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Friday, April 29, 2016

Consumer Sentiment Continues to Slide

Consumer sentiment fell to 89.0 in April, down 2 points from the previous month, according to the University of Michigan Consumer Sentiment Index.


The Current Economic conditions index improved 1.1 points to 106.7 in March, while the Index of Consumer Expectations continued its decline, falling 3.9 points to 77.6.


“The size of the decline [in future expectations], while troublesome, is still far short of indicating an impending recession,” said Richard Curtin, Chief Economist of UM Surveys of Consumers The decline is all the more remarkable given that consumers’ assessments of current economic conditions, including their personal finance, have remained largely unchanged at very positive levels during the past year.”

Personal Income and Consumption Rose in March

Personal income increased 0.4%, $57.4 billion, in March, according to the Bureau of Economic Analysis, up from a 0.1% gain in February. Personal consumption expenditures also increased, rising 0.1% or $12.8 billion.


Real disposable income – personal income less personal taxes – increased 0.3% in March, compared to a 0.2% increase in February.

The personal savings rate – personal savings as a percentage of personal income – was 5.4%, up 30 basis points from the previous month.

Wages and salaries increased $29.2 billion in March, compared to a decrease of $4.6 billion last month. The majority of the increase was due to a $26.3 billion increase in private sector wages and salaries. Government wages and salaries also increased, rising $2.8 billion.

The price index for PCE increased 0.1% in March, compared to a 0.1% decrease in February. Excluding food and energy, the index increased by 0.1%.

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Thursday, April 28, 2016

GDP Growth Slowed to 0.5% in the First Quarter

Real GDP for the first quarter of 2016 grew at an annual rate of 0.5%, according to the Bureau of Economic Analysis’s first estimate, down from the fourth quarter’s growth rate of 1.4%. The first quarter’s slower growth reflected positive contributions from personal consumption expenditures, residential fixed investment and state and local government spending, which was partially offset by negative contributions from nonresidential fixed investment, private inventory investment, exports and federal government spending.


Consumption was the largest contributor to GDP, accounting for 1.3% of growth, down from 1.7% during the fourth quarter. Consumption spending grew by $52.5 billion during the first quarter of 2016, compared to $68.3 billion during the fourth quarter of 2015.


Non-residential fixed investment was a significant drag on GDP, subtracting 0.8% from growth. The fall in non-residential investment was partially offset by a $19.4 billion increase in residential fixed investment, which contributed 0.5% to GDP.

Inventories subtracted 0.3% from GDP growth in the first quarter, as both farm and nonfarm private inventories declined. Net exports also subtracted 0.3% from GDP growth, as the decline in exports was greater than the decline in imports.

State and local government spending grew during the quarter, contributing 0.3% to GDP. This was offset by a decrease in Federal government spending, which was a 0.11% drag.

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Wednesday, April 27, 2016

Fed Holds Steady in April Meeting

The Federal Open Market Committee (FOMC) decided to maintain the current target for the federal funds rate at 25-50 basis points, as the stance of monetary policy remains accommodative.

The post meeting statement noted that economic activity “appears to have slowed” during the intermeeting period, even as labor market conditions improved further. Inflation has continued to run below the Committee’s 2 percent long-run objective, partly reflecting lower energy prices and prices of non-energy imports. The Committee expects inflation to rise to 2 percent over the medium term.

Language from the previous meeting’s statement, which said that “global and financial developments continue to pose risks,” was omitted. The Committee instead asserted that it will closely monitor global economic and financial developments.

Against this backdrop, all but one member voted to maintain accommodative policy at this meeting. Kansas City Federal Reserve President Esther George voted against this action, believing that a 25 basis point increase was warranted.

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Tuesday, April 26, 2016

Home Price Increases Slowed in February

The 20-City Case-Shiller Composite Index increased 5.4% year-over-year in February, down from January’s gain of 5.7%. The 10-City Composite Index increased by 4.6% from the previous year, down from a 5.0% annual increase last month. The National Index, which covers all nine census divisions increased by 5.3%, unchanged from January.


