Accentuating the Positive in the February Employment Report


The U.S. Labor Department's February jobs report provides the strongest indication yet that job losses have finally bottomed and job creation in the U.S. economy may be starting to occur. Analysts are highlighting a number of positive trends from the report that they expect to accelerate this spring, but they clearly don't yet discount concerns that the nation could slip back into another recession this year.

The Friday report said the unemployment rate remained steady at 9.7%, although the economy shed 36,000 jobs in February. A Bloomberg News economist survey predicted that 50,000 jobs would be lost in the month and that the unemployment rate would rise to 9.8%, so the better-than-expected results were somewhat surprising.

While an unemployment rate of 9.7% is nothing to cheer about, it does suggest that joblessness isn't getting worse. The rate peaked at 10.2% in October before starting to fall back. Many economists had expected the unemployment rate to rise in February because major snow storms canceled construction projects, forcing some workers out of jobs. Plus, many employers continued to announce job cuts. Economists are also pointing to government hiring of temporary census workers as distorting the February statistic, making the numbers appear better than they actually are.

"Jobs Gained Are Jobs Gained"

One seemingly clear positive note is that temporary employment rose for the fifth month in a row, increasing by 48,000. Manufacturing jobs edged higher after jumping some 20,000 in January, and retail jobs remained unchanged. Household employment also improved an impressive 308,000, adding to the 784,000 increase in January.

"As much as we are prone to look a gift horse in the mouth, we'll take the good news extrapolated from the jobs number whether it came from Census hiring or elsewhere," says John Stoltzfus, market strategist at Ticonderoga Securities. "Jobs gained are jobs gained, and it feeds positive sentiment that may make workers spend a little more than they'd earlier planned on or inspire a business owner to add or keep staff they might not have before."

The stronger-than-expected report did inspire the markets to move higher. The Dow was up 86.23 points in early-afternoon trading.

A Million New Jobs So Far in 2010?

"The February jobs report suggests that the economy is on the verge of creating jobs, and that it will break through to sustained job creation beginning in March," predicts Nigel Gault, chief U.S. economist for HIS Global Insight.

Gault believes that the Census hires were likely offset by the hiring that was depressed by the snow storms, so the February numbers are probably not as far off as some people fear. In fact, he says, "excluding storm effects, private payrolls would surely have increased."

Michelle Girard of Royal Bank of Scotland says the increase in the household survey shows that more than a million jobs have been created in 2010. "In 2003 (and to some degree in prior cycles), household employment began to rise well before payrolls," she said, "So, the strong improvement seen in the household employment figures recently provides an encouraging sign that payroll employment will soon turn up decisively."

While the trends are moving in the right direction, there's still plenty of healthy skepticism.

"Economists broadly agree that last year's American Recovery and Reinvestment Act has significantly boosted economic growth and reduced unemployment compared with what would have happened without it," says Center on Budget and Policy Priorities Chief Economist Chad Stone. "But forecasters are now concerned that the recovery will slow and could stall entirely without additional fiscal stimulus."