There's been a "revival" in U.S. factory production and worker productivity, but it remains to be seen if the increases will translate into more hiring later in the year, Pimco market strategist Tony Crescenzi told CNBC Friday.
“Corporations are doing well as far as cash goes,” said Crescenzi, whose company manages $1.3 trillion in assets. “What’s important is whether they’ll decide to give up some of the profit margin and transfer, if you will, to the labor" side if they want to maintain market share and keep up against competitors.
The strong yen is forcing many Japanese manufacturers to move operations to the U.S., he said. Wages are rising in developing nations, particularly China and India, forcing them to shift at least some production back to the U.S.
In addition, after last year’s earthquake and tsunami in Japan and floods in Thailand, “companies realized we’d better diversify the supply chain. So they wanted to increase production here a bit more,” he said.
At present, U.S. indicators are good, he said, starting with the unemployment rate.
“The unemployment rate is the most understandable economic indicator that there is, at least for Main Street. Most of the indicators are better” including labor, worker productivity, and car sales, Crescenzi said.
But with Europe’s problems still looming, and the Bush-era tax cuts and the payroll-tax holiday ending on Jan. 1, plus billions of dollars in automatic federal spending cuts expected, Crescenzi said there’s still a lot to concern him about the economy.
“It might make some people in the second half of the year a little more cautious about spending, so consumption could weaken then,” he said.