The PCE Price Index dropped by -0.3% in March, bringing the inflation measure down to 1.8% Y/Y, and the core index, which excludes the more volatile food and energy components, dropped -0.2% to 1.6% Y/Y. The Personal Income and Outlays report also noted +0.2% increases in both personal income and disposable personal income, with the increase finding its way toward personal savings (up +0.2 to 5.9%) rather than personal consumption expenditures (flat at 0.0%).

In their May meeting the Federal Open Market Committee (FOMC) left the federal fund target rate unchanged at 0.75% - 1.0%, citing a slowdown of economic activity in Q1. However, given a strengthening labor market, improving business fixed investment, solid fundamental underpinnings for consumption growth, and longer term inflation trends, the FOMC judged the Q1 slowdown to be transitory and anticipated economic growth would continue at a moderate pace.

The unemployment rate dropped -0.1% to 4.4%, its lowest reading since 2007, in April’s Employment Situation report from the Bureau of Labor Statistics. Of the 211,000 jobs created, there were gains in leisure and hospitality, healthcare and social assistance, financial activities, and mining, and there was a net loss of jobs in durable goods manufacturing and information (e.g. publishing, telecommunications). There were declines in the previous 12 months for the numbers of unemployed (-854,000), marginally attached workers (-181,000), and involuntary part-time workers (-231,000), and the labor force participation rate remains relatively stable at 62.9%.