Economics, U.S. Economy

Lots of good news in February’s jobs report, but we still have a long way to go

Image Credit: Shutterstock

Image Credit: Shutterstock

Today’s jobs report presented good news about the US labor market. The unemployment rate dropped to 7.7%, the lowest it’s been in over four years. Averaging payroll gains over the last three months shows the economy adding jobs at a rate of 191,000 per month. This is solid — but far from spectacular — job growth, fast enough both to absorb new entrants into the labor market and to bring down the unemployment rate at a slow but steady pace.

Looking beneath the hood of the report shows more good news. Many economists were worried that the increase in payroll taxes would suppress consumer spending. This didn’t seem to happen in February, with the economy adding around 48,000 jobs in the retail, leisure, and hospitality industries. It could be that the payroll tax increase didn’t have a large effect on consumer spending, ceteris paribus, or that the increase was offset by households’ improving balance sheets.

The best news in the report came from the construction industry, which added 48,000 jobs over the month — the largest monthly change since early 2007. The construction payroll numbers are consistent with the story that the Fed is succeeding in stimulating the economy through housing by lowing mortgage interest rates.

3.8.13 Construction Employment

Will March be as good as February? Remember that the sequester is not reflected in these numbers, and that the payroll tax increase could show up in the March numbers even though it seems not to have played a large role in February. Caution is warranted.

And though February was a good month, please don’t let that confuse you: The labor market is still in terrible shape.

Over twelve million American workers are unemployed. The unemployment rate is still way too high. The share of the working age population employed in jobs is staggeringly low — outside the current labor market downturn, you have to go back three decades to find the share as low as it is this month. Teenage unemployment is over 25% — the same rate of overall unemployment at the height of the Great Depression. These young workers are missing the opportunity to develop valuable labor market skills and to build their careers. Adult workers without high school diplomas are facing an unemployment rate of over 11%. Nearly eight million workers are employed part time for economic reasons.

And nearly five million workers have been unemployed for longer than six months. The long-term unemployed’s share of total unemployment actually increased this month.

February was a strong month, but our labor market remains in crisis. This is the immediate, most pressing problem facing the United States today. I fear that we will be dealing with its fallout for years to come.

Michael R. Strain is a research fellow at the American Enterprise Institute.  Follow him on Twitter at @michaelrstrain.

6 thoughts on “Lots of good news in February’s jobs report, but we still have a long way to go

  1. Gee Mike; is this website an Obama cheerleader like the NYT? Did you miss the OTHER reports?

    1) employment participation is at an all-time high record with 296,000 dropping out just last month.

    http://cnsnews.com/news/article/record-89304000-americans-not-labor-force-296000-fewer-employed-january

    2) We now have a record high number of people working two jobs and working part-time and that ONLY THOSE CATEGORIES gained, while full-time jobs took a beating.

    Thinking this website is either pro-Obama or run by market makers.

    • Than if you don’t like it,you can easily go on a Fox News website,or Townhall.com,newsmax plenty of conservative options available to spin the positive payroll report to your liking.He didn’t say it was a blowout number,he mentioned how the labor market was far from healed.Obama can’t force people back into the labor force pushing up the participation rate,they’ll re-enter in due time,and when they do the rate will rise, just like it has in every other recovery.

      • Nice! Drive away readers. Your article is not good news when taking into reality and facts.

        If you belive BLS figures, perhaps you should find another profession because only low-information idiots belive the junk you and guys like Krugman spew forth in an effort to help this administration keep it’s job approval. Any amateur economist with basic math skills can pick apart BLS figures once they look at the whole picture. Failing to report the whole picture is lying through omission. Consider that Mike!

      • They cannot re-enter if there are no jobs.

        Mike, I apolo0gize. My browser took me to a weird screen and I didn’t realize I was not responding to you.

        Kevin: Lying doesn’t halp anything. With 296,000 more jobs out of the market and the revelation today that the gain were mostly part-time jobs, there is not one ray of sunshine in that jobs report. Saying anything else is a lie.

  2. There is an additional factor, now referred to as “job splitting,” for which statistical adjustments are probably not yet available.

    Job splitting occurs when what was previously a 40 to 50 hour assignment is broken down into assignments of 28 hours, or less. This is done in connection with achieving a delicate balance between the numerical count of employees in a business enterprise, and the classification of those employees for various regulatory and “benefits” considerations.

    Thus, the increase in the “number of jobs” does not necessarily indicate an increase in productive assignments. It is possible that job splitting creates the need for those employed at a “split” job to obtain additional employment in order to subsist.

    Until that are statistical adjustments have been made, it is likely that more attention should be paid to increases or decreases in productive payroll hours.

    • What many of the naive optimists like to ignore are the constant changes in definition and methodology that make the reports look a lot better and drive a wedge between the official story and the experience on Main Street. What gets to me is why the people who normally support the GOP go along with the lies being reported.

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