The Bureau of Labor Statistics announced that the US unemployment rate fell to 8.9 percent, nonfarm payrolls increased by 192,000 and 222,000 private-sector jobs were added. Adding to the good news, the January rate was revised to show an increase of 63,000 jobs, from the previous estimate of 36,000. This is the first time in two years that the unemployment rate has fallen below 9 percent.
It was of note that hiring occurred across the board with private sector gains coming from every industry – save construction. Total government employment fell by 30,000 as state and local governments, dealing with shrinking budgets, cut back payrolls. While it is never good to hear that someone is losing a job, the fact that February’s unemployment rate has dipped below 9 percent while total government employment is falling may strengthen the idea that this spring’s employment gains are coming from the private sector. Of course, we will have to wait for the March unemployment report before speculating on any spring trends.
Despite the positive nature of the report, most believe the losses suffered during the great recession will be with us for some time. According to Peter Morici, an economist and professor at University of Maryland’s Robert H. Smith School of Business, “The economy must add 13 million private sector jobs over the next three years—360,000 each month—to bring unemployment down to 6 percent.”
Morici also expressed concern that news of the the job gains will spur further recovery in the labor participation rate, which can put upward pressure on the unemployment rate. He explained that as discouraged workers join the 13.67 million people currently looking for a job, they return to the ranks of the unemployed and push the unemployment rate up.
Structural Unemployment also continues to put upward pressure on the unemployment rate – with almost 44 percent of unemployed Americans, or six million people, out of work for more than six months. That is important to keep in mind when discussing the current unemployment picture because traditional wisdom holds that the longer a person is unemployed, the harder it is to find a job.
Despite the long road ahead, February’s jobs report is encouraging. It has even inspired a few experts to shake off the pessimism and see some light at the end of the tunnel. After the release on Friday, Michael Darda, chief economist at MKM Partners, declared “The labor market is turning the corner.”