227,000 New Jobs Added, While Unemployment Holds at 8.3%


Cutting metal

Steve Chock cuts metal during a class at Hennepin Technical College in Brooklyn Park, Minn. Photo by Ariana Lindquist/Bloomberg via Getty Images.

Making Sense

Healthy job numbers arrived Friday, and, for once, the two surveys — payroll and household — more or less jibe, or at least don’t contradict each other. The so-called establishment survey of companies, which asks for payroll tallies, showed a net increase of 227,000 jobs in February. The household survey, which is gathered by visiting 60,000 American households, found that about 370,000 more of us reported that we worked in February compared to January, which means, technically, that we’d worked at least one hour the week before the survey was taken.

Why then, you may ask, did the official unemployment rate not fall, but hold steady at 8.3 percent? The answer appears to be fairly straightforward: Almost half a million more Americans joined the labor force in February. That means nearly 500,000 more people were actively looking for work than in January. Lots of them seem have found jobs, judging by the numbers above. But 50,000 or so did not, the household survey suggests, meaning the total number of officially unemployed, which the government calls U-3, rose nearer to 13 million.

As readers of this page know, we pay closer attention to more inclusive unemployment statistics, specifically our U-7, which includes everyone who told the government that they want a job but don’t have one plus the part-time employed who are looking for full-time work. Our U-7 number is now 16.85 percent, down .05 percent from January’s 16.9 percent.

February 2012 Solman Scale and  U-7

In general, Republicans say the unemployment rate under President Obama remains far too high. Indeed, Republican presidential candidates Mitt Romney and Newt Gingrich have been using numbers that approximate our all-inclusive U-7, though neither man is exactly a paragon of precision on the subject.

If the payroll rate of increase holds, around a quarter-of-a-million jobs would be added to the economy each month. Using the latest household survey numbers, unemployment would drop to 6 percent in a year. These projections come courtesy of a nifty new online calculator from the Federal Reserve Bank of Atlanta.

So ask yourself: What U-3 unemployment rate should we be shooting for? 6.1 percent, last seen just before the Lehman Collapse in August of 2008? 4 percent, the low point under President Clinton? 1.2 percent, the lowest rate ever, registered in 1944 during World War II? Enter your target rate and how soon we should get to it, and the calculator will estimate the number of jobs needed.

Where are the jobs? Professional and business services showed the biggest gains, though more than half of the jobs added were in “temporary help services.” Health care and social assistance showed the next biggest gains — no surprise in an aging economy. Restaurant and hotel employment grew. Manufacturing and mining were up a bit. Government employment was flat.

All in all, it is a positive report, confirming the upbeat intuition of those like our esteemed friend Simon Johnson over at Baseline Scenario with whom we’ve been sparring on Twitter the past few days.

Johnson says the indicators are looking up, and surely he’s right. I remain skeptical, though I admit it’s probably a congenital condition. Nonetheless, when Johnson points to increased consumer debt as a reason to cheer, I look at the U.S. savings rate, back down to 4.6 percent. The historical average is 7 percent, and with more and more Americans nearing retirement — even if they’re retiring later — I just don’t see how the rate can stay this low. Won’t Americans have to save more, given how little they’ve stashed away? Won’t a higher savings rate bring this rally to a screeching halt? Will the day of reckoning really never come? For what it’s worth, those remain my questions.

What others are saying:

The New York Times reports that the job numbers “followed a flurry of positive economic reports about the American economy, including a continued rise in consumer confidence and growing strength in the manufacturing sector.”

Looking ahead to the Federal Reserve’s meeting next week, the Wall Street Journal surmises that the positive growth in jobs “raises questions for the Federal Reserve, where officials have been surprised that the unemployment rate has fallen so quickly recently given the recovery’s lackluster pace. If growth or inflation pick up much, officials seem unlikely to launch a bond-buying program because the economy might not need the extra help or because doing more could spur higher inflation.”

And portfolio manager Brett Baker told Marketplace that he’s cautiously optimistic about the numbers, adding “it’s too soon to take a victory lap on this.”

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions