A one-two punch of lower oil prices and increased hiring in the manufacturing sector is pushing the US economy back towards robust health, according to a report issued this month by a leading industry group.
Daniel J. Meckstroth, the leading economist for MAPI — the research arm of the Manufacturers Alliance for Productivity — predicted that gross domestic product (GDP) will expand 3% in 2015, up from the 2.8% projected growth in November.
The GDP is one of the key indicators of how well or poorly the economy is fairing. Meckstroth found that the robust growth will be sustained in 2016, when it will grow an estimated 2.7%.
Lower Fuel Prices
Although gasoline prices are creeping back up, in November they dipped below $2/gallon in many parts of the country, the lowest they have been since 2009.
Because people had to put less money in their gas tank, it gave them more to spend on other goods and services, which in turn boosted the US economy.
More Jobs
Lower gas prices were only one piece of the economic recovery. Last week, the Labor Department announced that 295,000 new jobs were added in February, reducing the unemployment rate to 5.5%, it’s lowest since May 2008 — before the financial crisis began. Last February, the unemployment rate was 6.7%.
“We have the wind at our back and confidence across so many sectors of our economy,” said US Labor Secretary Tom Perez.
Who’s Getting Hired?
About 32,000 new retail jobs were added in February, but the health care and business services sectors also saw substantial job gains.
And then there’s manufacturing. Production in manufacturing facilities is growing faster than even the GDP. It’s on target to reach 3.7% growth in 2015, according to Meckstroth.
“Consumer spending is stronger because of lower oil prices, and manufacturing job growth is being pulled by increased production,” Meckstroth said in releasing the latest MAPI report. “The fact that employment is continuing to grow shows the US economy is maintaining its momentum. Confidence indicators are strong, the unemployment rate is low, and credit is available. More people with income tend to be self-reinforcing.”
Wages Continue to Stagnate
While there are more jobs, they aren’t necessarily high-paying ones. Wages in the private sector rose only 0.1% in February, down from 0.5% growth the previous month.
And many of the jobs added in February were in the retail sector, which typically offers the lowest pay rates. Leisure and hospitality industries added 66,000 jobs, well better paying sectors such as education and health added 54,000.
Construction added 29,000 jobs in February, while the manufacturing sector added only 8,000 new jobs. The trade and transport sectors also reported hiring gains.
So while some of the economic news is sunny, there’s still a cloud over many Americans who feel as if the recovery has yet to include them, according to Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts.
“Everyone knows of someone who has been laid off or has a friend or relative who has been laid off,” Chaison told the New York Times. “We hear we’re on the road to recovery, but people aren’t convinced of that.”