Dollars and Sense: Stop worrying about jobs, start watching inflation

Focus on jobs. Once a month we have a week during which we get a lot of employment related data, and last week was that week for March. On Wednesday, payroll processor ADP said private employers hired 212,000 workers in February. The number was slightly below expectations, but still considered decent. On Thursday, we got the report for first-time claims for unemployment benefits. First-time claims rose by 7,000 to 320,000, the highest number since last May.

Don’t stop there. That doesn’t sound like good news. Both numbers moved in a negative direction. But it’s important to note that both numbers were still very good, and economists said cold and snowy weather in February and a strike by petroleum refinery workers likely were to blame for most of the uptick.

The key report. And then there was the key report, which came on Friday from the Bureau of Labor Statistics. The number of new jobs grew to 295,000, significantly above the consensus view on Wall Street. And the unemployment rate dropped to 5.5 percent. Critics of the Obama administration say if you drill into these numbers you will still find lots of unemployed and underemployed people. There is some truth to that criticism. The rate of unemployed and underemployed people, sometimes called U-6, is still at about 11 percent. But it’s important to note that this rate is always higher than the main U-3 unemployment report. The U-6 number was above 16 percent in 2011, when Obama took office, so you can’t blame all this on him. Bottom line: It’s hard to say these numbers are anything but good. We haven’t seen employment activity like this since the late 1990s.

Home and away. Overseas, the euro continues to fall. It hit an 11.5-year low against the dollar on Thursday, the same day European Central Bank President Mario Draghi outlined the ECB’s quantitative easing program at a press conference after a scheduled policy meeting. The program will go into effect this week. Here at home, I noticed a report from a group called The Business Roundtable, which claims CEOs of major U.S. companies say they are more optimistic this year than last. They expect both sales and capital spending to rise in the next six months. That optimism was reflected in monthly auto sales, which rose. The big surprise in a report released last Tuesday: Toyota outsold Ford to take the No. 2 spot, behind General Motors.

Putting a fork in February. February was a good month in the stock markets. The Dow and S&P 500 erased January’s losses and set new record highs. And the NASDAQ went over 5,000 again, a level it hasn’t reached since March 2000, at the height of the dot-com bubble. And even though the NASDAQ did retreat late last week, it is important to note the fundamentals of the NASDAQ are very different from 15 years ago. Internet companies have real revenue and real profits, and new devices such as smart phones have fulfilled some of the unmet promises of what came to be known as the dot-bomb era.

The week ahead. It’s going to be a fairly light week for reports, though several are worth paying attention to. The retail sales report on Thursday is always one of the month’s biggest reports because of the outsized role retail plays in the overall economy. The producer price index, due out on Friday, will give us one way of looking at inflation. So far, inflation has remained in check, but some analysts are worried the Federal Reserve’s bond-buying program will inevitably lead to runaway inflation. So analysts are hyper-sensitive to any indicator that might give us an idea of where inflation is headed.

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