Jobs Report: Evidence of a Recovery Keeps Piling Up

By Peter Coy

Who would have imagined in 2000, when the unemployment rate dipped below 4 percent, that people would be cheering someday about a monthly jobs report featuring an 8.3 percent rate? It’s the “light at the end of the tunnel” phenomenon. The February jobs report, released Friday morning, “adds to the evidence that the U.S. labor market has turned a corner,” said Capital Economics.

No question, the U.S. economy and the jobs market remain weak, but what people are focusing on is the direction, which is positive. Friday’s report confirmed the trend, showing an increase of 227,000 jobs in February and an upwardly revised 284,000 in January. That capped the strongest half-year since 2006, when Lehman Brothers, AIG (AIG), and NINJA loans were problems of the future, not the past.

True, the unemployment rate was unchanged at 8.3 percent. But that’s partly because of an inflow of half a million people who were emboldened to enter the labor market as word got around that there were jobs to be had. Not all of them were immediately successful.

Even the all-important employment-to-population ratio ticked up a bit. That’s the share of adult Americans with jobs. It plummeted when recession struck at the end of 2007 and has bobbed around its cyclical lows since the beginning of 2010. It went up a tick to 58.6 percent in February—still a far cry from nearly 65 percent back in 2000.

Not to say all is well. The average workweek did not lengthen, staying at 34.5 hours. Employers typically give more hours to their current workers before they bring on new hires, notes Heidi Shierholz, an economist at the Economic Policy Institute. When the recession hit, they cut workers’ hours. The average hourly workweek fell to as low as 33.8 hours in March 2009. It’s been climbing back, but it needs to go higher before employers will turn aggressively to bringing on new workers.

The young and the less-educated remain the hardest-hit. The unemployment rate for teenagers was 23.8 percent, and the rate for people without a high school diploma was 12.9 percent.

People who do have jobs are still quitting at a very low rate, indicating that they’re too nervous to explore other opportunities—and presumably too nervous to ask for big raises. According to a separate report from the Bureau of Labor Statistics released on Feb. 7, Americans quit their jobs at a seasonally adjusted annual rate of just 1.9 million in December, down from over 3 million annually before the recession.

Shierholz noted today that the U.S. has 5.3 million fewer jobs now than before the recession, when it should have added 4.6 million jobs just to keep up with population growth.

Federal Reserve Chairman Ben Bernanke sought to curb enthusiasm in congressional testimony last week, saying the labor market remains “far from normal” and continues to require extreme monetary measures like near-zero short-term interest rates.

Still, there seems to be a positive feedback loop between jobs and stocks. Stronger employment helps Wall Street, and the bull market in stocks has helped buoy the economy, which in turn pumps up the job market. On March 8 the Federal Reserve reported that household assets grew 1.7 percent in the fourth quarter as gains on stocks more than offset continued declines in home prices.

Americans seem to be gaining enough confidence to start borrowing again: Household debt rose in the last three months of 2011 for the first time since the recession ended in mid-2009. Non-mortgage consumer borrowing rose 6.9 percent in the fourth quarter. Housing was the exception: Mortgage borrowing fell 1.5 percent, notes IHS Global Insight, an economics research firm.
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