The Beginning of the Beginning of the Economic Recovery


IT HAS been no easy road getting here, and the path ahead looks rocky, but a real recovery seems to be developing for America’s long-suffering workers. This morning, the Bureau of Labour Statistics released new data on American employment, which showed a third consecutive month of robust job growth. Where previous reports contained a hint of weakness here or there, the fundamentals of this report look almost uniformly strong.

Payroll employment rose by 227,000 jobs in February. That marked a third consecutive month with job growth over 200,000, and it capped a 12-month period in which employment jumped by just over 2m—the best performance since January of 2007. Private-sector employment did even better. Private businesses have added over 750,000 jobs in just the last three months and 2.2m in the past year. February’s report may actually be better than it looks. The latest release revised up job gains over the previous two months by 61,000, a common occurrence of late.

Private employment is 2.8m jobs above the level at the end of the recession while government employment is nearly 600,000 jobs less than the level in June of 2009. The drag from government job losses continues, but at a much slower pace than was the case in 2009 through 2011. Through February, just 7,000 public-sector jobs were cut. Local governments actually added 2,000 workers in February.

The survey of household employment was similarly positive. The unemployment rate held fast at 8.3%. That, however, was due to a surge in workers into the labour force, of nearly 500,000, which offset the rise in employment entirely. Over the past few months, however, the household employment numbers have been, if anything, more bullish than the payroll figures, suggesting that the underlying trend toward improvement is very much the real thing. The employment-population ratio rose a tenth of a point to 58.6%, up from a low of 58.2% last summer. And alternative measures of unemployment are also getting better in a hurry.

Firms are adding workers across the economy. Manufacturing employment rose 31,000 in February and is up 227,000 over the last 12 months. Professional and business services continue to add labour at a rapid clip, including new temporary positions which indicate that further hiring may be on the way. The construction sector is still very weak; residential builders took on just 1,700 new workers in February. A better labour market overall, however, will raise housing demand and translate, eventually, into more of a recovery there.

If there is a cloud to this silver lining, it is the reminder that America’s economy remains quite far from where it ought to be. The 8.3% unemployment rate, while down sharply from a year ago, is still well above what economists consider to be the normal level. There are still nearly 13m unemployed Americans, and total employment is still just over 5m jobs short of the pre-crash peak. As strong as recent reports have been, they have yet to match those in the recovery from the recession of the early 1980s, for instance, when monthly job growth routinely topped 300,000.

And while momentum seems to be building, there is no shortage of threats around the world. Europe ever looms, and rising oil prices have households nervous. The biggest danger may be policymaker complacency, however. The Federal Reserve took steady strides toward more economic support in the last few months of 2011 but seems now to be backing away from hints of further accommodation. That would be premature. It was only last spring that the economy last enjoyed a three-month run of 200,000+ employment growth—a streak that quickly fizzled as dear oil, European crisis, Japanese catastrophe, Congressional bickering, and an idle Fed nearly tipped the economy back into recession.

Confidence in the American economy looks as good as it has in years, and is especially striking by comparison with the outlook across most of the world. If the recovery has taught us anything, however, it is to take nothing for granted.

Published by Stout Law Firm

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