Outlook and Market Review - First Quarter 2015

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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.