In an ominous sign for the U.S. economy, one of the few bright spots in early 2015 was revised away in Friday’s jobs report.
Now, signs point to a risk of commerce slowing and growth stagnating throughout the year, a year that President Obama and others hoped would be the long-awaited breakout for the still-damaged U.S. economy.
The Labor Department reported Friday that the U.S. added only 126,000 jobs in March, the fewest in 15 months. Even worse, it marked down its estimates for the past two months, meaning that job gains averaged less than 200,000 for the first three months of the year — well below the relatively strong 260,000 rate for 2014 and close to the average for 2013.
Friday’s report brought the jobs numbers into alignment with a number of other disappointing or outright negative economic data points from recent weeks, including falling retail sales, slowing manufacturing activity and weak industrial production.
The Federal Reserve Bank of Atlanta’s real-time projection of gross domestic product shows first-quarter growth coming in at a 0.1 percent annual rate, after the fourth quarter’s disappointing 2.2 percent.
For now, it appears that economic officials in the White House and Federal Reserve will not overreact to the news.
In recent comments, Fed officials have suggested that it would take major negative developments in the first quarter to change their current view of the economy.
The Fed said in its March statement that it will move to raise rates, for the first time since 2008, when it is “reasonably confident” that inflation is rising from its currently low levels to 2 percent.
Yellen said at a speech last month in San Francisco that confidence in rising inflation would come from “continued improvement in the labor market” and that she expected growth to pick up over the course of the year.
Atlanta Federal Reserve Bank President Dennis Lockhart, considered a centrist at the Fed, brushed off weak data to start the year. “The slowness in the first quarter obviously raises concerns that we’re going to see a continuing or persistent slowdown, but that’s not my base case view … My base case view is that we’ll see a rebound in the second and third quarter and beyond,” he said during an interview with the New York Times.
There were also clear headwinds to growth in the early winter months of 2015 that are expected to let up later in the year, most notably the unusually cold and harsh winter conditions in some states. Weakness in the euro zone also has led to a sharp appreciation in the dollar, hurting U.S. manufacturing.
In response to the jobs report, White House economists called for added infrastructure spending and to lift statutory caps on government spending. They had to stretch to find good news in the report, highlighting the facts that hourly wages are up in recent months in inflation-adjusted terms because of the falling cost of oil and that women account for a great share of jobs.
“It is important not to read too much into any one monthly report,” cautioned Jason Furman, Obama’s top economic adviser.
Jim O’Sullivan, the chief economist for the forecasting firm High Frequency Economics, echoed that assessment, writing that “the data can be volatile and one disappointment after a series of upside surprises is not very concerning.”
While job growth has been a disappointing 197,000 over the past three months, O’Sullivan noted, it has been 261,000 over the past six months, in line with the past year and a massive improvement over much of the economic recovery. The jobs recovery began in 2010 and was unusually tepid.
Most forecasters already saw weak growth for the rest of the year. The Federal Reserve’s latest projections from March placed gross domestic product growth at 2.3 percent to 2.7 percent.
