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By Jeffry Bartash, Market Watch–

The skimpier number of new jobs created in April has been shrugged off by those who think the U.S. economy is still on the right track. But a smaller group of doubters see it as an “I told you so” moment.

Who’s right? Several key reports this week on U.S. job openings in March and retail sales for April might give us a better idea of which camp has the upper hand.

The number of job openings that companies have been trying to fill are near a record high at 5.4 million. Retail sales are also expected to rebound in April after falling in March, helped by strong auto sales and higher gasoline prices.
Even if these reports contain more sunshine than rain, don’t expect the debate over the direction of the economy to be settled soon. Some sectors such as health care and finance still show plenty of momentum, while other industries like energy and manufacturing have struggled for months and will continue to do so.

In other words, the U.S. economy is behaving much like it has since exiting recession in mid-2009. It’s growing, all right, just not that fast and it’s prone to repeated ups and downs. Firing on all cylinders is simply not something this economy is capable of.

“The April employment report does not signal recession, it merely reflects a slow-growth economy,” said Steve Blitz, chief economist at ITG Investment Research.

The mixed economy

In April, the U.S. added 160,000 jobs to mark the smallest gain since last September, according to a preliminary government estimate issued Friday. The size of the labor force also shrank for the first time since last fall.

“This hardly seems a confirmation of the economy building strength,” scoffed Robert Brusca, who runs FAO Economics.

Other economists such as Richard Moody of Regions Financial took the report in stride. “The April data do not mark the start of an ominous trend,” he said.

Recent history suggests caution is in order. The economy slowed sharply at the start of 2014 and 2015, just like it has this year, only to snap back strong in the second quarter. Economists expect the same thing to happen again.

The U.S. has also experienced other dips in hiring that turned out to be temporary. Job creation fell to 150,000 a month last summer, for instance, before surging to nearly 300,000 a few months later.

By and large, the April employment report merely underscored existing trends in the labor market. Goods-producing companies in fields such as energy and manufacturing are struggling to grow, but service-oriented firms in retail, health care and white-collar business have picked up the slack.

What’s different now, though, is the financial outlook for business. Profits have been falling since last year and companies are looking for ways to cut costs. Hiring and investment usually declines when profits do, though with a lag of six months or so.

“The squeeze on corporate profits is certainly a worry,” said Brendan Murphy, senior portfolio manager at Standish Mellon Asset Management.

Add it all up and the Federal Reserve’s job probably got a little bit harder. The Fed had been planning to raise interest rates several times this year, but it’s had to back off in light of weaker U.S. and global economic conditions. The April employment report further muddies the picture.

“In the absence of stronger growth and job creation, the Fed will be hard-pressed to make the case for tightening,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.