The February growth in jobs was better than expected (175K vs. 149K), despite the persistence of very bad weather, so the market has raised its expectations for future growth modestly, as can be seen in the 15-20 bps rise in Treasury yields this week.
The two charts above show the monthly change in private sector jobs and the six-month annualized rate of change in private sector jobs, respectively. Things have been a little soft so far this year, and the pace of jobs growth is likely to pick up as the weather warms up, so we could see 200K or so per month, or a 2% or slightly better pace going forward. If jobs grow at a 2% pace and productivity rises at the pace of the past two years (1%), that would give us real growth of about 3%. That would be an improvement from the 2-2.5% pace of recent years, but it's nothing to get very excited about. For things to really improve we'd need to see growth well in excess of 3% for at least several years.
Still, 3% growth is nothing to sneeze at, especially with the yield on cash still near zero and way below the yields available on risk assets. The longer the economy continues to expand, the more pressure there will be for short-term rates to rise (i.e., the Fed will not only have to continue to taper but perhaps accelerate its timetable for a reversal of QE) and for yields on risk assets to decline (i.e., for prices to rise).
As the chart above shows, the two surveys of jobs are tracking each other fairly well. The private sector has added 8-9 million jobs in the past four years, and private sector jobs are likely to reach a new all-time high within the next few months.
As the chart above shows, all of the gains in employment over the past two years have been in the private sector (public sector jobs have actually dropped by 89K in the past two years). This is encouraging, since the productivity of the private sector far exceeds the productivity of the public sector.
The unemployment rate ticked up to 6.7% mainly because the labor force has increased by almost 800K this year. That is probably due at least in part to the expiration of emergency unemployment benefits beginning January 1st. That affected about 1.3 million people, and it wouldn't be surprising if some portion of those have decided to more actively search for jobs. That's also encouraging.