AFTER almost stalling in the first quarter, the U.S. economy will show whether it has got back into gear in the coming week with the monthly report on the labor market that has so far shrugged off global concerns and the strong dollar.

    Gross domestic product increased in the first quarter at an annualized rate of just 0.5 percent, implying quarterly growth of around just 0.12 percent, its weakest pace in two years. It was hit by soft consumer spending, businesses cutting inventories and investment and a strong dollar hurting exports.

    The labor market though remains robust, with average employment gains of 209,000 in the first quarter. A further 200,000 of non-farm payrolls are foreseen for April, data on which will be released Friday.

    The Federal Reserve left interest rates unchanged in the past week and kept the door open to a hike in June while showing little sign it was in a hurry to tighten monetary policy further given the economy’s slowdown. It hiked rates in December for the first time in nearly a decade.

    The core rate of PCE (personal consumption expenditure) inflation, the Fed’s preferred gauge, remains below the U.S. central bank’s 2 percent target in the first quarter, easing to 1.6 percent in the year through March, making rate hikes less likely. Wage growth was also muted.

    However, strong labor market data could eventually be the trigger for Fed action.

    Harm Bandholz, chief U.S. economist at UniCredit, believes the Fed will act in June, although this depends on how quickly employment gains impact household spending and cause the U.S. economy to rebound. (SD-Agencies)