Brisk Hiring In February Mitigates The Slowdown Risk
America is going through an interesting phase when the election campaign in full moon and Wallstreet seems to be nervous about the impending slowdown in the U.S. economy. The latest job report by BLS has reported a strong job market in February. According to the report, employers added 242,000 workers, which marks a hefty gain in the labor market. The labor force participation rate has also increased. It has continued its upward momentum since September last year. February month has come up with good news, job market is robust and retail sales are also picking up. The most encouraging sign in the job report is that the overall share of Americans in the job market has increased by 0.2 percent.
Growth estimates for the first quarter has been pegged around 2.5 percent per annum, but it may be tilted to downside after the Commerce Department reported widening of trade deficit by 2. percent.
Economists had forecast employment increasing by 190,000 last month and the jobless rate remaining steady. “We’ve got a real strong job market going,” said Carl Tannenbaum, chief economist at Northern Trust, while explaining the scenario. “It does suggest that fears about a U.S. recession have been greatly overdone.”
Compared to a similar scenario 4-years-ago in the last presidential election, the unemployment rate in the economy was hovering around 8.3 percent. The worries related to rising crude oil prices, burgeoning consumer debt and massive layoffs in government were hogging newspaper reports. Now, the unemployment rate has dropped to 4.9 percent and private sector has shown continuous 72 months of job gain and oil prices are at all-time low.
The momentum in the job market is alleviating concerns of a slowdown in the economy. The only cause for concern is falling wages by 0.1 percent after the increase of 0.5 percent in January.
Beth Ann Bovino, chief United States economist at Standard & Poor’s, seems optimistic. “We’re back in the saddle again.”
Fed may decide to hold the interest rate as of now, but it has increased the chances that it may choose to increase the borrowing rate in April or June.
Despite improvement in the economy, there is a lot of anger and distress in people. It has helped the Republican Party candidate Donald Trump to soar in the popularity rating.
However, there is also an interesting scenario on the employment front. The demand uptick is being seen in a range of industries; some sort of polarization in the job market is being seen. The demand in the hospitality and service sector is huge, but wages are on the lower side. The high paying sectors such as manufacturing, energy and warehousing are bleeding. These blue collar employees have been affected badly by the structural shift in the U.S. economy.
For example, losses continued to mount in the February month in the mining sector. It lost 19,000 jobs during February. People in Michigan and Ohio feel that the losses are due to trade deficit with China. That’s the reason that despite the employment rate is increasing, people continue to complain because of low wages. The middle class in the economy has been squeezed and they feel it tough to maintain their lifestyle.
However, if the job growth continues its momentum, it could lead to a changed view about the economy. It will also impact the political dynamics in the coming months. The brisk hiring will blunt the Donald Trump’s argument that the Affordable Care Act has thrown a lot of people out of their job. Those republican politicians crying about its bad impact as the number of jobs in the healthcare sector have increased by 38,000 in February.
There is no doubt that meaningful progress has been made after the end of the 2008 recession, but Americans are still feeling its pinch. The recovery is certainly there, but its form has changed. Once mining and energy sectors start sending improvement signal, people working in these sectors will have an increase in their income and it will also lift the overall wage level in the economy.