The US economy added 227,000 new jobs in February, marking the third straight month with over 200,000 jobs created. Moreover, the last two months jobs numbers were revised upward. While it will take more of the same good news to have confidence in the sustainability of the growth we are seeing, the progress has been good for the last quarter.
While the job numbers indicate a strengthening recovery, the rise in the labor force participation rate this month meant that there was no dent in the unemployment rate. Over the past year, the decline in the labor force participation rate helped lower the unemployment rate to 8.3 percent. However, as we highlighted in our recent white paper, labor force participation will likely rise back towards its demographic trend as the economy recovers. As labor force participation grows, more jobs will be needed to keep the unemployment rate dropping.
If the labor force participation rate levels out at 63.9 percent until November, …
Client Note: It Was The Best of Recoveries, It Was The Worst of Recoveries
Posted on March 5, 2012 by nchestnut
By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com
Well, maybe not “best,” but at least getting better. After a tough 2011 in the job market, recent economic and jobs indicators are trending in the right direction. This is good news, with a caveat: we’ve been here before, and the real question is whether the recovery we’re witnessing is real and sustainable or whether headwinds could knock it off course again. In advance of jobs day on Friday, we’re going to try to make the case for each view based on the evidence. (With our usual jobs day political benchmarking at the end.)
The best of recoveries:
One reason for optimism is the job numbers themselves. We’ve had job growth in the employer survey above 200,000 for two months in a row and the 4-week moving average for initial unemployment claims has dropped from its long streak above 400,000 to 354,000.
Moreover, as we noted last month, the underlying data in the last jobs report was positive. While the revisions told us that 2011 was worse than …
The jobs number today of 243,000 new jobs was great news, beating expectations, and bringing with it strong underlying data of increased hours worked, increased earnings and a drop in the average weeks of unemployment.
The asterisk to the report this month was a significant set of population revisions that happened over the past year, and concerns over people dropping out of the workforce. As we outlined in our white paper, the labor force participation rate has become a major concern during the recovery, and this month was no exception. The participation rate plummeted from 64 percent to 63.7 percent.
Demographic projections expect that participation rate to be at 65.3 percent. If that full participation rate is the goal, our economy is “missing” 3.8 million workers, up from the 3.4 million we noted in the white paper. The unemployment rate in that context has not budged at 10.4 percent.
Taking into account the population revisions of the …
In lieu of our usual client note, this month, we are releasing a white paper previewing the year ahead for jobs and politics.
Key findings:
There are over 3 million “missing” workers who should be in the labor force, but are not.
If labor force participation were in line with demographic projections, the unemployment rate would be above 10 percent.
The possibility of large numbers of people reentering the labor force makes it very difficult for the unemployment rate to fall below 8 percent by Election Day.
Briefings
In conjunction with this report, HPS is conducting a limited number of briefings on the analysis. If you are interested in scheduling a briefing, you can contact HPS at: (202) 822-1205.
Report
For unemployment projections and estimates of job growth to get unemployment down, you can access the full white paper here: http://bit.ly/xKWF0t
Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House. Prior to joining HPS, Matt worked …
The good news? There are again more jobs in the latest economic data. The bad news? Once again, there are fewer people in the workforce applying for them.
As we noted in our preview yesterday, there remain concerns about a shrinking labor force, with both political and economic implications over the coming year. The December jobs report mirrored the November report in this respect, with incremental improvements in jobs data, and a shrinking labor force in the details.
We can assume that many of these people who have dropped out of the labor force during the recession would like to be working. At some point, they will re-enter the job market. When that happens, we are likely to see the unemployment rate go up for a period before again declining. Politically, the President’s reelection campaign would like to see this happen sooner than later; economically, we have not yet reached that point.
