March was tough for the U.S. economy.
The U.S. only added 126,000 jobs in March, the lowest since December 2013 and well below the CNNMoney economist survey forecast of 244,000.
The unemployment rate remained the same at 5.5%.
Perhaps the biggest disappointment is that wage growth stayed sluggish. Average hourly earnings went up only 2.1% over last year. The goal is to see 3.5% — or better — wage growth. To put that another way, Americans made $24.34 an hour a year ago. That only bumped up to $24.86 an hour now.
Lackluster wage growth is a major reason why many Americans still aren’t feeling the economic recovery — and why they aren’t spending much lately.
“All the measures were weak and beyond what anybody thought,” says Allen Sinai, chief economist at Decision Economics. “It’s a bad first quarter.”
Warning signs: The March jobs report is disappointing and raises more questions about whether the U.S. economy is slowing.
After gaining momentum in 2014, U.S. economic growth has sputtered in 2015. The Federal Reserve Bank of Atlanta forecasts the economy grew 0% in the first quarter compared to a year ago. That’s right — nothing.
Consumer spending has been close to zero too. The most recent retail sales were negative, and the number of new homes getting built missed expectations. Slow wage growth helps explain why spending is so sluggish.
“Raising real wages is a big part of the unfinished business,” says U.S. Secretary of Labor Tom Perez. He emphasizes that wages are picking up, just not enough yet.
There’s also widespread concern that the strong U.S. dollar is hurting American companies that sell their products overseas. That could limit profits, and when profits shrink, companies pump the brakes on hiring and spending.
“The dollar is putting pressure on the U.S. economy,” says Russell Price, senior economist at Ameriprise Financial.
America’s dollar dilemma could make a big impact on whether the economy regains its momentum in the spring.
What’s next: Everyone from Main Street to the White House to the Federal Reserve will be watching to see if March was just a winter blip or if it’s a turning point. Remember what happened last year: economic growth was negative in the first quarter of 2014 before the economy gained steam and finished the year strong.
The Federal Reserve is thinking about when to raise interest rates for the first time in about a decade. Interest rates have been near zero — a historic low — since the financial crisis. Many credit the low rates for spurring a surge in the stock market and helping jumpstart the economy.
This latest report may make the Fed more hesitant to raise interest rates in June.
“The timing and pace of their interest rate actions is likely to be delayed a bit further,” says Price.
The stock market was closed Friday, but the futures market is tanking after the report. Dow futures fell 165 points and S&P 500 and Nasdaq futures are down about 1%.
Where the jobs are: Despite March’s weak report, experts believe the economy will regain momentum in the spring and summer.
The bright spots in hiring continue to be health care, business services and the retail sector. Those three industries led the way. Health care alone has added over 360,000 jobs in the past year.
On the other hand, cheap gas is starting to take its toll. The energy sector shed 11,000 jobs in March. The industry has lost 30,000 jobs so far in 2015 as oil prices have fallen dramatically from over $100 in the summer to under $50 this year.
Still, some economists are optimistic that 2015 will be repeat of last year: a slow winter followed by a pick up in the spring.
“We should see better jobs growth next month,” says Sinai.
