WASHINGTON — Just as the Federal Reserve seems to be inching toward an interest rate hike because of the strengthening U.S. job market, its task is getting more complicated.
Several key sectors of the economy are flashing some signs of weakness.
Housing, manufacturing and consumer spending — the U.S. economy’s main driver — have been tepid recently. The pace of homebuilding plunged in February. Factory output is slowing as a rising dollar makes U.S. goods costlier overseas and weakens exports. And retail sales remain sluggish, with Americans spending less at stores and restaurants last month.
The main engine of strength has been the U.S. job market. Employers have added more than 200,000 jobs for 12 straight months, and unemployment has reached a seven-year low of 5.5 percent, a rate typical of a healthy job market.
Yet, annual wage growth remains stuck at 2 percent, a level that can’t support robust gains in consumer spending and home purchases. Recently announced pay increases by Walmart, the Gap and other retailers have been modest and have yet to circulate through the economy. It’s hardly surprising, then, that critical pieces of the economy remain troubled almost six years into the recovery from the worst financial catastrophe since the Great Depression.
“We’re not in an economy that is fully firing on all cylinders,” said Gregory Daco, an analyst at Oxford Economics.
