The bigger picture

Job growth masks US economy's deeper weaknesses

Based on strong job creation, the US economy is on a roll. But headlines like Friday's news of 242,000 new positions in February don't tell the whole story. Productivity and gross domestic product (GDP) growth are still disappointing. Nervousness is holding people back from spending more, reinforcing America's status as a slow-growth economy.

The administration of US Presient Barack Obama has pointed to the falling unemployment rate, which held at 4.9 per cent last month, as a symbol of the strength of the US economy. That's valid, and a big improvement on the 2009 peak of 10 per cent. But payrolls are only one measure of health, and some other statistics are less rosy.

GDP grew at an anaemic annualised one per cent pace in the fourth quarter of 2015, though growth over a full 12 months was somewhat stronger. In the same three-month period, personal consumption spending grew at an unimpressive two per cent rate. Productivity fell at a 2.2 per cent annual pace. American productivity seems to have run out of steam, and without gains there's a lack of impetus for meaningful increases in wages and confidence.

Though the Federal Reserve finally started lifting interest rates in December, the US central bank's latest anecdotal evidence about the economy isn't vastly encouraging. Half of the 12 Fed regions reported only modest or moderate growth this year, with a few districts saying consumers aren't confident about spending because of the recent market volatility.

The details of the latest jobs report also reveal some headwinds. While domestic businesses like retail showed job growth, the global slowdown in growth and the strong dollar are hurting export-oriented sectors, such as manufacturing. On top of that, hourly wages slipped 0.1 per cent from January after an increase the previous month.

It's easy enough to find brighter spots, like record sales of vehicles by automakers in 2015. The point is, though, it's at best a mixed picture. Concerns about the economies of Europe and China mean worries will persist. Employment gains are most likely reaching their limit. Americans will need other reasons to be cheerful if they're going to spend enough to accelerate economic growth.