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Let's imagine the U.S. economy as a sailboat. Positive job growth has been like a pretty steady wind, pushing the economy forward. But there are also some tricky crosswinds out there, unpredictable ones. A big drop in oil prices and a stronger dollar do help the economy along, but in other ways can hurt it, add to that a recent slowdown in global growth. NPR's John Ydstie reports on whether crosswinds are likely to push the U.S. economy forward or knock it off track.
JOHN YDSTIE, BYLINE: Lots of economists have suggested the big drop in oil prices is a gift to consumers that will propel the economy upward. David Kotok of Cumberland Advisors is one of them. He argues cheaper oil will ultimately be a positive.
DAVID KOTOK: The U.S. comes out a big winner on a falling energy price, but it takes time to filter through and into the full economy.
YDSTIE: And it starts out as a negative shock to the oil sector. Kotok says cuts in production and energy company payrolls will cost the U.S. economy up to $150 billion. That's made investors nervous. As oil prices fell sharply in January, they sent stock markets gyrating. But as lower energy prices filter through the economy, Kotok says the positive effects worth $400 billion will overwhelm the negative. Economist Liz Ann Sonders, the chief investment strategist at Charles Schwab, agrees.
LIZ ANN SONDERS: The U.S. economy is 68 percent consumer spending. So right there, you know that falling oil prices is a benefit.
YDSTIE: Since it puts money in consumers' pockets. And low energy prices also benefit many businesses whose hiring will more than offset the losses in the energy sector. But Sonders says the oil and gas layoffs are making headlines.
SONDERS: The crash in oil prices happened fast and furiously, and now we're getting those series of layoffs. And rig counts are dropping. And now people are concerned, is this going to carry further into the economy? How much of this a function of weak global growth?
YDSTIE: And there's good reason to be concerned, says Jeffrey Snider, head of global investment research at Alhambra Partners.
JEFFREY SNIDER: Whenever you see oil prices collapsed, especially by something like 60 percent, something else is coming on. So therefore any benefit that might come to consumers in the form of lower energy prices is being overwhelmed by whatever it is that's causing oil to fall in the first place.
YDSTIE: And falling oil prices are a clear sign of a dangerously weak global economy, says Snider.
SNIDER: You have economies from Europe, Japan, China that are either in or very close to recession or some form of growth that is significantly degraded.
YDSTIE: And Snider says recent data suggest U.S. consumers are saving most of the windfall they get from lower energy prices, not spending it to fuel growth.
SNIDER: And that's an indication of very cautious behavior.
YDSTIE: Cautious behavior that he says suggests underlying problems in the U.S. economy, including slow wage growth. Snider says another crosswind is chilling profits for American exporters and multinationals. That's the strong dollar. Liz Ann Sonders agrees earnings at multinationals are being hit. But she argues a strong dollar signals confidence in the U.S. economy that is historically associated with strong growth.
SONDERS: We're not an export-oriented economy. You know, most other countries that want to try to lower the value of their currency is because a bigger part of their economy is export-oriented. So they want that weaker currency to boost exports.
YDSTIE: In the U.S., exports account for just 13 percent of economic activity. Sonders's bottom line is that the U.S. is likely to weather the crosswinds in the global economy and experience solid growth in 2015. David Kotok goes even further. He says the U.S. will show gradual improvement for the rest of the decade.
KOTOK: We're going to do it with a stronger currency, little inflation and low interest rates. It's a pretty picture for the United States.
YDSTIE: The strong jobs figures on Friday - more than a million jobs created in the past three months - bolster that optimistic view. John Ydstie, NPR News, Washington.
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