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Jobs report exceeds low-key hopes

By Mark Hamrick ·
Friday, March 7, 2014
Posted: 3 pm ET

There's a troubling quandary created by the February employment report. The Labor Department says 175,000 jobs were added last month, while the unemployment rate rose slightly to 6.7 percent. So why are some folks heralding this as good news?

The answer has to do with the muted expectations for hiring leading up to the report. It isn't that we have reason to sing "Happy Days Are Here Again," recalling the presidential campaign theme used by Franklin Roosevelt.

It's a little like walking off a curb and narrowly avoiding being hit by a bus. You are glad you weren't mortally wounded, but no better off than you were before.

A sobering thought

At the risk of being like the despised person flicking the lights on and off after last call at some dive bar, I'll point out one of the less-encouraging aspects of the report. Hiring in February fell below the monthly average of 189,000 over the previous 12 months. Robust it was not.

On the upside . . .

On the more positive side, the quality of the jobs added was better than in some months past. Some 79,000 of the job gains were in business and professional services. Defying the "Old Man Winter as job-killer" line of thought, 15,000 jobs were added in construction. (New home sales rose to the highest level in more than five years in January.) Bars and restaurants added 21,000 jobs last month, despite all the flight cancellations that ruined travel plans. Were winter-weary people seeking an antidote for cabin fever?

Where do we go from here?

The February jobs report only perpetuates debate about whether the economy is weaker than thought. "The economic weakness at the start of the year has been more prolonged and deeper than most economists, or even the Federal Open Market Committee, likely expected," says Scott Anderson, chief economist for Bank of the West.

The Federal Reserve forecasts growth between 2.8 percent and 3.2 percent at the end of this year. That predicted growth rate "appears at risk," Anderson says.

But in the near-term, there could be a bit of a slingshot effect, where some previously delayed hiring takes place. "I do expect to see a small pickup in jobs growth in the months ahead as the economy gradually improves," says Alan MacEachin, corporate economist at Navy Federal Credit Union.

The political divide

True, we aren't facing another fiscal cliff like we were a year ago, but the political divide remains alive and dysfunctionally well in Washington. For proof of that, we cite predictably divided official reactions to the jobs report.

  • From the Obama administration: "Despite a major snowstorm that hit the East Coast during the reference week for the labor market surveys, the rate of job growth picked up from the December and January pace," says Jason Furman, chairman of the Council of Economic Advisers.
  • From the Republican House leader: "While it's good news that more Americans found work last month, there are still far too many asking the question, 'Where are the jobs?'" says House Speaker John Boehner.

The White House's Furman acknowledges that there's more to be done. "The unemployment rate remains elevated, and for too many Americans, wages have been slow to rise," he says.

Brother can you spare a raise?

The report did show a pickup in wages, an issue the employed should appreciate. Average hourly earnings rose 0.4 percent, higher than the lackluster trend seen since the Great Recession. There's plenty of hand-wringing at the Federal Reserve over the lack of inflation in the economy. While it is just one month, the reading is welcomed and long-overdue.

Economist MacEachin says there could be more wage gains to come. "It's certainly a positive sign and hopefully a reflection of a stronger jobs market," he says. "I expect to see continued gradual improvement in wages as the unemployment rate decreases towards 6 percent this year."

Start of a trend?

We can celebrate that the employment report wasn't worse. The challenge will involve whether there's follow-through improvement in the months to come.

Are you expecting the economy to pick up in the coming months? Or do you think we're stuck in a rut?

Follow me on Twitter: @Hamrickisms.

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