You are here: Home News Everything in the economy’s slowing down except for job creation

Everything in the economy’s slowing down except for job creation

Market Watch, 29 March 2015 - The U.S. economy has slowed down by almost every measure except for perhaps the most crucial one: jobs.

Sales at retailers have been soft, manufacturers are growing more slowly and business investment has fallen six straight months, a batch of recent reports show. No matter. Companies continue to hire at the fastest pace in 15 years, with little sign they are ready to apply the brakes.

The willingness of companies to hire and to shun layoffs might be a sign they expect the economy to speed up again in the spring. The first quarter may have been held back by headwinds that are short-lived, such as heavy snowfall, a soaring dollar and a plunge in oil prices that forced companies in the fast-growing U.S. energy sector to retrench.

Yet if the pace of hiring also slackens, beware. Wall Street could get knocked for a loop and the Federal Reserve would almost certainly push back the timing of its first interest-rate increase in years.

But that’s not what investors expect when the latest monthly employment report is issued on Friday. In March, the U.S. likely added a healthy 255,000 jobs, with the unemployment rate holding at a seven-year low of 5.5%, according to economists surveyed by MarketWatch. That would be just a touch slower than the 288,000 average gain from December through February.

“On the bright side, labor markets continue to improve,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. Case in point: Jobless claims, a proxy for layoffs, have been under the key 300,000 threshold for three straight weeks and remain near a 15-year low.

The strong run of job creation is also expected to help lift consumer spending in February and keep consumer confidence near a postrecession high. They are part of a data deluge this week in the runup to employment report.

Even another strong job gain, however, probably won’t be enough to soothe heightened anxiety about the slowdown in the economy early in the new year.

An ultra-strong dollar that makes exports more expensive and harder to sell probably will remain a mild drag on U.S. growth for months to come, for one thing. Consumers are also still cautious even though lower gasoline prices and an improved labor market have lifted their confidence to a postrecession high.

The puzzling lack of business investment is another reason to fret.

Scott Anderson, chief economist of Bank of the West, points out that the level of manufacturing inventories relative to shipments of goods has climbed to the highest level since the Great Recession. If manufacturers have increased inventories faster than they can sell their products, they’ll have to cut back on production for several months to work off the excess.

“Manufacturers may have made some misjudgments about future demand,” he said.

If Anderson is right, factory orders in February and pair of surveys of manufacturing executives this week should supply some evidence.


Document Actions