builders would like to see. Whereas existing home sales were the highest in a decade, newly built units are still selling at depressed rates. Indeed, sales need to increase between 15% and 20% for the market to be called solid. Looking across the nation, solid gains were seen in all areas except the West. As for prices, they are rose rapidly, though the gains have had their ups and downs. Inventory is also improving, though it is hardly what one would call excessive. There is not a whole lot of speculative building going on.

Consumer confidence has skyrocketed since the election so it was not a great surprise that the University of Michigan’s Consumer Sentiment index eased in February. Household views on current conditions improved but they were more cautious about the future. That also should shock no one. Not surprisingly, Republicans are borderline irrationally euphoric about the future while Democrats are borderline irrationally depressed. That makes clear how the political divide is affecting people’s views on the future economy and possibly spending patterns.

MARKETS AND FED POLICY IMPLICATIONS: The more data we get, the more it is clear that the economy is moving forward solidly. No, we are not going to get 3% growth on an extended basis soon, but we should move back to the 2.25% to 2.50% range that we had seen until the collapse of energy prices shut down the energy sector. It is interesting, though, to see the divide between the new home and existing home sectors. In both places, inventory is low and prices are rising, but the sales pace of newly constructed properties is disappointing. Apparently, the real deals are in existing homes and people are moving in that direction. For construction to rise faster, we need demand to increase, but builders will not put the shovel into the ground unless they have a clear indication the product will move. That is not an easy cycle to break, but it will keep us from revisiting the housing bubble days. We could use a few more homes on the market to spur traffic and ultimately sales. On the consumer front, reality needs to set in. The future is neither a rosy as Republicans think or dark as Democrats believe. But the longer it takes for the replacement of the ACA and for tax cuts and spending increases to be passed, the more concerned households, especially Republicans, will become about the future. This shows how politics could affect economic activity in this highly divided nation. When or if the uncertainty over fiscal policy takes hold in the equity markets is a wholly different question, but for now, optimism reigns.

January Housing Starts and Permits, February Philadelphia Fed Survey and Weekly Jobless Claims

KEY DATA: Starts: -2.6%; Permits: +4.6%/ Phila. Fed (Manufacturing): +19.7 points; Orders: +12 points/ Claims: +5,000

IN A NUTSHELL: “There is not much to complain about the economy as housing and manufacturing are improving and the labor market remains tight.”

WHAT IT MEANS: We know that inflation is on the rise and while energy is a factor in the acceleration of price gains, it is not the only one. The economy is getting stronger and that has major implications for future inflationary pressures. In January, housing starts edged downward, but that came after an upward revision to the December numbers. Single-family construction rose but the volatile multi-family sector fell sharply. More importantly, the level of construction was 10.5% above the January 2016 pace and 6% above the 2016 average. In other words, builders started off the year in good shape. Permit requests jumped, moving back above starts. That points to greater home construction in the months ahead. Regional activity varied widely. Construction soared in the Northeast and South but cratered in the West and Midwest. Weather matters. The number of home under construction continues to rise, though it would be nice if it increased faster. Inventory remains too low.

The Philadelphia Federal Reserve Bank’s survey of manufacturers rose sharply in February. General business activity soared, helped along by a surge in demand. Only 6% of the respondents said new orders fell, indicating that the improving economy is lifting most boats. Hiring was a little slower than it had been. Firms seem to meeting the new demand by working their current employees longer. That makes sense given the labor shortage. This month’s special question had one result that should open Janet Yellen’s eyes. Manufacturers expect inflation to run at a 3% pace over the next ten years compared to a 2.7% average in the fourth quarter 2016 survey. The FOMC keeps noting that “most survey-based measures of longer-term inflation expectations are little changed”. If inflation expectations are rising, the Fed will have to act sooner rather than later.

Unemployment claims rose last week but remain near historic lows. There just aren’t a lot of people who have skills, are between 21 and 55 and can pass a drug and background check who are sitting at home watching The Price is Right. As a result, firms holding onto their employees tightly. I expect they will start moving part-timers into full-time positions, even if that raises costs. It is better than going without and could reduce turnover and improve productivity.

MARKETS AND FED POLICY IMPLICATIONS: While the economy is in good shape, the administration is not. The chaos is raising questions about the ability to push through significant tax cuts and spending increases. Unless revenue increases are found, the proposals will cause the deficit to soar. The political pressure a $1 trillion deficit forecast would put on the Republicans would be hard enough to deal with without political problems. With those issues, action could be either pushed into later this year or only showpieces would be passed. That would not be good news to all those investors who believe that happy days are here again. As for the Fed, the unmooring of inflation expectations that we saw in the Philadelphia Fed survey is a clear warning that the days of doing nothing are over. A large increase in both jobs and wages in the February employment report could put the March FOMC meeting into play. At the minimum, it would support my view that the next hike could come in May. Hey bond market people, are you looking at the inflation numbers?

4th Quarter GDP, December Durable Goods Orders and January Consumer Sentiment

KEY DATA: GDP: 1.9%; Exports: -4.3%; Inflation: 2.1%/ Orders: -0.4%; Excluding Aircraft: +1%; Private Capital Spending: +0.8%/ Consumer Sentiment: +0.3 point

IN A NUTSHELL: “It was a tough year for the economy, but growth in the fourth quarter was not as soft as the headline indicates.”