On a seasonally adjusted monthly basis, the National Index increased by 0.4%, the 10-City Composite increased by 0.6%, and the 20-City Composite increased 0.7%.

“Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The slower growth rate is evident in the monthly seasonally adjusted numbers: six cities experienced smaller monthly gains in February compared to January, when no city saw growth.”

Home prices rose on the month in fourteen of the twenty cities covered by the index, but fell in the remaining six cities. Seattle and San Francisco saw home prices increase by 1.1% over the month, while Cleveland and New York saw home prices fall by 0.6% and 0.5% respectively.

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Durable Goods Orders Increased in March

New orders for manufactured durable goods increased 0.8% to $230.7 billion in March, following a 3.1% decrease in February, according to the U.S. Census Bureau. The majority of the month’s increase was driven by a 2.9% increase in new orders for transportation equipment. Excluding transportation, new orders fell 0.2%.


New orders excluding defense fell 1.0% on the month, as orders of nondefense aircraft and parts and nondefense capital goods slipped. Nondefense aircraft and parts orders fell 5.7% to $9.6 billion, while nondefense capital goods orders fell 1.1% to $71.6 billion.

Shipments of manufactured durable goods, down three of the last four months, fell 0.5% to $237.0 billion, following a 1.0% decrease in February.

Inventories of manufactured durable goods were virtually unchanged at $394.1 billion, following a 0.3% decline in the previous month.

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Monday, April 25, 2016

New Home Sales Slipped in March

New single family home sales fell to a seasonally adjusted annual rate of 511,000 in March, according to the U.S. Census Bureau. The March rate is 1.5% below the revised February rate of 519,000, but is 5.4% above the year ago estimate of 485,000.


Sales were mixed across regions, rising by 18.5% in the Midwest, and 5.0% in the South, but falling 23.6% in the West. Sales in the Northeast remained virtually unchanged from the previous month.

The median price of a new home was $288,000, down from $297,400 in February. The average price was $356,200, up from $342,100 in the previous month.

At the end of March, there was an estimated supply of 5.8 months at the current sales rate, up from a 5.6 month supply in February.

Read the Census/HUD release.
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Wednesday, April 20, 2016

Existing Home Sales Rise in March

Existing home sales rose 5.1% in March to a seasonally adjusted annual rate of 5.33 million, according to the National Association of Realtors (NAR). March’s reading follows February’s revised rate of 5.07 million units.


"The choppiness in sales activity so far this year is directly related to the unevenness in the rate of new listings coming onto the market to replace what is, for the most part, being sold rather quickly," said NAR Chief Economist Lawrence Yun. "Additionally, a segment of would-be buyers at the upper end of the market appear to have been spooked by January's stock market correction."

Annual sales of existing homes rose across all regions, rising most notably in the Northeast and Midwest, increasing by 11.1% and 9.8% respectively. Sales in the West grew by 1.8%, and sales in the South grew by 2.7%.

The median existing home price increased to $222,700, a 5.7% increase from March 2015.

Distressed sales fell 2 points to 8% of sales in March. Seven percent of the month’s sales were foreclosures while 1% were short sales. On average, foreclosures and short sales sold for discounts of 16% and 10% respectively.

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Tuesday, April 19, 2016

Housing Starts Fall in March

Housing starts fell in March to a seasonally adjusted annual rate of 1.089 million, 8.8% below February’s revised estimate of 1.194 million; though, 14.2% above the March 2015 rate. Housing starts have remained above the 1.0 million rate for 12 consecutive months.


Housing activity fell in three of the four regions, with starts decreasing 15.7% in the West, 25.4% in the Midwest and 8.4% in the South. Starts rose sharply in the Northeast however, rising by 61.3%.


New building permits dropped during the month, falling 7.7% below February’s rate to 1.086 million, but grew 4.6% from March 2015.

Housing completions rose in March to a seasonally adjusted annual rate of 1.061 million, 3.5 points above February’s rate, and up 31.6 points from a year ago.

