U.S. Indicators Show Sudden Positive Reversal

Two separate economic indicators show a sudden reversal, hinting that recent weakness in the U.S. might have been temporary.

Independent payroll services firm ADP announced on Wednesday morning that private employment rose by 212,000 jobs in February, with goods-producing jobs rising by 31,000 and construction industry jobs gaining 31,000. Manufacturing was the weakest sector, according to the report, but still saw 3,000 new jobs relative to January.

The biggest gains were found in the service sector, which saw employment rise by 181,000 jobs in February.

Two separate economic indicators show a sudden reversal, hinting that recent weakness in the U.S. might have been temporary.

Independent payroll services firm ADP announced on Wednesday morning that private employment rose by 212,000 jobs in February, with goods-producing jobs rising by 31,000 and construction industry jobs gaining 31,000. Manufacturing was the weakest sector, according to the report, but still saw 3,000 new jobs relative to January.

The biggest gains were found in the service sector, which saw employment rise by 181,000 jobs in February.

Although analysts had expected a total of 220,000 jobs to be added, many believe the momentum for economic expansion in the United States is strong. Moody’s Analytics Chief Economist Mark Zandi noted in a statement that the job gains are “broad-based” and indicate that the economy will see full employment by the middle of 2016. “Job growth is strong, but slowing from the torrid pace of recent months. Job gains remain broad-based, although the collapse in oil prices has begun to weigh on energy-related employment,” Zandi said.

Non-Manufacturing Activity Rises

Gains in service-sector jobs are following an increase in non-manufacturing activity, as measured by the Institute for Supply Management’s Non-Manufacturing Index. The NMI rose to 56.9 in February, up 0.2 points from January. The increase surprised some economists, who expected a drag on services to result from falling demand in the energy sector amidst falling oil prices and the west coast port strike, which introduced supply constraints for some businesses in the country.

“Comments from respondents have increased in regards to the effects of the reduction in fuel costs and the impact of the West Coast port labor issues on the continuity of supply. Overall, supply managers feel mostly positive about the direction of the economy,” said the report’s author, ISM Chair Anthony Nieves.

The biggest gains were in employment, imports, prices, and order backlog, indicating demand is gaining strength throughout the economy. The increase in prices is particularly surprising, as many economists believe deflationary pressures from falling energy costs could keep all prices low.

The increase in employment, which rose from 51.6 to 56.4, is largely in-line with expectations. The increase in prices and employment are likely to cause wages to increase throughout 2015, which economists believe will create a virtuous cycle that encourages more spending and more economic growth throughout the year.

Fed Sees Expansion

The Federal Reserve released its Beige Book late Wednesday afternoon, which observed continued economic expansion throughout the United States, despite a decline in oil and natural gas drilling in Cleveland, Minneapolis, Kansas City, and Dallas districts. “Reports from the twelve Federal Reserve Districts indicate that economic activity continued to expand across most regions and sectors from early January through mid-February,” said the Federal Reserve.

Further economic expansion is expected to continue, indicating the unlikelihood of a recession in the short term. However, some economists caution that the Fed is likely to raise its interest rate target by the middle of 2015, which could threaten economic growth if it raises borrowing costs for businesses and individuals too suddenly.