Euquant

General Perspective: Employment report shows good news

1.      The economy is clearly mending, although very slowly. The biggest indication is its ability to withstand the bad weather in February without backsliding. Most forecasters thought that the employment numbers would be much worse than they turned out to be. The forecasters under-estimated the improving labor market.
2.      The unemployment rate remained constant in February at 9.7% (most forecasters thought it would increase to 9.8% especially because of the bad weather in February).
3.      The economy lost only 36,000 jobs (most forecasters were expecting it to lose 100,000 jobs because of bad weather).

The most important developments over the last month are as follows:

a.     The labor force increased by 342,000 workers in February, following a 111,000 increase in January; a clear sign that workers are beginning to move back into the labor market in search of jobs, and have stopped dropping out as a result of being discouraged.
b.     The number of unemployed workers increased by only 34,000 in February, despite the bad weather.
c.     The unemployment rate for black workers declined by .7% to 15.8%. Historically, blacks have recorded the highest rates of unemployment.
d.     The number of discouraged workers remained unchanged; a sign that individuals are no longer dropping out because they have become discouraged.
e.     The number of under-employed workers (part-time who would like to be full-time) increased by 475,000 to 8.8 million. It is hard to read whether this is a good sign or a bad sign because employers could be rehiring or retaining part-time workers because conditions are improving.

Other positive signs

a.     The Federation of Small Business survey of small businesses shows the employment picture is improving and that small businesses are beginning to hire.
b.     ADP National Employment Report shows job losses of only 20,000 (a significant improvement over the 60,000 job loss in January). Their report is not affected by weather related factors. The report also shows a gain of 17,000 service sector jobs, but the manufacturing sector lost 37,000.
c.     New claims for unemployment averaged 470,750 for the month of February, an increase of only 3,500 even after considering the effects of bad weather.
All of these factors combine support the claim that the economy is improving, although slowly.

Industries with the largest gains in employment

Temporary Help Services	47,500
Healthcare	20,400
Education	12,000
Leisure and Hospitality	7,000

Industries with the largest losses in employment

Construction	-64,000
Transport/warehousing	-12,000
Information Services	-18,000
Financial Services	-10,000
Motor Vehicles/parts	-9,700

By Danny Boston, Economics Professor at Georgia Tech & CEO of EuQuant