Hiring Shows Growing Strength
By Conor Dougherty
2 April, 2011
The Wall Street Journal
The American job market is starting to show some muscle.
The government’s broadest snapshot of the labor market showed the U.S. created 216,000 jobs in March as the private sector added 230,000 jobs, offset in part by continued cuts by local governments.
The jobless rate, the most politically salient measure of economic health, edged down to 8.8%, its fourth consecutive monthly decline even though more Americans entered the job market. The unemployment rate has now dropped one percentage point since November.
The data suggest the recovery from the deepest recession in generations finally is translating into significant job growth, a welcome sign of momentum in the face of threats from higher oil prices and supply disruptions after the Japanese earthquake.
The news sent the Dow Jones Industrial Average up 56.99 points to 12376.72, its highest close of 2011.
“It’s a very solid report that shows the labor market gaining momentum,” said David Greenlaw, an economist with Morgan Stanley in New York. He estimated that of the one-percentage-point decline in the jobless rate over the past four months, 0.8 point was due to rising employment and the rest to a contraction in the labor force.
The jobs report showed that strong growth in business’s output and profits still isn’t translating to sustained pay increases. Hourly wages were flat in the month, while hours worked also were unchanged.
Stagnant wage growth is a concern because workers have seen more of their disposable income eaten up by higher costs for food and fuel. But it may reassure the Federal Reserve, where some have grown more outspoken about inflation fears.
Indeed, the jobs data set the stage for a shift in Fed policy. With the labor market gaining a more solid footing, a $600 billion program of Treasury bond purchases appears likely to end in June. This will effectively mean the Fed is moving from easing monetary policy to a neutral stance of no longer easing but not yet beginning to tighten policy.
The next debate inside the Fed — about when and how to raise interest rates — has only begun to take shape. A slew of officials from regional Fed banks have spoken out over the past two weeks, with several calling for a swift rise in interest rates as a means of heading off inflation. But leading decision makers at the Fed, including New York Fed President William Dudley, Vice Chairman Janet Yellen and Chairman Ben Bernanke, have either thrown cold water on the idea of a quick move to tighten or haven’t addressed the issue.
“Economic conditions have improved in the past year. Yet, the recovery is still tenuous,” Mr. Dudley said in a speech in Puerto Rico Friday.
Austan Goolsbee, chairman of the President’s Council of Economic Advisers, praised the month’s “solid employment growth” but added: “As long as millions of people are looking for jobs, there is still considerable work to do to replace the jobs lost in the downturn.”
House Speaker John Boehner (R., Ohio) said, “Any improvement in the jobs picture is welcome news for the country, but Washington needs to do more to end the uncertainty plaguing job creators.”
Even with Friday’s robust report, the U.S. has 13.5 million unemployed people, and the percentage of them who are long-term unemployed — meaning they have been out of work six months or more — grew to 45.5% from 43.9% in February. If monthly job growth continued along last month’s trajectory, it would take eight years for the unemployment rate to return to its pre-recession level of around 5%.
The public sector remained a weak point, as local governments shed 15,000 jobs last month in an effort to close budget gaps. But many other sectors showed strong growth. Professional and business services gained 78,000 jobs. Factories added 17,000 jobs, while health care added 37,000. Over the past 12 months, health care has added an average of 24,000 jobs a month.
The government also revised upward job figures for the two previous months, indicating the economy added 7,000 more jobs than previously thought.
The positive news on jobs comes amid worries about the pace of the recovery. Some forecasters recently downgraded their estimates for growth in the first quarter, blaming weaker-than-expected consumer spending amid higher prices for food and energy.
J.P. Morgan Chase economists last month lowered their estimate of first-quarter growth in gross domestic product to an annualized 2.5% pace from 3.5%, citing weaker-than-expected economic data.
A separate report Friday emphasized manufacturing’s strength. The Institute for Supply Management said its gauge of factory activity, which is based on a survey of purchasing managers, slipped slightly to 61.2 in March from 61.4 the month before. Readings above 50 indicate expansion.
Scott Thompson, President of Lexicon Staffing in Beaverton, Ore., has seen evidence of employers’ new willingness to add jobs. For the past year, Mr. Thompson’s staffing agency has filled mostly temporary-job vacancies. Over the past few months, he has seen employers shift toward hiring far more permanent workers. Full-time hires represent about 40% of his worker placements now, compared with 10% a year ago.
“That says to me that budgets are loosening up,” he said.
Matt Goff, a 39-year-old computer-network engineer, recently used Lexicon to switch jobs. Mr. Goff, who got his new job last Monday, had been looking for a new position for months, in part because his last employer had been cutting staff, raising employee contributions for health-care benefits and cutting back perks such as paying for training courses.
“When I started looking, there were times when you would [go online] and see no new jobs in my field for days on end,” he said. “Now I see usually anywhere between three and five new jobs in a day.”
His new job comes with a 10% pay cut, but he says his take-home pay is likely to go up because his health insurance will cost less.