What’s up with the U.S. economy? After practically no GDP growth in the fourth quarter of last year and tax increases implemented at the start of 2013, there weren’t many high expectations for the first quarter. Many economists were expecting tepid growth in the key economic growth measures. Instead, recent economic reports have come in […]
What’s up with the U.S. economy? After practically no GDP growth in the fourth quarter of last year and tax increases implemented at the start of 2013, there weren’t many high expectations for the first quarter.
Many economists were expecting tepid growth in the key economic growth measures. Instead, recent economic reports have come in better than expected, showing surprisingly strong consumer spending and job growth.
On March 13, the U.S. Commerce Department reported that retail sales rose 1.1 percent in February, more than double what economists had been forecasting and much higher than the revised 0.2 percent gain in January.
If you strip out gas sales (which have increased because of higher prices), retail sales still rose a healthy 0.6 percent last month despite most Americans seeing their take-home pay cut at the beginning of the year with the end of the 2 percent Social Security payroll tax cut.
“This all suggests that the hit to spending from the payroll tax cut and higher gasoline prices, which reduce the amount of cash available to spend on other items, hasn’t been too bad,” Paul Dales, senior U.S. economist at Capital Economics, said in an Associated Press story the day of the report. “The recent pickup in both employment and earnings growth bodes well for consumption growth later in the year, too.”
U.S. employers added 236,000 jobs to their payrolls in February, the U.S. Bureau of Labor Statistics reported on March 8. That easily exceeded economists’ forecasts for growth of about 160,000 jobs.
The unemployment rate fell to 7.7 percent last month from 7.9 percent in January. It’s the lowest unemployment rate since December 2008. Average hourly earnings and the average workweek also ticked up in February.
All this is certainly good news, but we have seen this movie before. The beginning of the year brings a series of positive economic reports that leads people to believe the economy is finally firing on all cylinders. And then, just like that, the economic data turns sour in the spring and summer, disappointing economists and leading to more unprecedented action from the Federal Reserve to help out.
Just last year, the U.S. economy added an average of 262,000 jobs a month in the first quarter, before slowing to an average of 108,000 jobs gained per month in the second quarter.
Will this year be different? Will the economic recovery take full flight? Stay tuned.
Adam Rombel is editor-in-chief of The Central New York Business Journal. Contact him at arombel@cnybj.com