The first quarter began with strong reports from the labor market and upward revisions for the last three months of 2014; it ended with the opposite.  The payroll data for March came in at just 126,000, and with revisions the quarter created 591,000 jobs compared to more than a million in the previous quarter.  To be fair, the average pace throughout this recovery has been similar to the first quarter’s pace at around 600,000, but there has clearly been a deceleration from the strength of late 2014.  We should also remember that 2014 started in a similar fashion.

As with last year, weather played a role, along with the labor dispute in West Coast ports, which saw Los Angeles (the nation’s busiest port) handle 29% less cargo in January than it did in January 2014.  The dispute was resolved in mid-February.

Beyond these more temporary effects, the US economy spent the first quarter adjusting to two longer term economic headwinds – lower oil prices and a stronger dollar.  As one of he world’s top 3 oil producers, US companies are slashing oil exploration budgets and hiring plans in light of continued weakness in oil prices.  Similarly, the dollar’s sharp rise in recent months has pressured exports and made imports more price competitive.  The combination of these factors led to flat manufacturing employment numbers in March.  

David Fuller's view

Here is The Weekly View.

I find little to disagree with in this summary.  However, there are two important variables which subscribers should keep an eye on over the next few months.

The Dollar Index will remain an important influence.  If this managed to break up out of the current range, as many people are predicting, and trend higher over the next few months, it would be a further headwind for the US economy and stock market.  Conversely, if the Dollar Index were to range somewhat lower, this headwind would be reduced.  You may recall my own view that the Fed probably intervened, commencing on 16^th March, discretely of course, since its own policies would be complicated by further near-term strength in the Dollar.

The other, less important variable concerns the price of crude oil in the USA.  If this pushed above $60 with the help of a softer US Dollar, it would steady nerves concerning the US oil industry and also reduce any inclination to slow developments in the solar-led renewables sector.