Steady hiring is supposed to fire up economic growth. Cheap gasoline is supposed to power consumer spending. Falling unemployment is supposed to boost wages. Low mortgage rates are supposed to spur home buying. America’s economic might is supposed to benefit its workers. Yet all those common assumptions about how an economy thrives appear to have broken down during the first three months of 2015, AP reported.
The economic benefits that normally would flow after a full year of solid hiring have yet to emerge. Just 126,000 jobs were added in March, the government said Friday. Average weekly paychecks fell. Restaurants cut back on hiring.
Had Friday’s report been released a few days earlier, “it would have been laughed at as a great April Fools’ joke,” said Gregory Daco, head of US macroeconomics at Oxford Economics.
The middling gains confirm evidence elsewhere of a broad economic slowdown. During the first three months of the year, the Atlanta Federal Reserve forecasts that the economy actually came to a standstill – failing to grow at all.
Factors Overlooked
Now, some analysts are pointing to factors that might have been downplayed or overlooked this year. Others are holding to their projections about the economy as it theoretically should be.
Here are five factors that help explain why the US economy isn’t accelerating as you might expect.
- Nasty Weather: For parts of the United States, it felt like endless winter. The snowfall and frigid temperatures that lingered until the closing days of March can freeze economic growth. Construction crews built fewer homes. If weather was a culprit, it might actually be an encouraging fact.
- Strong Dollar: Many US factories ship their wares around the world. But because the US economy has fared better than its trade partners, US factories are now at a disadvantage. Goods from US factories are about 20 percent costlier in Europe than a year ago, an increase that has dampened sales.
- Oil’s slick Moves: A barrel of crude oil costs under $50, having more than halved in price since June.
- Meager Pay Raises: It’s hard for consumers to spend more if their paychecks barely move. Average annual wage growth is stuck at a meager 2.1 percent even as the US unemployment rate has tumbled over the past year to a near-normal 5.5 percent from 6.6 percent. And average hours worked declined last month, causing workers to earn even less than they did in February.
- Going Automatic: The US economy is undergoing seismic technological shifts. And many employers are finding automation preferable to hiring. A survey of Harvard Business School alumni released in September found that nearly half would rather invest in technology than hire or retain workers. This displacement can undermine the usual connection between falling unemployment and rising wages.
