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Good News on Many Economic Fronts; Oil, Housing Still Threaten Recovery

March 4, 2011 at 7:42 PM EST
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A new report shows U.S. employers added 192,000 jobs in February and the jobless rate fell to 8.9 percent. Jeffrey Brown discusses the numbers and recovery prospects with former Labor Department Chief Economist Lisa Lynch and Nariman Behravesh, chief economist at IHS Global Insight, an economic and financial forecasting company.
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JIM LEHRER: We begin with the good news of the February jobs report.

The Labor Department today reported a net gain of 192,000 jobs, almost all of them in the private sector, and the most in nearly a year. The unemployment rate fell to 8.9 percent, the lowest in almost two years. And the so-called underemployed rate, including part-time workers and those who have stopped searching, dropped under 16 percent.

Overall, the number of people out of work dipped to 13.7 million, still nearly double the number before the recession.

President Obama welcomed the news as he spoke this afternoon in Miami, Florida.

PRESIDENT BARACK OBAMA: So our economy is now added 1.5 million private sector jobs over the last year, and that’s progress.

But we need to keep building on that momentum. And in a world that’s more competitive, more connected than ever before, that means answering some difficult questions. How do we attract new jobs? How do we attract new businesses? How do we attract new industries to our shores?

JUDY WOODRUFF: On Wall Street, the jobs report was overshadowed by another surge in the price of oil. It topped $104 a barrel over new concerns about loss of production in Libya.

In response, the Dow Jones industrial average lost 88 points to close below 12170. The Nasdaq fell 14 points to close at 2784. For the week, both the Dow and the Nasdaq rose a fraction of a percent.

Now back to the jobs story and to Jeffrey Brown.

JEFFREY BROWN: And we take a closer look at today’s data with Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandies University,  she’s a former chief economist for the Labor Department , and Nariman Behravesh, chief economist at IHS, an economic and financial forecasting company.

Well, Lisa Lynch, you and I have certainly talked a lot about bad jobs numbers in the recent past. Can we finally today talk about some good ones?

LISA LYNCH, Heller School for Social Policy and Management at Brandies University: Jeffrey, it’s wonderful to be able to finally talk about a report where we’re seeing good news across so many fronts.

We saw, as you reported, increase in employment. We have now had 12 months of steady job growth out of the private sector. We have a drop in the unemployment rate, the biggest drop in the unemployment rate over the last three months since we experienced in the 1980s.

So, we’re seeing very sharp decreases in the unemployment rate. We saw hourly wages up just in line with inflation. We saw manufacturing continuing to roar back. We saw recovery in the construction sector.

So, this is the solid, great-news employment report that we have been waiting to see for about six months. And we need to continue to see this kind of a report for the next nine or 12 months to really feel like we’re out of the woods.

JEFFREY BROWN: Now, Nariman Behravesh, one of the mysteries of course we have talked about for a while is that, even as we have had signs of economic growth, it really hasn’t translated to jobs. Do you see signs here that that is happening at last?

NARIMAN BEHRAVESH, Chief Economist, IHS Global Insight: Absolutely.

And I think one of the things that’s changed is the mood of businesses. If you look at various business sentiment surveys, they have all improved, not just big businesses, but small businesses, crucially, small businesses as well.

So, certainly, companies have had the money to spend on a variety of things, including hiring. And it now looks like they are actually doing that. And if you look at the average payroll jobs growth in the last five months, it’s been around 150,000, which is good. It’s not great, but it’s good.

So, it certainly looks like we have turned the corner in terms of this recovery now spreading to the jobs market.

JEFFREY BROWN: And, Nariman, when they do that, if I ask you why they’re now willing, is it confidence, is it actual signals that they see? What do they see, the companies I mean, that — that allows them to say, OK, now we will really hire?

NARIMAN BEHRAVESH: Well, we have had almost the — a little more than a year-and-a-half of recovery now.

