SALON

Friday, Mar 8, 2013 3:31 PM UTC

Can our growth survive the sequester?

The new jobs report reveals unemployment is at its lowest level in four years, but the good news may be short-lived

By

Topics: On the Economy, sequester, Unemployment, Jobs report, U.S. Economy,

Can our growth survive the sequester?Job seekers wait in line during a job fair in Portland, Ore., on April 24. (Credit: AP/Rick Bowmer)
This originally appeared on Jared Bernstein's blog, On the Economy.  

Payrolls expanded by 236,000 last month and the jobless rate ticked down to 7.7%, its lowest rate since late 2008, outperforming analysts expectations.  Hours worked per week increased and hourly pay rose as well, suggesting a potential improvement in employer demand (though, as noted, some indicators in the report point the other way—these monthly reports are never an analytical slamdunk).

Whether the better-than-expected results signal a faster underlying trend in job growth, and whether it can withstand the fiscal drag from the sequester, is yet to be seen, a point I return to below.

Since we want to avoid reading too much into any one month in these volatile data, the smart move is to average the last few months of payroll gains to smooth out the noise.  Doing so reveals some acceleration in hiring: over the past three months, average monthly gains were 191K; over the prior three months, 182K; and over the three months before that, 135K.

Unemployment is also down from 8.3% a year ago to 7.7% last month, as noted.

I’ll work up the details throughout the day* but for now, let’s think a bit about what this report may be telling us:

–What might be behind this recent acceleration?  Even while wages and incomes have been relatively flat for most people, households have improved their balance sheets by deleveraging their debt and, with home prices rising in many places, are building back a bit of wealth.  That’s probably helping to boost consumer spending, which has been doing better than expected.

–Construction added 48,000 jobs last month and about 150,000 since September, another sign of the improving housing market.

–Combining the improvement in hours per week with the growth in jobs, aggregate hours worked in the private sector were up 0.5%, versus a decline last month.  Again, we’ll have to see if this sticks but if so, it will contribute to faster GDP growth this quarter—more on that in a sec.

–There were some notably less favorable indicators in the report: though the number of the unemployed fell by 300,000, the share long-term unemployment (jobless for at least six months) ticked up from about 38% to about 40%.  This is indicative of a worrisome situation, where one group of workers churns in and out of joblessness while another large group remains stuck there.

–One reason the unemployment rate ticked down was because 130,000 people left the labor force and the participation rate ticked down (explaining roughly one of the two-tenths decline in the jobless rate from 7.9% to 7.7%).  That’s not consistent with an “improving labor demand” story.

–Broadly measured unemployment, including part-timers who’d rather be full-timers and discouraged workers who’ve given up looking for work (and are thus not counted in the unemployment rate) is still very highly elevated at 14.3%.  Still, that’s down from 15% a year ago.

–Finally, as I wrote yesterday, it’s too soon for the sequester to be seen in these numbers.  My take on that is as follows:

The question is not whether the sequester will hurt—it’s likely to reduce growth by about half-a-percent and kill a bunch of jobs too.  The question is “off of what base?”  If the economy can strengthen such that it’s growing 2.5-3% this year then 0.5% slower growth still means at least slowly declining unemployment.  But if underlying GDP growth is 1.5%-2%, the impact of the sequester could be such that we’ll longingly look back on reports like today’s.

*For e.g., there’s been a somewhat anomalous up-and-down cycle with payrolls since they started growing in early 2010, with faster job growth at the beginning and end of years and weaker job growth in the middle.  Not sure what to make of that but it’s worth looking into.

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden. Follow his work via Twitter at @econjared and @centeronbudget. More Jared Bernstein.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • This photo. President Barack Obama has a laugh during the unveiling of the George W. Bush Presidential Center in Dallas, Tx., Thursday. Former first lady Barbara Bush, who candidly admitted this week we've had enough Bushes in the White House, is unamused.
    Reuters/Jason Reed

  • Rescue workers converge Wednesday in Savar, Bangladesh, where the collapse of a garment building killed more than 300. Factory owners had ignored police orders to vacate the work site the day before.
    AP/A.M. Ahad

  • Police gather Wednesday at the Massachusetts Institute of Technology to honor campus officer Sean Collier, who was allegedly killed in a shootout with the Boston Marathon bombing suspects last week.
    AP/Elise Amendola

  • Police tape closes the site of a car bomb that targeted the French embassy in Libya Tuesday. The explosion wounded two French guards and caused extensive damage to Tripoli's upscale al-Andalus neighborhood.
    AP/Abdul Majeed Forjani

  • Protestors rage outside the residence of Indian Prime Minister Manmohan Singh Sunday following the rape of a 5-year-old girl in New Delhi. The girl was allegedly kidnapped and tortured before being abandoned in a locked room for two days.
    AP/Manish Swarup

  • Clarksville, Mo., residents sit in a life boat Monday after a Mississippi River flooding, the 13th worst on record.
    AP/Jeff Roberson

  • Workers pause Wednesday for a memorial service at the site of the West, Tx., fertilizer plant explosion, which killed 14 people and left a crater more than 90 feet wide.
    AP/The San Antonio Express-News, Tom Reel

  • Aerial footage of the devastation following a 7.0 magnitude earthquake in China's Sichuan province last Saturday. At least 180 people were killed and as many as 11,000 injured in the quake.
    AP/Liu Yinghua

  • On Wednesday, Hazmat-suited federal authorities search a martial arts studio in Tupelo, Miss., once operated by Everett Dutschke, the newest lead in the increasingly twisty ricin case. Last week, President Barack Obama, Sen. Roger Wicker, R.-Miss., and a Mississippi judge were each sent letters laced with the deadly poison.
    AP/Rogelio V. Solis

  • The lighting of Freedom Hall at the George W. Bush Presidential Center Thursday is celebrated with (what else but) red, white and blue fireworks.
    AP/David J. Phillip

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 3 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

vote
Would we give up burgers to stop climate change? New study suggests if we reduce our intake of animal products by 25%, we can halt climate change
594 points595 points | 238 comments
vote
Facebook has been used to find ex-lovers, childhood BFFs or the one who got away. He used it to find the guy who, without his consent, made him his drug mule.
232 points233 points | 22 comments
vote
“This could be a career ender for Michele Bachmann”
143 points144 points | 55 comments
vote
Poll: 3 in 10 voters say “armed revolution might be necessary” - 29% say they believe they'll have to act "in order to protect our liberties" in the next few years
49 points50 points | 16 comments
vote
Capitalism, not feminism, killed home cooking–and fixing our broken food system is gonna take a lot more than some privileged women embracing “new domesticity”
32 points33 points | 19 comments

From Around the Web

Presented by Scribol
listener_new_rect The Listener: "The Shelter Cycle": Raised in a cult

Recommendations