Market Insights

Some big reports last week showed widening improvements for the U.S. economy. In case you missed them, let’s take a look at the big themes.

First, employment growth continued unabated. ADP’s private-sector payrolls and the Labor Department’s non-farm payrolls both crushed estimates. There were some downward revisions to previous readings, but they were smaller than the overall beats.

Second, hiring spread to new corners of the job market. Construction, transportation and warehousing and retail had their biggest gains in a year. Does it make sense to worry about a recession when such economically sensitive areas are growing?

Third, “leisure and hospitality” employment is accelerating. The category has added 247,000 jobs since October, its biggest four-month winning streak since January 1990. This is what all those pundits must mean when they talk about consumers shifting away from “stuff” toward “experiences.”

Fourth, factories keep humming along even if they didn’t add a lot of workers. The Institute for Supply Management said new orders rose sharply amid low customer inventories. Consumption is improving as input costs wane.

Rising Wages and the Dovish Fed

Fifth, something could be happening with wages. Monthly data for January showed a lower-than-expected 0.1 percent gain. On the other hand, a different report for the fourth quarter showed the biggest growth (3.1 percent) in over a decade.

Sixth, the Federal Reserve seems to have turned completely dovish. In October, policymakers spoke of four rate hikes. In December, they spoke of “gradual” increases. Last week they abandoned the notion altogether in favor of being “patient.” Now they’re even talking about keeping more assets on their balance sheet. Forget about Jerome Powell taking away the “punch bowl.” He’s filling it back up!

There have been negatives like jobless claims spiking to a 15-month high and consumer sentiment falling to a 28-month low, but both seem linked to the recent government shutdown. Investors also face uncertainty about President Trump’s trade war with China and the potential for another showdown with Congress.

But at the end of the day, conditions are strong and potentially getting better. Just when you thought it couldn’t get any better for the U.S. economy, we got even more good news last week.

Here’s one final thought: With interest rates low and wages rising, how long before housing comes back to life?

Philadelphia Housing Index vs S&P 500, three-month percentage change.