What We Learned Last Week
- According to the Institute of Supply Management, the service sector activity slowed. This is the latest item on the growing list of sectors of the economy hurt by plunging petroleum prices. Many more benefit from low oil prices than are harmed, however, and that accounts for the steady progress in the labor market.
- Businesses created fewer jobs in January than in the previous month, but suspicious weakness in previously-steady business services, private education and other services is a hint that January’s weakness might be an aberration. In any case, January’s employment gain of 151,000 was double the 75,000 pace needed to tread water—that is, to hold unemployment steady. For that reason, unemployment crept lower and populations of hidden unemployment continued to shrink. Average hourly earnings growth has quickened to 2.5 percent at an annual rate, up from the 2 percent rut they were stuck in for most of the recovery.
- Labor income soared 0.9 percent in January with hours worked up 0.4 percent and average hourly earnings up 0.5 percent.
- Dealers sold 17.5 million light vehicles in January, matching the 2015 sales pace.
- Jobless claims edged up, but rises were centered in only a handful of states—many that struggled with a large snow storm.
What We Expect to See in the Week Ahead
- January retail sales are expected to be moderate.
- Fed Chair Janet Yellen testifies before Congress on the state of the economy and the Fed’s policy intentions with futures markets now discounting only one move this year.