Spring Bounce Back

Many of us are spending our Saturdays out in the yard, helping our lawns bounce back from a tough winter. As the brown patches and bare spots that are reminders of colder days fade, our lawns’ roots are showing underlying strength. It’s heartening to see the new growth and greenery now emerging, just as we saw last spring.

Similarly, the U.S. economy is bouncing back after a largely weather-driven first quarter decline, just as it did a year ago. The April 2015 Employment Situation report showed enough strength to suggest the economy is gaining traction, with growth in “good old American know-how” jobs continuing. Encouragingly, wage growth in this important segment has also been above average. We continue to watch wages in all sectors, as more bounce is needed to ensure broad-based wage growth.

The most recent report on new claims for unemployment fell to its lowest level since 2000, and the four-week average for these claims is at a 15-year low. These healthy results are another indication that temporary factors affecting the economy in the first quarter are fading, keeping the Federal Reserve on track to potentially raise rates in the latter part of 2015.

There is continued confidence in the strength of the consumer, with consistent consumption patterns that we’ve seen before (in the early stage of the recovery from the Great Recession), i.e., consumers spending some, saving some, and paying down some debt. It was encouraging that March sales rebounded and were revised up, despite April retail sales disappointing many. Second quarter core retail sales are now running 2% ahead of the first quarter—a big improvement from the 0.5% first quarter gain. And again, temporary factors affecting first quarter retail sales have subsided.

These recent economic reports do not change the expectation that U.S gross domestic product (GDP) will grow 3%-plus over the remainder of 2015, consistent with growth rates during the previous business cycle. Looking ahead, consumer spending gains continue to look supportive of GDP growth in the coming months.

Spring is a time for renewal and a time for landscapes and lawns to bounce back. In our eyes, the U.S. economy is also bouncing back after a weak first quarter, and based on the many indicators we follow, it continues to have solid roots. To be sure, more is needed, and in the weeks ahead we will be watching the consumer, jobs, wages, and other key economic indicators for evidence this bounce back is occurring.