NEW YORK (TheStreet) -- The progression of positive jobs numbers since the start of 2015 is a far better reflection of the economy than the negative first quarter GDP report, says Scott Anderson, chief economist for Bank of the West.
"There have been some seasonal adjustment issues with the GDP number, like bad weather on the East Coast, and the West Coast port shutdown weighed heavily on the economy was well," says Anderson about the 0.7% contraction in first quarter GDP. "And even though the GDP number was weak in the first quarter, we didn't see it impact the job market too much."
Anderson believes the U.S. economy can maintain a growth rate of 200,000 jobs a month or better for the rest of the year. As for inflation, he does not see it as much of a problem at all, despite core CPI for April coming in above Wall Street estimates at 0.3%.
"Inflation is still too low by the Fed's standards. They want to move core consumer inflation back up to 2%, and we are trending at 1.5%," says Anderson. "We are seeing some signs that wage inflation is starting to pick up, especially where I live in the Bay Area, and the Fed will certainly be encouraged by that."
The bond market may already be on to it. The yield on the 10-Year Treasury bond climbed above 2.3% this week, up from 1.7% in late January. Anderson expects the yield on the benchmark Treasury bond to gradually rise to 2.5% by the end of 2015. "Slow growth is going to make it hard for the Fed to raise rates back to previous norms," he says. "The slope of the Fed's rate-hiking path will be very shallow."
As for the all-important consumer, Anderson says this summer will see a burst of spending as Americans hit the highway to enjoy their vacations. "The consumer is the key and that's what we are basing our prediction for a second-half rebound on," he says. "One reason why we didn't see a big jump in consumer spending in the first quarter is because they thought the drop in gasoline prices was temporary, so they saved it."
For evidence of the U.S. consumer coming out of his or her shell, Anderson points to the impressive May auto sales figures released this week. The industry sold a seasonally adjusted annual rate of 17.7 million-units, the highest level since July 2005.
Anderson also does not worry about a bubble forming in the equity markets either. "The stock market may be a little overvalued but I don't see evidence of froth," he says. "A selloff is certainly possible but I would not make wholesale changes in a portfolio."