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Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., said he cut his outlook for growth during the first quarter to 1.5 percent from 2 percent because of weak spending even as the labor market has improved.
“Slower productivity growth” is responsible for job gains amid a drop in U.S. growth from 3 percent in the fourth quarter, Feroli said today on Bloomberg Television’s “ Bloomberg Surveillance” with Tom Keene. “We have a fair amount of spending data right now for the first quarter for consumers and business investment. It is adding up to a softer number.”
Employers in the U.S. took on 227,000 workers in February, completing the best six months for payroll growth since 2006, Labor Department figures showed last week. U.S. growth is expected to slow to 2.1 percent in the first quarter, according to the average of 81 economists surveyed last month by Bloomberg News.
The economy may see “probably an acceleration in the second quarter if energy prices can level off,” Feroli said. “If 1.5 percent were to persist, it would be something to worry about. But it could be a hiccup, hopefully in the pattern of better growth.”
Federal Reserve policy makers, who meet tomorrow, are unlikely to start a third asset purchase program, known as quantitative easing, in part because core inflation, excluding food and energy prices, is near 2 percent, Feroli said.
“I do not think we are going to get QE tomorrow,” Feroli said. “Something people are not talking about enough is that core inflation has stabilized pretty close to the Fed’s target. That is not arguing for more accommodation.”
Fed Chairman Ben S. Bernanke said Feb. 29 that the labor market remains “far from normal” and repeated that the main interest rate is likely to stay exceptionally low at least through the end of 2014.
Trade will weigh on first quarter growth “more than we had anticipated,” JPMorgan’s Daniel Silver said in a note.
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