Labor market is bright point in economy

Consumer and government spending continue to be the primary supports for the U.S. economy. Meanwhile, fears from the slowdown in manufacturing, relatively tighter financial conditions in the United States, and the problems arising from further currency devaluation in China are weighing on markets.

Confidence for consumers, and even for small businesses, remains at solid levels. Retail sales in January rose a modest 0.2% and December data was revised from a slight drop to a slight gain. The jobs market appears likely to see further growth, with jobless claims remaining low and quit levels rising, according to the Job Openings and Labor Turnover Summary (JOLTS) report, which indicates rising confidence for the labor force. Wage growth appears to be improving, which should indicate that core inflation will continue to rise this year.

The U.S. economy should still see modest growth in 2016 and further gains in core prices, as well as some stabilization in food and energy prices, which may allow the Federal Reserve to raise rates this year.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

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