Hidden Strength in the Employment Report

Posted on March 10th, 2012 by

The Bureau of Labor Statistics released its Employment Situation for February 2012 this morning. Overall the report is very encouraging. The economy produced 227,000 jobs in February and for the last three months the U.S. economy has produced an average of 245,000 jobs per month and a total of 3.37 million jobs since January 2010. Since we need to produce about 100,000 jobs each month to keep up with population and labor force growth, the unemployment rate should continue along its downward trajectory through the rest of the year. Even so, the unemployment rate for February remained at 8.3%.

But there are two stories buried in the report that point to a stronger economy. First, while the unemployment rate was unchanged from the previous month, the reason why it was unchanged is positive. This might sound counter-intuitive, but people who had withdrawn from the labor market because they were discouraged by their lack of success in finding work, are now returning because their prospects appear to be better. So, the labor force increased along with employment, leaving the unemployment rate steady. Second, each month the Labor Department revises its past estimates of payroll employment. In the February report the Labor Department increased their estimates of December and January payroll employment by 61,000 jobs. This is an indication of further momentum for employment in the future and a stronger U.S. labor market.


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