First Quarter 2015 Economic Review

The beginning of April has kicked off the 2015 baseball season, as well as the release of economic data for first quarter 2015. So far this season, games have shown a nearly record low number of runs. While the start of the season may have disappointed fans of the long ball, we have to keep in mind that the season is very young. What happens in April isn’t always an indication of how the season will go. Similarly, it may be tempting to look at individual pieces of economic data—many of them affected by weather, the West Coast port strike, and the stronger U.S. dollar—and have concerns about the state of the economy.

We prefer to look at the bigger picture and take a longer-term view. Many of us were discouraged by the March jobs report. However, when we consider other indicators, we are encouraged by the overall health of the economy. For example, initial filings for jobless claims remain near the lows of the ongoing economic expansion. In addition, in the 12 months prior to the weather-impacted March report (ending in February 2015), the U.S. economy had created an average of nearly 275,000 jobs per month, exceeding 200,000 in each of those months—the longest streak in 20 years.

It is also encouraging that the Beige Book, the Federal Reserve’s qualitative assessment of economic, business, and banking conditions on Main Street, continues to indicate solid, mid-cycle economic growth. The recent report indicates that the weak economic data in the past few months likely overstated the weakness in the U.S. economy at the start of 2015. That weakness is likely to get plenty of attention in late April, when the initial estimate of first quarter 2015 gross domestic product (GDP) is likely to confirm tepid growth during the quarter.

Looking ahead, it’s important to note that some of the factors that depressed economic activity in the first quarter have already reversed. The weather has improved, the port strike has been settled, and the oil and gas industry has made significant progress adjusting to the new lower oil price environment. As a result, like last year’s second quarter, which sprang back sharply from a weather-driven decline in first quarter GDP, we may see growth rebound in the current quarter. We are already seeing some encouraging signs; for example, housing starts bounced back in March after a sharp weather-driven decline in February.

Just like even the best hitters have an off night, or even an off week, there will always be some economic reports that are less encouraging than others. In today’s 24-hour media world, we have constant access to economic data. It’s important not to get distracted by any individual report that might seem discouraging. Instead, we are keeping our eyes on the bigger picture and larger trends.