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Unemployment Rate Drops in March, but Economic Recovery Remains Fragile

The U.S. unemployment rate for March dropped to a two-year low of 8.8 percent as the economy gained 216,000 jobs. Ray Suarez discusses the numbers with Joel Naroff of Naroff Economic Advisers and Catherine Mann of Brandeis University International Business School.

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    The unemployment numbers released today were better than expected, and the Obama administration hailed the good news as a sign of a stronger economy.

    The nation saw its second consecutive month of steady growth on the jobs front, news the president praised, while still remaining cautious.


    The unemployment rate has now fallen a full point in the last four months. And the last time that happened was during the recovery in 1984, where we saw such a significant drop in the unemployment rate.

    Now, despite that good news, everybody here knows we've got a lot more work to do. There are still millions of Americans out there that are looking for a job that pays the bills.


    The Labor Department announced the economy added 216,000 new jobs in March. There were 14,000 fewer government jobs, but that number was balanced out by private employers, who added 230,000 jobs. As a result, the unemployment rate fell to its lowest level in two years, 8.8 percent.

    Testifying before the Joint Economic Committee of the House and Senate this morning, Bureau of Labor Statistics Commissioner Keith Hall called the news promising.

    KEITH HALL, Bureau of Labor Statistics: For more than two months, we have had pretty steady job growth. It's been around 135,000, 140,000 a month. And, in the last two months, it looks like we may be getting an acceleration in job growth, which would be a good sign.


    But Republican leaders jumped in, voicing concerns that the strong report won't sustain continued job growth.

    REP. JOHN BOEHNER, R-Ohio, speaker of the House: Today's job report is welcome news, but Washington needs to do a lot more to end the uncertainty and get our economy moving again.

    It's clear that we need to cut spending, we need to stop unnecessary regulations, end the threat of tax hikes and pass the trade bills that are out there. And these are the pillars of a Republican plan that will actually create jobs in America.


    The long-term unemployed continue to struggle, with more than six million people out of work for six months or longer, and some could be facing an end to their unemployment benefits soon. In recent weeks, Michigan, Florida and Arkansas have taken steps to cut the duration of assistance to the out-of work.

    And Missouri, a state with a jobless rate over 9 percent, has decided to stop accepting federal money dedicated to extending payments. Benefit eligibility for thousands there will end tomorrow.

    The labor picture certainly seemed brighter in March, but there are still a number of questions many economists are asking.

    We explore this with Joel Naroff, the president of Naroff Economic Advisers — he joins us from Philadelphia — and Catherine Mann, a professor of economics and finance at Brandeis International Business School. She joins us from Boston.

    And, Professor, when you look at the numbers overall, what are they telling you for this month?

  • CATHERINE MANN, Brandeis University International Business School:

    Well, I think what we're seeing is a virtuous cycle developing in the services sector.

    Now, of course, that's the most important part of the economy. It's the part of the job-creation engine that really has been lagging for quite a few months now. Manufacturing has been solid. And that's excellent and good. But until we get a virtuous cycle developing in services, particularly the upper-income services, like business, professional and technical, we're not going to have a self-sustaining recovery.

    And we are seeing job growth there. I think, as companies start getting contracts, they start hiring workers to fulfill those contracts, I think we're starting to see that virtuous cycle develop.


    Joel Naroff, we're often told when we do this segment once a month, don't look at just one month.

    OK. Take a look at the last couple of months and this latest set of numbers. What do you see?

  • JOEL NAROFF, Naroff Economic Advisers:

    Well, that's where the really good news is.

    If you like a — take a look at the last two months, you're seeing that the private sector has really begun to shift gears. They have been very, very cautious about hiring. Businesses have been very, very uncertain about where this economy is going, whether this recovery would really pick up steam.

    But now we're seeing a couple of hundred thousand or more jobs created a month in the private sector. And they're very broad-based. We're seeing 60 to 65 percent of the industry showing job gains. That tells me that this isn't just a one-off situation. It tells me that the extended growth that we have seen over the last 20 months has now reached the point where businesses have to start hiring.

    And that's the best part about it. It is broad-based. It's stronger. And the last few months are really a sign that we could be shifting gears in this economy.


    Professor Mann, does this last month also say something, perhaps, about durability? Because the March numbers come in the wake of a European debt crisis, eruptions across North Africa and the Middle East, spikes in the price of oil, and yet, people were still hiring.


    Well, I think it's a little bit too early to say that we haven't been hit by any of these issues from the global economy.