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Monday, April 18, 2016

Builder Confidence Unchanged in April

The National Association of Home Builders/Wells Fargo Housing Market Index was unchanged at 58 points in April, indicating that more builders view conditions as good than poor. The index has remained unchanged for three consecutive months.

“Builders remain cautiously optimistic about construction growth in 2016,” said NAHB Chief Economist Robert Dietz. “Solid job creation and low mortgage interest rates will sustain continued gains in the single-family housing market in the months ahead.”

Index components were mixed in April. The index measuring sales expectations in the next six months, and the index measuring buyer traffic each rose one point to 62 and 44 points, respectively. The component charting current sales conditions fell two points to 63.

The three-month moving averages for regional HMI scores posted declines. The Northeast and West fell two points each to 44 and 67 points, respectively. While the Midwest and South posted one point respective losses to 57 and 58 points.

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Friday, April 15, 2016

Industrial Production Fell in March

The Index of Industrial production fell 0.6% in March according to the Federal Reserve, largely due to declines in mining and utilities. Total industrial production for the first quarter fell 2.2% compared to last year.


Mining output fell 2.9% on the month, continuing the downward trajectory for the industry. Mining output fell at an average pace of 1.6% monthly over the past seven months.

The utilities index fell 1.2% in March, primarily due to a 4.6% decline in natural gas. The utilities index is down 7.7% over the past 12 months.

Manufacturing also declined in March, falling 0.3%. The largest manufacturing declines were in motor vehicles and parts, and in electrical equipment, appliances and components, both of which declined by 1.5%. Over the past year, manufacturing output is up 0.4%.

Capacity utilization slipped to 74.8%, 50 basis points below February’s reading, but up 1.2% on the year.

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Thursday, April 14, 2016

CPI up 0.1% in March

The Consumer Price Index increased 0.1% in March, as the indexes for energy and all food items less food and energy rose during the month. Over the last 12 months, the index for all items increased 0.9% before seasonal adjustment.


The energy index rose 0.9% in March after three consecutive monthly declines. The gasoline index increased 2.2% after a 13.0% drop in February. Fuel oil also increased for the first time since May 2015, rising by 1.7%. Over the past 12 months, the energy index fell 12.6%.

Prices for all items less food and energy increased 0.1% in March, compared to a 0.3% rise in February. Most indices rose slightly, including shelter, medical care, commodities, and apparel. The index for used cars and trucks fell 1.1%. Over the past year, the index for all items less food and energy increased 2.2%.

The food index fell 0.2% in March. The food-at-home index fell 0.5%, the largest decline since April 2009, as five of the six major grocery store food indices fell. The food-away-from-home index increased by 0.2%. Over the past 12 months, the food index increased 0.8%.

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Wednesday, April 13, 2016

Beige Book: Labor Market and Consumer Spending Improve

Economic activity expanded across the twelve Federal Reserve Districts, according to the April 2016 edition of the Federal Reserve Beige Book. Most Districts reported that growth was in the moderate-to-modest range, and expect similar growth going forward.

Labor market conditions strengthened between February and March. Most Districts reported job gains with only the Cleveland District reporting declines. Service industry employment rose in the Boston, New York, Philadelphia, Richmond, St. Louis and Dallas Districts. Several Districts reported issues filling jobs in low and high-skilled occupations, and wages increased in all but the Atlanta District.

Banking conditions remained positive, as credit conditions improved in most Districts. The lending environment remained competitive, and contacts in one District said that competition for borrowers was holding down profit margins. Commercial real estate lending grew in the majority of Districts, while auto loan demand picked up in the Chicago and Philadelphia Districts.

Consumer spending picked up in most regions, and retailers expressed optimism for the remainder of the year. Retailers in several Districts continued promotions and generous discounts. However, contacts in the Chicago area were disappointed that low gas prices and tighter labor markets did not provide a boost to sales.

