Friday, March 4, 2011

Employment: Good News at Last

The Lehmann Letter (SM)

This morning's February employment report from the Bureau of Labor Statistics should bring smiles all around:

Employers added 192,000 jobs in February. As you can see from the chart, that's the biggest gain since the initial bounce back from the depths of the recession. Private employment grew even more strongly, adding 222,000 jobs, while government employment fell by 30,000.

The unemployment rate, at 8.9%, was virtually unchanged from January's 9.0%. This disconnect, between the large number of new jobs added and the stubbornly high unemployment rate, illuminates the rough road ahead. The economy requires 200,000 to 300,000 new jobs each month to reduce the unemployment rate to an acceptable level: Somewhere around 5%. Keep in mind that population growth brings new workers into the labor force each month. Moreover, as the employment situation improves, discouraged workers -- who had dropped out of the labor force -- will return to look for work. This means that new jobs must be found for all three populations: The unemployed, new entrants into the labor force and the return of discouraged workers.

The change in the political climate presents an additional challenge. During the depths of the recession, when the private sector lost millions of jobs, the federal government's stimulus program added government workers to payrolls. The transition to fiscal restraint puts the job-growth burden entirely on the private sector. Private job growth must be especially strong to offset the expected decline in government payrolls.

Job Growth

(Click on chart to enlarge.)

Recessions shaded

But let us rejoice in today's good news and let's hope it's an omen of more good news ahead.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2011 Michael B. Lehmann

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