Minneapolis-based Ceridian’s new economic indicator, the Ceridian-UCLA Pulse of Commerce Index (PCI), bounced back 1 percent in March after February’s snowstorm-induced decline of 0.7 percent, signaling “the U.S. economy remains in steady recovery,” according to Ceridian.
The Index also suggests 4 percent Gross Domestic Product (GDP) growth in the first quarter, much stronger than most economists have forecast.
The seven-state Upper Midwest region posted the strongest gain nationally with an annualized 21.3 percent growth of the PCI. Released this morning, the index indicates a strong rebound in the goods-producing sector that is “relatively representative of what is what going on in Minnesota and Missouri,” which make up the majority of economic activity in the region, according to Craig Manson, senior vice president and index expert at Ceridian.
Because the index tracks the volatile goods-producing sector of the economy, it can amplify changes in the broader economy and acts as a leading indicator to pick up those changes earlier, Manson explained.
“The good news in March is that the economy is still recovering at a pace that should support job growth, although unfortunately not at a pace that will drive rapid improvement in the unemployment rate. GDP needs to grow at a 5 to 6 percent rate to drive meaningful change in unemployment,” said Ed Leamer, chief economist for the PCI, in a prepared release.
For the first quarter of 2010, the PCI grew at an annualized rate of 9.7 percent nationally, a solid gain but not enough to offset the declines of 14 percent and 16 percent suffered in the fourth quarter of 2008 and the first quarter of 2009. “In other words, we fell into the recession much more rapidly than we are climbing out of it,” Leamer said.
Based on the PCI performance, Leamer projected that gross domestic product likely came in at 4 percent, which would support normal job growth of 150,000 per month. That is well above the consensus GDP forecast of 2.9 percent growth but below the 5 to 6 percent growth needed to generate 250,000 jobs a month that would rapidly drive down the unemployment rate, according to Leamer.
The index is based on real-time fuel-consumption data observed from Ceridian’s credit- and debit-card processing business for over-the-road trucking and serves as an indicator of the current state and possible future direction of the U.S. economy. By tracking the volume and location of diesel fuel being purchased, the index closely monitors the over-the-road movement of produce, raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers.
Ceridian developed the index working with economists at UCLA Anderson School of Management and Charles River Associates.