Friday, March 4, 2011

Jobs growth continues to slowly improve

The February jobs situation improved from January, but wasn't what could be called robust (as I was hoping). The private sector added 222K jobs, according to the establishment survey, and 162K according to the household survey. The latter survey has been noisy in recent months, but the former has been more stable. For now I think the establishment survey is doing a better job of tracking the situation, and it shows that jobs over the past six months have increased at a 1.6% annual rate, which is the fastest pace of growth since July '06. Since the low last February, the establishment survey says the economy has created a little over 1.5 million new private sector jobs, while the household survey counts 1.8 million. Things are getting better, but they have a long way to go before you could say they were great. Judging from all the other numbers we are seeing, I continue to think that we will see continued improvement here—it is just a matter of time.

Despite the relatively tepid pace of jobs growth, the unemployment rate has declined. This is mainly due to the fact that the labor force has not grown at all in the past three years (a rising number of people employed divided by a shrinking total labor force gives you a lower unemployment rate), whereas it has typically grown about 1% per year. This likely reflects things such as discouraged workers giving up on their job search, and baby boomers deciding to retire early. What it implies is that once the economy starts moving forward in a more energetic fashion, many of those who "dropped out" may decide to get back in, thus boosting the size of the labor force and slowing the decline in the unemployment rate. 

Public sector jobs continued to decline in February. Although this is tough on those who are being laid off, it is a good sign for the economy as a whole, since one of the biggest problems that state and local governments face is a bloated workforce. Government at all levels has grown too big too fast, and must be reined in if the private sector is to have a chance to unleash its dynamism. If the public sector consumes fewer resources, and there are fewer bureaucrats to meddle with things, the private sector will benefit.

As a followup to my post the other day, it turns out that the ADP estimate of private sector job growth was spot-on. The past few months of BLS data were revised higher, moving closer to the ADP numbers, and the February number was almost identical for the two surveys.


John said...

The stock market doesn't seem to like the "good news" job report.

Suppose corporations would rather have high unemployment so they can keep wages low.

What do you think?

Benjamin Cole said...

The key word is "slowly."
Man, oh, man, this job recovery is agonizing.
The Fed needs to pour it on.
The point of an economy is not price stability; the point is prosperity.

John said...


I think the market saw it coming. There was a big day yesterday. Today looks like profit taking ahead of the weekend...also, oil is up again.


Like Scott has been saying, the job recovery is going to take awhile. I think that means no rate hikes this year. QE2 ends in June, on schedule, but no QE3. Just my own expectations...subject to change, of course!! Hope you are doing well.

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McKibbinUSA said...

However, the US employment to population ratio continues to stagnate -- more at:

The US is leveraging unemployment in order to generate growth and to keep inflation in check...

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