By Matt McDonald, (202) 822-1205, firstname.lastname@example.org
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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, our model shows President Obama needs just 185,000 jobs per month to break the politically important 8 percent unemployment mark by Election Day. That would mean at the current pace, we should hit that mark.
However, if more people re-enter the labor force and bring the participation rate back to its demographic trend, the number of jobs the President needs to break 8 percent is higher.ﾠThis is the trend we are beginning to see in this month’s numbers.ﾠIn this scenario, the President needs 285,000 jobs per month.ﾠThis is still doable, but a more aggressive number to hit consistently in the eight jobs reports between now and the election.
We now seem to be entering the mirror phase of last year’s trend.ﾠLast year, the unemployment rate plummeted, even as the underlying data was not that great.ﾠNow, we may be entering a phase where the underlying data is good, but the unemployment rate will remain stuck in the low 8-percent range.
As we have discussed before, these statistics are simply a window into the economy that people are experiencing.ﾠFor the President, he should hope that people feel like the recovery is picking up steam, even in the face of a potentially stubborn unemployment rate in the coming months.
Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.ﾠPrior to joining HPS, Matt worked for McKinsey and Company. He holds an MBA from MIT’s Sloan School of Management and a degree in economics from Dartmouth College.