It’s no April Fool’s joke: The unemployment rate is now at a two-year low of 8.8 percent in February and employers added 216,000 jobs in March, according to new labor market numbers, providing fresh evidence that the labor market is gaining momentum.
The report exceeded the expectations of experts who had predicted job gains of around 190,000. Also, the February unemployment number was revised to show an increase of 194,000 jobs, up from the previous 192,000.
“Payroll gains that bested expectations in March were welcome news, indicating that the labor market is beginning to hit its stride despite new headwinds from higher oil prices and concerns about Japan and Europe,” said Sophia Koropeckyj, economist with Moody’s Analytics.
Since a February 2010 low, total payroll employment has grown by 1.5 million jobs, while unemployment has dropped a full percentage point since November 2010. Growth of 200,000 to 300,000 jobs a month is typical of strong economic recoveries, experts say.
But not everyone is optimistic. Paul Ashworth, chief U.S. economist with Capital Economics, said that declines in the unemployment rate over the past few months have been primarily due to an exodus of people from the labor force (those who are either employed or who are unemployed but looking for work). The labor force participation rate held steady at 64.2 percent, the lowest rate in a quarter of a century; that number includes anyone who is employed or unemployed, age 16 or over. Normal participation rate is around 66 to 67 percent and has gradually declined since 2000. Millions of workers who dropped out of (or never entered) the labor force during the Great Recession continue to wait on the sidelines.
“While monthly employment gains around the 200,000 mark are obviously an improvement on what we've seen up until now,” said Ashworth, “job growth still isn't strong enough to bring the unemployment rate down rapidly.”
There are 13.5 million people still looking for work. Nearly half, or 6.1 million, are long-term unemployed or out of work for six or more months. Their share of the unemployment numbers increased from 43.9 to 45.5 percent in March. And another 8.4 million people are underemployed.
“The reality check in this report is the larger context: Given the size of the gap in the labor market, even at March’s job growth rate, it would still take until around 2018 to get back to the pre-recession unemployment rate,” said Heidi Shierholz, economist with the Economic Policy Institute, a Washington-based think-tank. “As a snapshot, this report looks quite good, but given where we are, we need to see this and more in the coming months.”
Meanwhile, strong gains in the payroll employment numbers were largely driven by the professional and business services sector, which added 78,000 jobs. The education and health care industries added 45,000 jobs. Other jobs gains occurred in the manufacturing sector (17,000), leisure and hospitality (37,000), and mining (14,000).
Construction employment, however, dipped by 1,000 jobs, and local and state government jobs declined by 15,000. The local government sector has lost 416,000 jobs since an employment peak in September 2008 as states struggle to balance their budgets. But job cuts seem to be lessening as states see rising tax revenues, said Koropeckyj. Total tax receipts for state and local governments hit $1.29 trillion in 2010, just 2.3 percent shy of the $1.32 trillion taken in during 2008, not adjusted for inflation, according to Census Bureau data.
Moody's Analytics expects employers to add 200,000 jobs each month through 2012; job gains will accelerate to more than 300,000 monthly in 2013. At this pace, the economy will have regenerated all of the job losses during the recession by mid-2013. Since the recession began in 2007, the economy has shed more than seven million jobs.
“As long as millions of people are looking for jobs, there is still considerable work to do to replace the jobs lost in the downturn,” Austan Goolsbee, chairman of the President’s Council of Economic Advisers, said in a statement. “Nonetheless, the steep decline in the jobless rate and the solid employment growth in recent months are encouraging.”
Related Links:
U.S. Economy Adds 216,000 Jobs in March—Rate at 8.8 % (New York Times)
Stock Futures Pointing to Gains After Unemployment Rate Falls to Two-Year Low (Washington Post)
March Jobs Report: Jobs Gains, Unemployment Falls (CNN)
