{"id":1490,"date":"2019-04-02T11:29:14","date_gmt":"2019-04-02T15:29:14","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1490"},"modified":"2019-04-02T11:29:14","modified_gmt":"2019-04-02T15:29:14","slug":"february-durable-goods-orders-and-march-small-business-hiring","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1490","title":{"rendered":"February Durable Goods Orders and March Small Business Hiring"},"content":{"rendered":"\n

KEY DATA:<\/strong> Durable Orders: -1.6%;\nEx-Aircraft: +0.1%; Capital Spending: -0.1%\/ Paychex Index (Over-Year): -0.88%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cBusinesses are just not investing and that is\na worrisome thing for the economy going forward.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Productivity has been growing minimally and it\nwas hoped that the tax cuts would trigger a surge in capital spending.  Well, maybe not.  Durable goods orders tanked in February, but\nthat was largely due to a massive drop in Boeing airplane demand. <\/em><\/strong> Nondefense aircraft orders were off over\n30%.  Even excluding aircraft, demand\nfor big-ticket items was up only modestly. <\/em><\/strong> Some of the most critical sectors, such as computers,\ncommunications equipment, vehicles and machinery, all posted negative\nnumbers.  <\/em><\/strong>There were gains in\nmetals and electrical equipment, but that was it.  But the most disconcerting number in the report\nwas the proxy for private sector capital spending:  It also eased back. <\/em><\/strong> For the first two months of 2019 compared to\n2018, orders are up just 2.6% and that gain is not inflation adjusted.  In other words, so much for the investment\nboom.<\/p>\n\n\n\n

Friday we get the March employment numbers and there\nare some differing indicators of how strong it could be.<\/em><\/strong>  The Supply Managers\u2019 manufacturing employment\nindex popped and the NFIB index has been trending upward.  However, the Paychex\/HIS Markit Small Business\nEmployment index keeps showing slowing job gains.  That decline continued in March and it has\ntranslated into a wage gains bouncing around, rather than continuously\naccelerating.<\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  The\ncapacity of the economy to expand depends heavily of firms being more efficient\nand that requires investing in new equipment, buildings and software.  While capital spending is growing, it is\ndoing so at a pace that is not likely to improve productivity markedly.  <\/em><\/strong>With labor markets tight, it is hard\nto see how growth can accelerate sharply for any extended period.  I had based, at least to some extent, my 2019\nsolid growth forecast on the supposition that it takes time for firms to ramp\nup large spending decisions and by early this year, we should be seeing those\ndecisions turn into actual orders.  That\nhas yet to happen and given the worldwide slowdown and consumer cautiousness, I\nam no longer expecting a second round of business investment increases.  If investors look at the fundamentals, what\nthey will see is that wage gains are accelerating, productivity is lagging and\nhousehold and business spending is rising moderately, at best.  With world growth also slowing, it is hard to\nsee where profit growth is going to come from<\/em><\/strong>, especially since this\nyear\u2019s numbers have last year\u2019s tax hyped gains as comparisons.  Fed Chair Powell has already bowing once to\nthe screams of the markets and this forecast of modest earnings growth makes me\nwonder what he will do next.  For me, the\nrisks are not balanced, as the Fed claims, but are skewed toward the\ndownside.    <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Durable Orders: -1.6%; Ex-Aircraft: +0.1%; Capital Spending: -0.1%\/ Paychex Index (Over-Year): -0.88% IN A NUTSHELL:  \u201cBusinesses are just not investing and that is a worrisome thing for the economy going forward.\u201d WHAT IT MEANS:  Productivity has been growing minimally and it was hoped that the tax cuts would trigger a surge in capital … Continue reading February Durable Goods Orders and March Small Business Hiring<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1490","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1490","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1490"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1490\/revisions"}],"predecessor-version":[{"id":1491,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1490\/revisions\/1491"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}