And the fears last summer of a double dip seem to have sort of vanished or disappeared, diminished, if you will. And so there is a sense of, yes, this recovery has legs; it’s going to continue. So it’s, I think, that, and just, in general, the sales numbers are looking good. Consumers are spending. Exports are strong.

So, in a variety of fronts, with the exception of housing, of course, but on a variety of fronts, this economy seems to be doing reasonably well.

JEFFREY BROWN: And, Lisa Lynch, you mentioned manufacturing and I think you mentioned construction. This was pretty broad, right? Why — tell us a little bit about the sectors where there was the most growth, and there were some that we didn’t see growth.

LISA LYNCH: So, we saw improvement in manufacturing employment, up 33,000 jobs, much of that in the durable goods sector, and in particular in machinery and fabricated metals, which is consistent with businesses buying new plant and equipment, which they haven’t done for a long period of time, fabricated metals that are going into business investment. So that’s great news.

And, in fact, in durable manufacturing since two years — 2008, we have seen employment gains there of almost a quarter-of-a-million. We saw improvements in the construction industry, another 33,000 added in employment there. Now, that’s after a January number that was a big drop. And so there’s some fluctuations there related to the severe weather that we had in January.

But we saw improvements in transportation and warehousing. So, goods are being made, and they’re getting put out on to the road. We saw job gains in temporary help industry. That’s also another very good indication of employers bringing people on. And, hopefully, they will transform them from temporary workers to permanent workers.

And we saw gains in eating and drinking establishments and the old reliable health care sector, which just keeps on chugging along with adding jobs. We didn’t see job gains in the retail sector, somewhat surprisingly, given what Nariman said, that people are out spending. Consumers are spending.

But, all in all, across most of the sectors, we saw good job growth.

JEFFREY BROWN: Yes. Yes.

LISA LYNCH: One other important sector, though, that didn’t happen of job growth was the state and local government. And, there, we saw 30,000 workers losing their jobs.  

JEFFREY BROWN: That’s part of another story that we continue to follow every day.

But, Nariman, I want to ask you about another thing we just reported, was, of course, the stock market went down today on fears of oil. And we have oil prices going up, energy costs generally. We have food prices around the world. There are some warning flags still out there.

So, how — are those fears things to worry about that might impact the potential for job growth going forward?

NARIMAN BEHRAVESH: Indeed, they could. And I think this is a potential risk.

So far, I would say what we have seen in terms of oil prices and food prices are not going to threaten the recovery. But if oil prices rise a lot more, then indeed we could see a big problem. Just to kind of give you a rule of thumb, every 10 dollars on oil prices reduces growth in the U.S. by about two-tenths to three-tenths of a percent.

So, right now $10, $15 in the last couple of months, we’re looking at growth maybe instead of being 3.2 or 3.3, only 3 percent. But if it goes to $150, say, that’s a whole different story, or even higher. Then, I think we have reason to worry.

JEFFREY BROWN: So, Nariman, briefly, summing up, do you — is it too soon to call it a turning point? What — how would you characterize it?

NARIMAN BEHRAVESH: I would say, certainly, the job situation is a turning point. I think we have seen this recovery now spread to the jobs market.

There is this sort of cloud, thundercloud on the horizon. But if all goes well, and, in fact, some of the turmoil in the Middle East sort of settles down, oil prices will come down, and that particular source of risk, if you will, to the U.S. economy will dissipate.

JEFFREY BROWN: And, Lisa Lynch, what do you see? Where — how would you characterize it? And how many — if you get about 200,000 jobs this month, how many do we need and how long do we need to sustain it before you say, OK, now it’s real?

LISA LYNCH: So, 200,000 jobs a month, if we continue to keep that pace of job creation to get back down to, say, the 5 percent unemployment rate we were at before this recession started, that pace of job growth would mean it would take until 2019 before we got back down to 5 percent.

So, we see — we need to see reports like this and more in order to make a significant dent into that 13.7 million pool of unemployed that you talked about at the top of the show.

JEFFREY BROWN: All right. We will leave it there. Lisa Lynch, Nariman Behravesh, thank you both very much.

LISA LYNCH: Thank you.