Manufacturing activity increased in most Districts, with moderate growth in the Richmond and Chicago regions, and modest growth in the Philadelphia, St. Louis and San Francisco areas. Only the Cleveland and Kansas City Districts reported declines.

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Producer Prices Declined 0.1% in March

Producer prices fell 0.1% in March, seasonally adjusted, after falling 0.2% in February, according to the U.S. Bureau of Labor Statistics. March’s decrease was attributable to lower prices for final demand services.


Prices for final demand services fell 0.2%, marking the first decline since October 2015. Eighty percent of the decline in final demand services could be traced to a 0.5% decrease in margins for final demand trade. The index for final demand transportation and warehousing services also fell, dropping 0.3%.

The index for final demand goods moved up 0.2%, following eight consecutive declines. Most of the increase could be traced to prices for final demand energy, which rose as gasoline prices increased by 7.1%. The index for final demand goods less foods and energy moved up 0.1%, while final demand foods fell 0.9%.

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Retail Sales Down 0.3% in March

There were $446.9 billion of retail and food service sales in March (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), down 0.3% from February, but up 1.7% from a year earlier, according to the U.S. Census Bureau.


Core retail sales – excluding automobiles and parts – increased 0.2% after remaining unchanged in the previous month. Year-over-year core sales increased 1.8%.

Retail trade sales fell 0.2% on the month, but were up 1.3% from a year earlier.

Sales at gasoline stations increased 0.9% in March, but were 15.6% lower than a year ago. Sales at motor vehicle and parts dealers fell 2.1 % from February, but improved 1.4% from a March 2015.

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Tuesday, April 12, 2016

Small Business Optimism Largely Unchanged in March

The NFIB Small Business Optimism Index was virtually unchanged in March, dropping 0.3 points to 92.6. Six of the ten components posted declines on the month, while four posted increases.



Labor market conditions deteriorated slightly in March, as 48 percent of small businesses reported hiring or trying to hire, down from 49 percent in February. Forty-one percent of employers reported few or no qualified applicants for available positions, down 1 point from the previous month. A seasonally adjusted net 9 percent of employers plan to create new jobs, down 1 point from February and 6 points from December.

The percent of owners reporting higher sales in the past three months fell 2 points to a net negative 8 percent. Thirteen percent of small business owners reported weak sales as their top business problem, up 2 points from the previous month.

Capital spending picked up slightly, with 59 percent of businesses reporting capital outlays, up 1 point on the month. The percent of owners planning capital outlays in the next 3 to 6 months rose 2 points to 25 percent.

Credit conditions deteriorated slightly, as 5 percent of owners reported that all their borrowing needs were not met, up 1 point from February. Fifty-three percent of respondents explicitly said they did not want a loan, up 1 point on the month. Two percent of owners cited financing as their top business problem, also a 1 point increase from the previous month.

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Thursday, April 7, 2016

Consumer Credit Grew 5.8 Percent (SAAR) in February

Consumer Credit increased at a seasonally adjusted annual rate of 5.8 percent in February, rising $17.2 billion (compared to $14.9 billion in January) to $3.57 trillion.



Revolving credit rose at an annual rate of 3.7 percent ($2.9 billion) to $940.6 billion, compared to a 0.3 percent decrease in January.

Non-revolving credit increased at an annual rate of 6.6 percent, or $14.3 billion, compared to January’s increase of 7.0 percent. Total outstanding non-revolving credit now stands at $2.63 trillion.



Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 37 percent of outstanding credit. Depository institutions and finance companies are the secondary and tertiary holders, with 25 percent and 23 percent, respectively, of outstanding non-revolving credit.

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Wednesday, April 6, 2016

FOMC Minutes: Economic Activity Expanding Moderately

In the minutes of their March 15 – 16 Federal Open Market Committee (FOMC) meeting, Fed officials showed some concern regarding soft business investment and net exports, but noted that data on economic activity and labor market conditions was “broadly consistent with their earlier expectations.”

