KEY DATA: Leading Indicators: +0.2%/ Phila. Fed: -14 points: Expectations: +13.4 points/ Claims: down 6,000

IN A NUTSHELL: “The economy is continuing to expand slowly and the labor market is tightening, but the manufacturing sector remains weak.”

WHAT IT MEANS: Next week the Fed meets and will evaluate what is going on. So, what is going on? Not much. The Conference Board’s Index of Leading Indicators rose in March after having declined the previous two months. On net, this report points to a continued expansion in the months to come, but hardly a break out into strong growth.

On the manufacturing front, the Philadelphia Federal Reserve’s survey of manufacturers took a steep dive in April. Just about every component was down sharply from its March level. Normally, that would be a warning sign that something not so great was going on in the manufacturing sector. However, that might not be the case. While current conditions cratered, optimism improved sharply. Respondents were more optimistic about future demand and as a consequence, expect to hire more people and work them longer. This improving outlook for the future seems to indicate that the current slowdown may not last long.

On the labor front, we have a totally different picture. Unemployment claims dropped to their lowest level in nearly 43 years. Adjusting for the size of the labor force, it was the lowest level ever. Firms are holding on to their workers as tightly as they ever have, a clear sign of growing labor shortages.

 MARKETS AND FED POLICY IMPLICATIONS: Yes, the economy is expanding. Yes, manufacturing seems to be lagging. But can we really say that economic activity is faltering if the labor market is still tightening? Probably not. I say probably because unemployment tends to be a lagging indicator, though more recently the length of the lag has likely shortened. The economy starts to turn before firms figure it out, both on the upside and the downside. Regardless, next week’s FOMC meeting will not be interesting as far as its outcome: There will not be any change in rates. But the statement will matter. Since there is no press conference or dot chart or forecast estimates, the parsing of the words in the statement will be all we have to go on. I don’t expect any major change from the previous statement, since the economy has not rebounded sharply enough to cause anyone to say growth is accelerating. Thus, the members could save some money by phoning it in. Okay, I am kidding. There will be some dissent as some members are still leaning toward moving sooner rather than later, but we will not know about their views until the minutes come out a three weeks later. As for the markets, today’s reports, other than the surprisingly low claims number, should not have a major impact on investor thinking. We are still in earnings season and oil and Europe and just about everything other than fundamental economic data should drive decisions.