Assumptions about economy breaking down

Associated Press

WASHINGTON

Steady hiring is supposed to fire up economic growth.

Cheap gasoline is supposed to power consumer spending.

Falling unemployment is supposed to boost wages.

Low mortgage rates are supposed to spur home-buying.

America’s economic might is supposed to benefit its workers.

Yet all those common assumptions about how an economy thrives appear to have broken down during the first three months of 2015.

The economic benefits that normally would flow after a full year of solid hiring have yet to emerge. Just 126,000 jobs were added in March, the government said Friday. Average weekly paychecks fell.

Restaurants cut back on hiring because savings at the gas pump didn’t lead to more dinner reservations. Builders and manufacturers each cut 1,000 workers from payrolls, thanks to tepid construction activity and so-so factory orders.

Had Friday’s report been released a few days earlier, “it would have been laughed at as a great April Fools’ joke,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics.

Here are five factors that help explain why the U.S. economy isn’t accelerating as expected:

NASTY WEATHER

For parts of the United States, it felt like endless winter. The snowfall and low temperatures that lingered until the closing days of March can freeze economic growth.

STRONG DOLLAR

Many U.S. factories ship their wares around the world. But because the U.S. economy has fared better than its trade partners, U.S. factories are now at a disadvantage: America’s relative health has helped drive up the dollar’s international value. Goods from U.S. factories are about 20 percent costlier in Europe than a year ago, an increase that has dampened sales.

OIL’S SLICK MOVES

A barrel of crude oil costs less than $50, having more than halved in price since June. This means wells are pumping out smaller profits, if not losses. When oil prices plunge and billions of dollars are at stake, oil companies tend to respond quickly to curb production. The number of active rigs has fallen 50 percent since October, according to Baker Hughes, an oilfield services company. This has led to layoffs, tighter budgets and fewer orders for equipment, all which hurt growth.

MEAGER PAY RAISES

It’s hard for consumers to spend more if their paychecks barely move. Average annual wage growth is stuck at a meager 2.1 percent even as the U.S. unemployment rate has tumbled over the past year to a near-normal 5.5 percent from 6.6 percent.

GOING AUTOMATIC

The U.S. economy is undergoing seismic technological shifts. And many employers are finding automation preferable to hiring.