WASHINGTON – U.S. hiring has been strong for the past six months, yet economic growth has faltered over the same period. Which yardstick paints the more accurate picture of how the country is doing?
The March jobs report, to be released Friday, may help answer that question. Economists forecast another solid month of gains: They expect employers added 200,000 jobs in March, while the unemployment rate remained at an eight-year low of 4.9 per cent, according to a survey by data provider FactSet.
Hiring at that pace would demonstrate that employers remain confident enough in the economy to add to their staffs, despite signs of sluggish growth. That suggests they see the sluggishness as likely to be temporary.
It could also provide a needed boost to growth for the rest of this year, especially if it is accompanied by a solid increase in pay. More jobs and higher incomes typically fuel consumer spending, which is a critical source of growth this year. Other potential drivers of the economy, such as exports and business investment, have weakened.
Consumer spending has faltered since last winter after healthy gains in 2015. Spending ticked up just 0.1 per cent in February for the third month in a row. That tepid trend caused many economists to slash their forecasts for growth in the first quarter of this year to below 1 per cent.
Mark Zandi, chief economist at Moody’s Analytics, says the economic growth figures will likely be revised higher over time, bringing them more closely in line with the strong jobs numbers.
“If you are trying to understand how this economy is doing, I wouldn’t pay attention to the GDP numbers,” Zandi said. “I would pay attention to the jobs numbers. We can count jobs.”
Americans appear to be pocketing much of their savings from lower gas prices rather than spending them. The savings rate rose to 5.4 per cent in February, the highest in a year.
Drivers paid an average of $1.86 a gallon in the first three months of this year, according to AAA. That was the cheapest quarterly average in 12 years, AAA says, though gas prices have ticked higher in the past few weeks.
Zandi helps payroll processor ADP compile monthly figures of private sector hiring. The latest ADP report released Wednesday found that U.S. businesses added 200,000 jobs in March, though the ADP figures frequently diverge from the official numbers.
Other economic data has been unusually mixed. Several reports suggest that manufacturers may be stabilizing after a difficult 2015, when weak overseas growth and the strong dollar hurt production.
A survey by the Institute for Supply Management, a trade group of purchasing executives, found that factory activity has shrunk for five straight months. But its measure increased to 49.5 in February, nearly topping 50, which is the level that signals expansion.
The latest ISM manufacturing data will also be released Friday. Several regional factory surveys that have already been issued showed healthy increases in March.
And U.S. factory output increased in February for the second straight month, according to the Federal Reserve. Those gains came after a string of declines, though output is still up 1.8 per cent in the past year.
Americans have pulled back a bit from home-buying. Sales of existing homes fell a sharp 7.1 per cent in February, held back by a lack of available supply that has pushed up prices.
And sales of new homes rose 2 per cent in February. However, the gain was entirely attributable to a jump in the West, where sales soared after a sharp fall the previous month. New home sales declined in the other three regions.