This wasn't a great report. Heck, it wasn't a "good" report. But it was a little better than most recent reports. If we average the last two months together, the 63,000 payroll jobs added in January and the 192,000 payroll jobs in February, that gives 127,500 payroll jobs per month. And that is a barely enough to keep up with the growth in the labor force. Private payrolls were a little better at an average of 145,000 per month, as state and local governments continued to lay off workers (something we expect all year).
The best part of this morning’s jobs report may be the hints that the government is understating actual job growth. As we’ve noted before, the Labor Department’s monthly estimate of employment changes is often too pessimistic in the early stages of a recovery (and too optimistic in the early stages of a downturn). The department tends to underestimate how many new businesses are starting as the economy picks up.
The jobs report could’ve been better. If not for the 30,000 jobs the public sector lost, we’d have created 222,000 jobs. So it’s worth worrying that the House GOP is pushing a spending bill that economist Mark Zandi says will cost 700,000 jobs and Ben Bernanke says will cost “a couple hundred thousand” jobs. Zandi’s estimate is high enough to wipe out this jobs report and a few more like it.
A lot of bloggers and commentators out there are worried about government layoffs pushing us back into the ditch. I think if you believe in the "strong" version of stimulus (multipliers 2x or higher), then this implies that we're probably going back into the ditch regardless of the prevailing political ideology. We're seeing 8.9% unemployment with a $1.6 trillion federal deficit. There's no way we're going to continue that for another three years or so. Politically, it's not supportable, and while I know that the deficit anti-hawks will scoff, I'm skeptical that the markets will happily lend us another $5 trillion in such a short period without demanding higher interest rate premiums.
The unemployment rate is falling: to 8.9% in February from 9.0% in January and 9.8% last November. For some reason, we seem to be able to get unemployment down with far lower rates of job creation than in the past. Why? ... [I]f the new normal was slow growing employment, the new new normal is a slow growing labour force. Put the two together and the unemployment decouples from the overall health of the economy. Why? Perhaps the Great Recession has permanently diminished work opportunities for big swathes of the work force, in particular prime-age men. Perhaps America is now experiencing an echo of what older Europe and Japan already have: a demographically driven slowdown in potential growth. Or perhaps it’s one of those temporary statistical mysteries that will disappear soon.
We could still see the unemployment rate tick back up once some of the millions of Americans who have left the workforce re-enter. But if the job growth continues to accelerate, then we will continue to see slow progress at whittling down the number of unemployed Americans. Let's just hope that rising oil prices, arguably the biggest threat to the recovery at this time, don't get in the way.
(Chart from Calculated Risk)