Mar 12, 201508:43 AMOpen Mic
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Market and economic update: Consumers are saving their energy-cost windfalls
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U.S. job growth has been impressive, with nonfarm payrolls adding 295,000 jobs in February and 3.3 million over the past year, the highest 12-month change in 15 years. The unemployment rate dropped to 5.5%, partially due to declining labor force participation, but also due to employment growth in the household survey.
Wage growth remains modest based on average hourly earnings, which have grown just 2% for the past year. Ultimately we believe income growth should improve over the course of the year, based generally on the significant improvement in the unemployment rate. Consumers in the meantime appear to be saving their energy-cost windfalls, as the savings rate in January climbed to 5.5%, its highest level in two years.
We anticipate consumer spending should improve over the course of the year due to stronger employment, rising wage growth, and some lift to real consumer budgets from lower energy prices. Growth in the United States appears to be solid based on the Institute for Supply Management purchasing manager indexes (PMI). Manufacturing has moderated somewhat, perhaps due to the stronger U.S. dollar, but nonmanufacturing activity has picked up some momentum. The U.S. economy, in general, appears on pace to grow at an average of 2.8% over the course of 2015, helped by solid consumer employment growth, little drag from government austerity, and some lift in investment spending.