The Labor Market Continues to Improve

Here are my comments on the employment report:

The labor market continues to improve, CBS News

Job growth is better, but still too slow -- at this rate it will take years to get back to full employment -- so the question is whether job growth will continue to accelerate, level off, or (shudder) perhaps even slow down. I'm hoping for acceleration, but there's no certainty it will come.

[Editing is slow today, no link yet, so here's the post:]

The employment report brings good news. According to the the Bureau of Labor Statistics, nonfarm payroll employment rose by 227,000 in February, and the unemployment rate was unchanged at 8.3 percent.

How can an unchanged unemployment rate be good news? The unemployment rate falls when more people get jobs, and it increases when more people enter the labor force and begin looking for jobs. In the current report these two factors offset each other leaving the unemployment rate unchanged. There were more jobs, but also more people looking. As the BLS reports, "The civilian labor force participation rate, at 63.9 percent, and the employment-population ratio, at 58.6 percent, edged up over the month." The fact that more people are looking for jobs can be viewed in a positive light since it reflects increased optimism about their chances of finding employment.

The job creation number is also good news even though the 227,000 jobs that were created falls short of the amount we need to recover in an acceptable amount of time. At this rate, it will be several years before we reach full employment. That's too long, and I have been hoping to see signs that job growth is accelerating. In past recessions recoveries there have been several months with 300,000 or 400,000 created and we need job creation of this magnitude to keep up with population growth and provide jobs for the millions of people still looking for work.

This report does show signs that job creation is accelerating. The increase in employment is broad-based, each month the job creation figures look a bit better, and if the acceleration in job growth continues that will be a very welcome development. Will it continue? It would be a mistake not to expect rough spots on the road to recovery, there will inevitably be setbacks and in any case we cannot be certain that the needed acceleration will occur. Trouble in Iran could cause oil prices to spike and that would be very bad news. Europe looks better, but surprises are always possible, and there are other risks as well.

Thus, although the labor market is improving it's still too soon for policymakers to forget about the job market and turn their attention elsewhere, though they have mostly done that anyway. And it's certainly too soon to begin reversing course through interest increases or deficit reduction. The economy is looking more hopeful, but until the hopes are realized we need to keep doing all we can to help the labor market recover.