It was a good week for the economy.
Even before Friday's Non-Farm Payrolls report, we reported that a lot of data was coming in very strong, suggesting at least that the expiration of the Payroll Tax Holiday was not hitting the economy as hard as some had feared.
Prior to the jobs report, we saw really nice numbers on ISM Manufacturing, ISM Services, consumer credit, and initial jobless claims.
In our annual forecast rollout last November, we predicted that the US economy would move “over the hump” of fiscal contraction, with still-sluggish growth in most of 2013 followed by a gradual acceleration to an above-trend pace in late 2013 and 2014. But the recent data raise the tantalizing prospect that the “hump” may already have occurred . ... The most visible data point is the strong February employment report showing a nonfarm payroll gain of 236,000 and a drop in the unemployment rate to 7.7%. But arguably the more important one is the apparent resilience of consumer spending despite the $200bn tax increase that took effect in January. ... In our view, it is still too early to close the books on the early-2013 consumption slowdown. After all, we only have auto sales and consumer confidence in hand for February so far. And we still think that the weakness in federal spending will restrain growth in coming quarters. But if consumption picture holds up in light of upcoming data, a modest upward adjustment to our growth forecast would probably make sense.
Of course, the sequestration has just barely begun, and it may take some time for that to play out. But it's clear that we're getting close to breaking away from the post-crisis "new normal" and more towards the "old normal" trend growth for the economy.
So tantalizingly close!
Anyway, Calculated Risk has put up a great roundup of last week's data. Bill McBride prefaces his writeup with the line: "WARNING: Don sunglasses before reading! :-)"
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