Meeting participants were “encouraged” by the growth of consumer spending over the previous quarters, and expect consumer spending to rise moderately due to employment and income gains. Many, however, noted that this strength in household spending would be partially offset by weakness in net exports due to sluggish foreign growth and dollar appreciation.

Participants noted that the labor market had strengthened further during the intermeeting period, and that households’ perceptions of job availability and firms’ assessments of the difficulty of filling jobs had returned to pre-recession levels.

Opinions were mixed on the recent increase in inflation, with some seeing the increase as consistent with a firming trend, while others believed that it was unlikely to be sustained, as it reflected an increase in the prices of volatile goods.

Against this backdrop, all but one member voted to maintain accommodative policy at this meeting. Kansas City Federal Reserve President Esther George voted against this action, believing that a 25 basis point increase was warranted.

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Tuesday, April 5, 2016

ISM: Non-Manufacturing Sector Expanded in March

The ISM Non-Manufacturing Index registered 54.5 percent in March, up 1.1 points from February’s rate and marking the 74th consecutive month of growth in the sector. Twelve non-manufacturing industries reported growth in March, while two reported contraction.


Growth in the Business Activity Index increased to 59.8, up 2 points from February’s reading. Respondents noted higher demand for services, as well as higher development for new products. Thirteen industries, including mining and educational services reported growth in business activity, while the arts, entertainment and recreation sector reported a decline.

Non-manufacturing employment grew after a month of contraction in February, as the index rose 0.6 points to 50.3. Nine industries, including mining, educational services, and healthcare reported increases in employment, while six industries, including, arts, entertainment and recreation, utilities and professional services reported decreased employment.

The New Orders Index registered 56.7 points, up 1.2 points from the previous month. Respondents cited both higher sales, along with new and expanding programs and projects during the month.

Supplier deliveries slowed for the third consecutive month, as the index increased 0.5 points to 51.0 (readings above 50 for this index indicate slower deliveries). Five industries reported faster deliveries during the month, while four reported slower deliveries.

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Foreign Trade Deficit Increased in February

The U.S. international trade deficit widened in February to $47.1 billion, up $1.2 billion from January. The widening of the balance was driven by a $3.0 billion increase in imports, which outpaced a $1.8 billion increase in exports.


The goods deficit increased $0.9 billion to $64.7 billion, while the services surplus decreased $0.3 billion to $17.7 billion. The petroleum deficit narrowed by $0.2 billion to $8.9 billion.

Exports of goods increased $1.8 billion to $118.6 billion, driven largely by a $1.9 billion increase in consumer goods, which included a $0.6 billion increase in diamond exports. Exports of services fell less than $0.1 billion to $59.5 billion, largely due to decreases in transport.

Imports of goods increased $2.7 billion to $183.3 billion, largely due to a $3.6 billion increase in consumer goods, which offset a $1.3 billion decrease in passenger car imports.

Imports of services increased $0.3 billion to $41.8 billion due to marginal increases in travel, transport, and other business services.

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Monday, April 4, 2016

Manufactured Goods Orders Fell 1.7 Percent in February

New orders for manufactured goods fell 1.7 percent to $454.0 billion in February, following a 1.2 percent January increase according to the U.S. Census Bureau. This was the third decrease in the last four months. Excluding transportation, new orders fell by 0.8 percent to $379.8 billion.


New orders for manufactured durable goods fell 3.0 percent to $229.1 billion in February, following a 2.8 percent increase in January. Orders for transportation equipment led the decrease, falling 6.2 percent to $74.1 billion.

Shipments of manufactured durable goods decreased 1.0 percent to $238.0 billion, after a 1.4 percent increase in January. Shipments excluding transportation, fell by 0.6 percent, compared to a 1.3 percent decrease in the previous month. Shipments of nondurable goods fell for the eighth consecutive month, dropping 0.4 percent to $224.8 billion. Declines in shipments of petroleum and coal products drove the decrease.

