The U.S. economy barely moved in the First Quarter of 2015 as businesses slashed investment, exports tumbled and consumers showed signs of caution. The advanced estimate of GDP growth for the first quarter by the Bureau of Economic Analysis was a scant 0.2%, which is likely to be revised downward on May 29th. The jobs market was uneven in the first quarter but the headline U-3 unemployment rate inched down to 5.4%. The U-6 unemployment rate, which captures a much wider range of both unemployment and underemployment, is 10.8% compared to 11.8% one year ago. The labor participation rate continues to be very low but there was some improvement in the first quarter. Many economists believe 5.2% for the U-3 rate is likely to be the full employment rate given current conditions but wage growth continues to be low. Capacity utilization remains well below the long run average, suggesting that there is still a lot of room for expansion before bottlenecks lead to excess demand. The personal consumption expenditure index increased 1.4% at an annual rate in the first quarter and the consumer price index increased 2.1%on a non-seasonally adjusted basis.
First quarter real GDP in US grew 0.2%, well below the expected 1%, according to the initial estimate released by the Bureau of Economic Analysis. This increase primarily reflected positive contributions from personal consumption expenditures (PCE) and private inventory investment, which were partly offset by negative contributions from exports, nonresidential fixed investment, and state and local government spending. Real final sales of domestic product (GDP less change in private inventories) decreased 0.5% in the first quarter. This lack of growth pushed market expectations of a rate hike from mid-2015 to later in the year.