Job applicants complete forms at a job fair sponsored by Swissport, in Newark N.J.
For some time time now, the American economy has been a strange dichotomy. On the one hand, we’re in the midst of an historically strong four-year bull market, yet the unemployment rate remains stubbornly high. The real estate market is showing impressive strength, yet GDP growth is sluggish. The result is a situation where consumers, businesses, and even the government have become overly cautious, each waiting for the other to make the first move before they start behaving like we’re in a real recovery.
Last month, however, the situation began to look a bit brighter. The Labor Department announced that the economy added 157,000 jobs in January, but revised its previous estimates to show that job growth in the later half of 2012 was much better than expected. And this morning’s report — which shows that the economy added 236,000 jobs in February, and that the unemployment rate fell to 7.7% — is more evidence that the thawing of the labor market has picked up speed of late.
Looking deeper into the numbers we see a few more reasons to be cautiously optimistic. The average workweek increased by 0.1 hours, while the average hourly earnings also inched up by 4 cents. These metrics are key because a longer workweek indicates that employers may need to add employees to keep up with business. And earnings are very important for consumers’ ability to spend and stimulate the economy. Another key piece of data is that the construction sector added 48,000, bringing the total for new construction jobs to 151,000 since September. This shows that the housing recovery has begun to bolster the jobs situation in a meaningful way.
So what are the implications of today’s data? While no single report can say too much about the economy or the employment situation, the trend clearly shows a job market picking up steam. Apart from that being good news in its own right, Fed-watchers will be standing by to see if this news changes the bank’s stance on stimulus. Though Ben Bernanke has been at pains to communicate that stimulus will continue until after a true recovery has taken hold, some market participants are wary that the Fed will pull back sooner than Bernanke’s public comments indicate, and today’s numbers may stoke those fears.
Of course, nobody should get too excited about this single month of data, or even the underlying trend. At this very time last year many of us were overly optimistic about a three-month string of job growth that gave the false impression that the economy had reached escape velocity. Quickly thereafter, job growth tanked, taking with it the hope that 2012 would be the year of the robust recovery.
At the same time, today’s is a broadly positive report , and hopefully the kind we can expect to see a lot more of in the months to come.
