Amid the global jitters that rattled the financial markets at the start of the year, optimistic economists offered assurances that the U.S. economy was reasonably healthy and didn’t deserve the bad rap the markets effectively were giving it.
A mid-February agreement between Saudi Arabia and Russia to freeze oil output has stabilized worrisome oil price trends, and that has helped the major market indexes to begin bouncing back. Last week, upbeat news from several sectors of the American economy prompted stock investors to shed even more of their pessimism.
No only did the Labor Department say the country added 242,000 jobs in February, but auto sales also remained high, construction spending for January climbed, factory orders rebounded — though less than economists expected — and the Institute for Supply Management’s index that tracks the service sector showed growth and topped expectations.
By the end of the week the markets had posted their third successive week of gains. The Dow Jones industrial index rose 0.4 percent on Friday, to 17,006.77, closing above 17,000 for the first time since Jan. 5.
The Standard & Poor’s 500 index rose 0.3 percent to 1,999.99, barely finishing below its own psychologically important barrier of 2,000, a number it last closed above on the same day the Dow ended trading above 17,000. The Nasdaq composite index rose 0.2 percent to 4,717.12, giving the nation’s three main stock indexes their third week of gains in a row.
All three rose more than 2 percent for the week.
The Labor Department’s February jobs report topped expectations, although it revealed some flaws in the nation’s continuing recovery from the Great Recession that could hold back the sellers of big-ticket items such as cars and boats. The average hourly wage fell by three cents, to $25.25, and the number of hours that people worked declined by 0.2, to 34.4.
The government said job gains occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services. As MarketWatch noted, the pay in many of those jobs is below the national average. Higher-paying sectors, such as manufacturing, cut jobs.
"[There was] something for everyone: recession fears ease with strong job growth, but negative wage growth points to a [Federal Reserve] on hold for now,” Quincy Krosby, market strategist at Prudential Financial, told USA Today.
“Clearly, slack in the employment landscape is being absorbed, but the Fed needs to see wage growth improve" before it decides to resume the modest rate increases that it is considering this year, Krosby added.
The jobs report was the culmination of a week that showed strength in important sectors of the economy.
U.S. auto and light-truck sales rose 6.8 percent last month, to 1.3 million vehicles, marking the best February since 2001. The annual adjusted sales rate was 17.53 million, the best for a February since 2000. Ford, Fiat Chrysler, Nissan and Honda reported double-digit sales gains.
Wells Fargo economist Sam Bullard told Reuters that the auto sales numbers showed the consumer is still a bright spot. Auto sales are an early indicator each month of consumer spending.
"Consumers, while still cautious overall, are confident enough in their own personal economic situation and the outlook to be able to purchase a car," Bullard said.
Additionally, the Commerce Department said construction spending rose 1.5 percent in January to a seasonally adjusted annual rate of $1.14 billion, buoyed by state and local spending on infrastructure, the highest since October of 2007.
The Commerce Department also said factory orders rose 1.6 percent in January after falling for two months in a row, although economists had expected a 2.4 percent gain.
In the service sector, there was growth, although it was slower than in the prior month. The Institute for Supply Management’s non-manufacturing index fell 0.1 percent to 53.4. Readings above 50 percent signal expansion.
As a result, there has been a noticeable shift in perception about the U.S. economy. Business Insider said Monday that the most recent data show the country may not be booming, but it’s not slumping, quoting a note to clients from Don Rissmiller at Strategas Research Partners:
“The case that the U.S. is in an economic recession is fading, with continued growth in payroll employment in February,” he said. “True, the [Bureau of Labor Statistics] jobs report was not universally good. But, so far, there hasn't been the contagion from financial strain that would link Wall Street and Main Street in a negative feedback loop. That doesn’t mean risk assets have a clear path forward from here. But of the three major sources of uncertainty: oil, China and the Fed, there isn’t a lot of new worry now.”