PNC economists provide insight into key indicators that may have an impact on current business performance and the path ahead.
Institute for Supply Management (ISM) Manufacturing Survey
- The ISM Manufacturing PMI, or Purchasing Manager’s Index (PMI), decreased to 49.0 in March 2025, bearing out the expected impacts of tariff action. Both manufacturers’ own inventories and their customers’ inventories saw gains in March 2025’s report, further supporting the scenario where recent hints of a manufacturing turnaround may well have simply been the result of businesses stocking up in order to get ahead of tariff impacts.
- New Orders for March 2025 posted a second consecutive sharp drop, falling to 45.2 – the weakest since May 2023. After New Orders moved strongly above the expansionary threshold of 50.0 through the fourth quarter of 2024, the February and March readings reveal that the short-lived trend was preparation for subsequent near-term weakness, as the rhetoric surrounding tariffs became action and the realities of higher manufacturers’ costs hit home.
- Commodity Prices revealed further upward pressure facing manufacturers with a rise to 69.4, the highest reading since June 2022. Higher costs for manufacturers suggest that renewed upstream price pressure will be pushing consumer prices higher through at least mid-year.
U.S. Goods and Services Trade Deficit
- The seasonally adjusted nominal U.S. goods and services trade deficit retreated 6% in February to $122.7 billion before adjustment for inflation, from the largest trade deficit on record of $130.7 billion in January. Despite the monthly retreat, the three-month average trade deficit reached the highest level in more than two years. On a year-ago basis, the total trade deficit was up 77% in February.
- The goods trade deficit fell more than the services trade surplus on the month. The goods trade deficit narrowed 5.7% in February from a record high in January, led by a 5% increase in goods exports and a less than 1% decline in imports.
- Goods imports fell 0.2% on the month. Imports of consumer goods rose 3% in February after increasing in January. In smaller categories of consumer goods, imports of cell phones and other household goods jumped 14% on the month as retailers rushed their purchases ahead of higher tariffs. On a year-ago basis, imports of all categories increased except for autos, which were down more than 8%.
- The services trade surplus fell to $24.3 billion in February from $25.2 billion in January. This came from a narrow decline in services exports (down 0.4%) and a small rise in services imports (up 0.7%). Travel services, the second-largest category, registered a deficit for the month. Travel outside the U.S. (services imports) rose 1.4%, while inbound travel to the U.S. (an export) fell 1.4%. Over the past year, total services exports and imports have increased, but exports rose more than imports, resulting in a 3% climb in the total services surplus from the same time last year.
Employment
- U.S. job growth came in better than expected in March at 228,000, according to a survey of employers from the Bureau of Labor Statistics. The consensus expectation was for job growth of 140,000. The three-month moving average of job growth through March was 152,000. This is down from a three-month moving average of 184,000 in February, and average monthly job growth of 168,000 in all of 2024. Job growth is easing but remains solid.
- The unemployment rate rose slightly to 4.2% in March from 4.1% in February and 4.0% in January. The unemployment rate rose even as employment increased, because the labor force (the number of people working or looking for work) rose by an even larger 232,000. The labor force participation rate (the share of adults working or looking for work) rose to 62.5% in March from 62.4% in February, the lowest rate since January 2023, when the labor market was still recovering from the pandemic. The labor force participation rate has been between 62.4% and 62.8% for more than two years. This is below the 63%+ rate prior to the pandemic, and the labor market is structurally tighter now than it was pre-pandemic.
- Average hourly earnings rose 0.3% in March from February, after a 0.2% increase in February (revised lower from 0.3%). On a year-ago basis, average hourly earnings were up 3.8% in March, compared to 4.0% growth in February. Average wage growth has been around 4% since the fall; this is down from close to 6% in early 2022, when the historically tight labor market was driving very large pay increases. But it is up from below 3.5% before the pandemic, and strong wage growth is one reason why progress in slowing inflation to the Federal Reserve’s 2% objective has been uneven recently.
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