Unemployment Reaches Four-Year Low
Amid concern that ongoing budget negotiations and sequester-related cuts may yet deal a blow to the nation’s struggling recovery, the U.S. Department of Labor released promising job creation numbers on Friday.
Growth among automakers, builders, and retailers helped to create 236,000 nonfarm jobs in February, pushing the unemployment rate to a four-year low of 7.7%.
Areas showing the most promise included professional and business services, healthcare, and construction, with the latter reporting the creation of 48,000 jobs, its highest monthly increase in nearly six years.
A gathering recovery in home prices was one contributing factor to the good news from the construction sector, which has had little to report in the way of positive movement since the housing bubble burst in late 2007.
On the current trajectory—with 1.2 million new jobs added since September—unemployment is on track to fall below 7.0% by year’s end.
Among those facing improved prospects are recent college grads and those in the manufacturing sector.
Those making their first post-graduation forays into the labor force see this as particularly welcome news, and engineering students in particular report high rates of pre-graduation job offers.
The nation’s manufacturing firms, meanwhile, added 14,000 jobs in February. Auto manufacturing is expected to see even more hiring through the second quarter, as car- and truck sales enjoy the momentum that carried them to sales of 14.5 million units in 2012 (a 14% year-over-year increase).
Despite all the good news, many economists say the sequester is likely to make its presence felt before long. Chairman of the White House Council of Economic Advisors, Alan Krueger, says improvements in the labor market could be derailed by these budget reductions.
“The sequestration is going to make some important cuts,” Krueger says. “It’s going to hurt investment, and it’s going to slow economic growth and job creation.”
“We think we’ll see some slowdown in April and May because of the sequester,” agrees Bank of America Merrill Lynch Senior U. S. Economist Michelle Meyer. “We’re going to see federal job cuts, and the spring is going to be a soft patch for the labor market.”
A key contributor to this growth—and one that is unlikely to disappear—is the Federal Reserve’s commitment to keeping the benchmark lending rate near zero and continuing to invest $40 billion each month in mortgage bonds. The Fed has said the benchmark rate will not increase as long as unemployment remains above 6.5%.
That support may be enough to maintain this forward movement, and Drew Matus, Deputy U.S. Chief Economist at UBS Securities thinks this report is just the confirmation the Fed needs to keep them on the current track, convincing them that “…they’re doing exactly the right thing by stimulating the economy.”