WHAT IT MEANS: If ever there were a day when the headline numbers misrepresented what was going on in the economy, today was that day. Take overall economic growth, which posted a modest gain in the final quarter of the year. For all of 2016, GDP expanded at a disappointing 1.6% pace. The increase was 2.4% in 2014 and 2.6% in 2015. So why am I saying things are not that bad? As always, let’s go to the details. Consumers spent at a solid, though slightly slower pace in the fourth quarter. But I will take 2.5% every quarter. Business spending on equipment and intellectual property was up faster than in the third quarter. Companies are now rebuilding their inventories. Firms did cut back on investing in structures, but that is a notoriously volatile component. Also, the government, at least state and local governments, is now starting to spend more normally, even if spending on defense remains weak. The real problem with this report is that the economy suffered a “tofu attack”. Poor soybean crops in South America led to a huge surge in U.S. exports in the summer, but that rise was temporary. The fall in exports coupled with a jump in imports meant that instead of adding 0.85 percentage point, as it did in the third quarter, trade subtracted 1.7 percentage points of growth at the end of the year, a 2.55 percentage point swing. In addition, the key measure of private sector domestic activity, final sales to private domestic purchasers, grew faster. On the inflation front, consumer costs rose at the Fed’s target rate in the fourth quarter and over the year, the rise is now close to the Fed’s 2% goal.

Adding to the belief that the economy is in good shape was the December durable goods report. Yes, it declined, but let’s go to the details. The biggest drop was in defense aircraft. Not even a solid rise in civilian aircraft sales could overcome that decline. Excluding aircraft, order rose strongly. In addition, the best measure of private sector capital spending rose solidly for the third consecutive month. Even the energy sector is investing again. This report was strong and indicates the economy may have some momentum building.

Finally, The University of Michigan’s Consumer Sentiment index rose modestly in January after jumping in December. That the gain in confidence was sustained is good news for future consumer spending.

MARKETS AND FED POLICY IMPLICATIONS: The economy didn’t do particularly well last year, but we did end the year on a positive note. Consumers are spending, businesses are investing and the government is no longer blocking the way. With the energy sector, which had restrained growth significantly in the first half of the year turning around, even without any significant fiscal stimulus, growth should move back above 2% this year. That should be enough to cause the unemployment rate to drop below full employment by the end of the year and continue the upward trend in both wage and price inflation. That implies the Fed will likely have to raise rates multiple times this year and I expect an increase of 100 basis points. How those longer-term trends play with equity investors is unclear, but if they read today’s data as weak, that would be a misinterpretation of the numbers.

December Existing Home Sales and January Philadelphia Fed NonManufacturing Survey

KEY DATA: Sales: -2.8%; Prices (Over-Year): 4%/ Phil. Fed (NonManufacturing): +18.2 points; Expectations: +7.3 points

IN A NUTSHELL: “The dip in housing sales is more a sign of the lack of homes to be bought than the desire to buy homes.”

WHAT IT MEANS: While the housing sector has come a long way in the past six years, it is still can have its ups and downs. The National Association of Realtors reported that existing home sales moderated in December, though the decline was nothing significant. Given that the November rate was the highest in nearly a decade, a small drop isn’t worrisome. Condo sales fell sharply while single-family purchases were off more modestly. Three of the four regions posted declines with the South flat, so weather cannot be the excuse. As for prices, they were up decently. But the real story in the report was the continued decline in inventory. The number of homes on the market hit its lowest level since the NAR started collecting the data, which was 1999. It is hard to sell homes that are not for sale.

The Philadelphia Federal Reserve Bank’s January survey of nonmanufacturing firms was quite a surprise. While the activity index is pretty volatile, the surge in the current economic conditions index was huge. Orders jumped, revenues soared and hiring picked up – but only for full time workers. Interestingly, the demand for part-timers grew less rapidly. While the greater Philadelphia region may not be the fastest growing area in the nation, unemployment rates have been coming down. Firms may be switching part-timers to full-time when they cannot find qualified workers to fill open positions. Looking forward, the expectations index hit is highest level in the nearly six years this survey has been in existence. That bodes well for future hiring and investment.

MARKETS AND FED POLICY IMPLICATIONS: The Trump administration hit the ground running, but what all those executive orders mean for the economy is unclear. Easing pressures created by Obamacare may sound good, but what exactly that entails and what the impacts will be on patients, the insured, insurers and providers is anyone’s guess right now. The pipelines may get built, but when is also uncertain as court cases will undoubtedly be filed. And as an aside, you build energy pipelines for energy reasons, not for jobs. The jobs disappear quickly but the pipelines are here to stay, so let’s evaluate the projects accordingly. But what really matters are whatever tax changes are passed, the structure of any Obamacare replacement, what regulations are rescinded and whether trade flows are affected by tariffs (excuse me, border tax) or export subsidies (excuse me, border adjustment tax). I’ll get the hang of the new PC economic jargon eventually. That is important because as we all know, there is no such thing as a free anything. Some businesses and individuals will gain from the changes while others will lose. Until we know more, the best we can say is that we don’t really know. And I am just not sure when we will know. Meanwhile, the Fed and investors have to operate in this environment of uncertainty. If you believe the business and consumer confidence surveys, there are great expectations about the future. Now it is up to Congress to deliver.