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A disappointing jobs report has caused a lot of speculation as to a possible economy slowdown. Since the report, William Dudley, New York Federal Reserve president is the first Fed representative to address the issue, noting that the job drop was broad based. In fact, Dudley raised questions whether the report itself didn’t indicate a significant slowdown economy. Q1 is expected to be weak, Dudley said, around 1% GDP growth, also noting that such drops are reflective of “temporary factors”. These temporary factors include a decrease in retail sales and manufacturing in recent months.
The report in question showed that the US economy only added 126,000 jobs in March, significantly below the 250,000 figure that economists had foreseen. What remains to be seen is whether the central bank will deem this March job slowdown as foreshadowing even more significant decreases of the labor market.
Mr. Dudley explained that this situation may have been caused by several factors. On the one side, it’s the dollar rise which is likely to have caused weak trade. Moreover, the US dollar’s strength may have also represented a “significant shock” to the economy. A further drop in energy investment may have also been caused by the oil decline and all in all, oil exploration drops will most likely cause a drag on economy.
Until now, the US job growth represented the lone bright spot suggesting that the economy was on a positive trend. Yet this unexpected slow reinforced the idea that the Federal Reserve would delay the initial rate hike until later this year.
Speaking further on the matter, he also explained that his expectations are that inflation will firm later this year while the rate-hike path is most likely going to be shallow. Such an increase would only be reasonable if the labor market experienced added improvements .
“The timing of normalization will be data dependent and remains uncertain,” Mr. Dudley said, pointing towards the fact that the economy’s evolution cannot be fully anticipated.
Despite a weaker first quarter, the GDP should have an overall 2% rise for 2015 while unemployment continues to drop towards the 5 percent mark by the end of the year.
Image Source: nytimes