    I think it's a little early to say that the oil price hikes that we're currently experiencing won't damage this job creation, in part because 45 — or basically a quarter of the job creation is coming in retail, food services, food away from home, that sort of thing, leisure and hospitality, where the consumer spending that we have seen coming from the tax reductions and so forth, those have really powered those consumer-based job creation.

    Now, with the oil price hike and the gas hike, what you're seeing is more and more of the — the benefits of consumer spending going to the oil companies and to gasoline. And so, that has a potential for damaging this economic recovery.

    And I think it is way too early to consider what might be the consequences for global trade and so forth of the disruption to the supply chains emanating from the terrific tragedies in Japan. It's too early to tell about that.


    Joel Naroff, it looks from the numbers like we're really dealing with a two-tier pool of unemployed people, the long-term jobless and everyone else.

    Talk a little bit about that number, because it still remains troublingly high.


    It's troublingly high. It's not going down. Indeed, to an extent, it's actually rising.

    When you take a look at the unemployment rates for those who are on extended unemployment, they're not coming down at all. That's where really the problem's existing. And that's really an indication of how tough it is to find a job in this economy right now.

    And, you know, a lot of business are still hiring people who are working in other business. We need to take a look at the unemployed, because there is an awful lot of skills that are out there that are just not being put to use.

    And the longer you are on unemployed, it appears that the more difficult it is to get a job. And that's not good news for the long-term unemployed at this point.


    Well, earlier in this cycle of increased joblessness, people were talking about employers looking at the long-term unemployed or learning to look at the long-term unemployed in a different way. It sounds like you're not seeing that yet.


    Well, I'm not sure it's happening yet.

    I think employers do understand that being unemployed, being unemployed for an extended period of time is not necessarily an indication of the ability and the capabilities of a particular worker, and they're looking at the unemployed in a different way.

    But that doesn't necessarily mean that they're going out there and finding them and hiring them. A lot of the people who are looking, they have the connections, if they're still working, and there's still a lot of work that needs to be done to bring these long-term unemployed people really into the market, where they can find the jobs and make the connections necessary to get the openings that are coming up.


    Professor, as we mentioned earlier, this month's numbers featured a continued decline in government employment. With the phasing out of the stimulus monies, is that going to be the shape of things to come for a long time?


    Well, the decline in government employment is entirely at the state and local level. There was just a 1,000-person increase at the federal level.

    There's clearly going to be more job loss at the state and local level, because the budgetary situations facing the states' governments continue to worsen, not improve. And so, coming down the pike, there's going to be more tightening, not less, at the state and local level. So, you know, that's not the place to look for job creation.


    And states are signaling they may have trouble paying their unemployment insurance, even with federal loan promises to continue paying those benefits. What do you make of that?


    Well, I think one of the things that might be happening here is, for the states with the most difficult situation, both economically and perhaps politically, they're saying to their long-term unemployed, go sit in somebody else's state. Go look for a job someplace else. There aren't being — aren't jobs being created here in my state. Go find a job in another state.

    It's an interesting sort of exporting your joblessness that usually we talk about in the global context, but we can certainly talk about it in the state-to-state context as well. And I think there's some of that going on. How much of it is economic, how much of it is a political issue, I think that's an interesting political economy question to ask.


    But, Joel Naroff, if you want to go look in another state, you won't necessarily be able to sell your house, if you still own one.


    Well, that's exactly the problem.

    It's a nice idea to try and export your unemployed. The only problem is, is that the unemployed probably can't sell their house. They are probably underwater on it or they don't have enough equity to sell it and to buy another home. And that's one of the real big problems we're finding has been a consequence of the housing market collapse.

    With prices down, people have become housebound. They're immobile. And a lot of the growth that's occurred over the last few decades in this country has been because people are able to move, quickly can get rid of their homes and move to another place, another opening. And, right now, that's just not the case.

    And so, people are stuck in two ways. They're stuck in their homes and they're stuck because there's not enough jobs in their areas and it's a tough environment for a lot of people.


    Joel Naroff and Catherine Mann, thanks for both joining us.


    You're welcome.


    The unemployment drop sent both oil prices and stock values up.

    On Wall Street today, the Dow Jones industrial average gained 57 points to close above 12,376. The Nasdaq rose eight points to close at 2,789. For the week, the Dow gained 1.3 percent; the Nasdaq rose 1.4 percent. The jobs report also pushed oil prices up to nearly $108 a barrel, a new 30-month high.

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