Employment is probably the most important variable in the American economy at this state of the business cycle because it determines speed and sustainability of the current economic recovery. The February employment picture is encouraging.
1. The nonfarm payrolls dropped by 36,000 jobs instead of the expected 50,000-100,000 job losses. This number is considered positive, compared to an average monthly loss of 700,000 jobs in the last three months of 2009.
2. Some believe that the payrolls would have shown a net job increase if it had not been for the awful snow storms that affected the North East in February.
3. The hardest hit sectors -construction, retail, and hotels and restaurants -- didn't seem to be significantly affected. For example, only 64,000 jobs lost in the construction sector which is partly related to the weather.
4. The manufacturing sector have added jobs for the second month in a row, the first time since 2006.
5. Number of temporary jobs, which is a leading indicator of the labor market, has now increased for five months in a row.
6. The average hourly earnings have inched up by three cents to $22.46 an hour.
7. The long-term unemployed workers-those unemployed for more than six months- have also fallenf from 6.3 million to 6.1 million. However, those workers still make up 40 percent of the unemployed.
Off course, there are still big negatives in the February labor picture which include a drop, although small, in the average workweek which decreased from 33.9 hours to 33.8 hours in February. This is also weather-related. The overall job market picture is also still not pretty, despite the improvements. There are currently 14.9 million Americans who are unemployed, almost double the number when the recession started. The underemployment rare, which accounts for the discouraged workers and those who involuntarily work part time jobs, has increased from 16.5 percent to 16.8 percent but is less than the all time high of 17.4 percent that took place last October.
The stock, oil, commodity and foreign exchange markets all welcomed the February jobs report. Placing the employment picture for February within the overall picture for the labor market, the updated picture shows that there is no double-dip and the recovery will continue to improve. This is also reinforced by the positive retails report for February and the declining jobless claims for the last week of that month.
I still expect 3% growth rate for 2010. I also expect the employment to pick up steam near the end of this year, with small and medium businesses starting to hire more steadily. As is the case with most recessions, business will continue to pull us out of this Great Recession. 2010 is the year of recovery, while 2011 will be the year of expansion.
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