Unemployment is down and America, it seems, is going back to work.
The February employment report from the Bureau of Labor Statistics, which details job increases and the unemployment report was released on Friday, offered a double whammy of good news. The unemployment rate dropped again to 8.9%. More importantly, the economy added 192,000 jobs last month. That was a huge jump from just a month ago, when the economy added just 62,000. Some of that was the result of weather. January had some pretty bad snow storms. February has turned surprisingly nice. So construction companies and transportation companies that are slowed by weather were able to hire.
But it wasn’t just weather alone. Companies in a lot of industries are hiring. Healthcare employers added 34,000 workers. Restaurants added 14,000 workers. And yes, construction added 33,000 workers. Those are small number but they all add up. Perhaps, the strongest sector and biggest surprise was manufacture, up 33,000 jobs. In fact, the U.S. manufacturing sector, which has long been given up for dead by many economist, has added 195,000 jobs since December 2009, making one of the fastest growing sectors of the economy.
“The arrow is pointing in the right direction,” says John Feinman, the chief economist for DB Advisors.
What’s driving the manufacturing growth? Emerging markets. Of course, that has some nervous. But if you look at the numbers, it appears that growth in China and elsewhere is helping America more than it hurts us. Here’s why:
There has been a lot of talk lately that free trade kills jobs. And with the economy and corporate profits jumping back faster than unemployment that talk has been getting even louder. Emerging markets are growing faster than the US economy. US companies are shifting to meet that demand overseas. And increasingly, US companies that sell goods in China and elsewhere are making those goods in, well, China and elsewhere. “Some of the reason the job growth has been slow is that US companies are hiring but they are doing it in South Korea or Taiwan or elsewhere,” says John Canally, an economist for brokerage firm LPL Financial.
So how much is free trade hurting US job growth? Not much. At least not compared to the past two recessions. The latest downturn ended in June 2009, or 20 months ago. And while many think 192,000 jobs is slow growth for a economy that exited recession nearly two years ago, compared to the last two recessions, that’s actually not bad job growth. The economy added just 25,000 jobs in July 2003, which was 20 months after the early 2000s recession ended. In the early 1990s, 140,000 employees were added to the payrolls at the same point in the recession we are in now.
Yes, in neither of those recession did we loose 9 million jobs. So with those large job losses you would expect a much sharper snap back. But neither of those times did we have a financial crisis or the national budget deficit we have now. So I think that is a push. Yes, more jobs are being created overseas, and some of those jobs would have likely been created here. But some jobs are being created here because of the emerging markets as well. My point is: There has been a lot of changes in the global economy. And that is raising questions about whether America is still No. 1 in the world economy. And we might not be anymore. But I’m not sure that’s as bad as people think. In terms of job growth, at least during that past 20 years, all those large structural changes don’t seem to have that much affect on the employment numbers.
More good news: Just a few months past where we are now in those past recessions, job growth really started to take off, particularly in the 1990s – adding 200,000 to 300,000 jobs a month. My guess is that’s what we are going to see this time again.