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Amid a Soft Patch, Some Sweet Relief

We’ve seen a mixed picture of the economy lately, with a good jobs report last week coming amid some concerning signs of core weakness. But some new data provide reassurance that we may once again be slogging through a soft patch rather than sliding into recession.

This morning we received the ISM Non-Manufacturing Survey, which measures services. That came in at 54.5 for March, a gain of 1.1 points over February, and comfortably over the neutral level of 50. We saw some nice improvements in the activity index, new orders and especially new export orders. Yes, services can be exported: think business, financial, professional and education services, as well as entertainment and science.

Manufacturing, meanwhile, bounced back from its winter doldrums to post a nice increase in March, according to data released by ISM on Friday. It hit 51.8, up from 49.5 in February and back over the neutral level of 50. “Those are good signs,” said Bob Hughes, senior research fellow at the American Institute for Economic Research. “Manufacturing has been weak in recent months. It’s good to see this. It’s even better when you look into some of the details.”

New orders, and new export orders, saw big jumps, Hughes said. “That’s a nice gain and a very positive sign,” he said, adding, “One month doesn’t make a trend.”

Also out this morning was the Job Openings and Labor Turnover survey by the Bureau of Labor Statistics. Total job openings in the most recent month measured, February, fell to 5.4 million jobs, down from 5.6 million in January. The softness was widespread across industries, but given the good employment numbers of last week, it may be that employers were busy filling those openings, Hughes said.

People quitting their jobs, meanwhile, were up, at 2.95 million in February, from 2.85 million in January. People quitting their jobs is generally a sign of confidence in the economy, as people feel more secure in finding a new one, or perhaps they already have a new one lined up, Hughes said.

“In the broad picture, the economy is in one of the many soft patches we’ve had since the end of the recession. In the midst of a soft patch, the economy is somewhat more vulnerable,” Hughes said. “To see some positive data is obviously encouraging. We’re continuing to get mixed signals, we’re still keeping a cautious view of everything.”

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