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Friday, April 1, 2016

Construction Spending Fell 0.5 Percent in February

Construction spending fell 0.5 percent in February to $1,144.0 billion (SAAR). January’s spending estimate was revised up to $1,037.5 billion. During the first two months of the year, construction spending amounted to $157.1 billion, 11.2 percent higher than in the first two months of 2015.



Total private construction fell to a rate of $846.2 billion, 0.1 percent below January’s estimate of $847.2 billion.

Private residential construction rose 0.9 percent to a seasonally adjusted annual rate of $447.9 billion in February.

Private nonresidential construction fell 1.3 percent to a rate of $398.3 billion, as construction related to communications and manufacturing fell.

Public construction fell 1.7 percent to a rate of $297.8 billion, largely due to a 4.2 percent fall in educational construction. Highway construction also fell by 2.1 percent during the month.

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Consumer Sentiment Fell Slightly in March

Consumer sentiment fell to 91.0 in March, down 0.7 points from the previous month, according to the University of Michigan Consumer Sentiment Index.


“Despite the recent small monthly variations, the overall level of confidence has remained largely unchanged during the past nine months,” said Richard Curtin, Chief Economist of UM Surveys of Consumers. “This stability reflected more positive personal finances being offset by less favorable prospects for the economy. Indeed, consumers were more optimistic about their inflation-adjusted income expectations than any time since 2007.”


The Current Economic Conditions Index fell 1.2 points to 105.6 in March, but was 1.6 points higher than it was a year ago. The Index of Consumer Expectations fell 0.4 points to 81.5.

“Consumers anticipated that the slower pace of economic growth will more than likely put an end to further declines in the unemployment rate,” says Curtin. “What was surprising was that the expectations of higher gas prices and higher unemployment have not caused an increase in uncertainty about personal financial prospects.”

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Manufacturing Industry Expands in March

The ISM Manufacturing Index rose to 51.8 points in March – up 2.3 points from February’s reading of 49.5. March’s reading marked the first expansion in the manufacturing sector in four months, as readings above 50 indicate expansion in the manufacturing industry. Of the eighteen industries, twelve reported growth while five reported contraction.


The employment index registered 48.1 points in March, marking the fourth consecutive month of contraction. Six industries, including printing and related support activities, and nonmetallic mineral products reported employment growth, while nine industries including petroleum, paper products and apparel, reported contraction.

The index of new orders registered 58.3 points in March, up 6.8 points. Thirteen industries reported growth, while three industries reported a decrease in orders.

Export orders rose 5.5 points to 52.0, marking the highest reading since December 2014. Seven industries, including wood products and miscellaneous manufacturing reported growth during the month, while ten industries reported a decrease in export orders.

The inventories index registered 47.0 points, up 2 points from February’s reading. Inventories contracted in March for the ninth consecutive month.

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215,000 Jobs Added in March, Unemployment Moves Up to 5.0 Percent

Total nonfarm payroll employment rose by 215,000 jobs in March, down from last month’s upwardly revised total of 245,000. The national unemployment rate rose slightly to 5.0 percent.


The services sector added 219,000 jobs, down from 260,000 in February. The majority of new service jobs were in education and healthcare, which added 51,000 jobs. Over the past year, healthcare employment has grown by 503,000 jobs. Retail trade also continued its growth, adding 47,700 jobs during the month.

Goods producing industries shed jobs for the second consecutive month. Manufacturing employment fell by 29,000 amid heavy job losses in the durable goods subsector. The mining and logging industry also continued to shed jobs, falling by 12,000. The mining industry has lost 185,000 jobs since peaking in September 2014. Construction employment continued to be a bright spot among goods producing industries, adding 37,000 jobs. Over the last 12 months, construction employment has increased by 301,000.

The civilian labor force participation rate moved up slightly to 63.0 percent in March. The number of long-term unemployed, those jobless for 27 weeks or more was unchanged at 2.2 million. The number of discouraged workers, those who gave up looking for work was 585,000, down 153,000 from a year ago.

Average hourly earnings grew by 7 cents to $25.43, after a 2 cent decline in February. Year-over-year earnings have grown by 2.3 percent.

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