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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

175,000 Jobs Added: America and the Fed Get a Breather



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The Bureau of Labor Statistics reported this morning that 175,000 jobs were added in February, and the unemployment rate remained unchanged, at 6.7 percent. The jobs number is a solid improvement – about 150,000 jobs were expected, and both December and January added around 100,000 jobs. The unemployment rate actually moved in the wrong direction, from 6.6 to 6.7 percent, but that is not necessarily a bad thing: It relieves the Federal Reserve, which had set a 6.5 percent target as its threshold for when it would plan to start increasing interest rates, and suggests that Americans are still looking for work rather than leaving the labor force.

In this sense, the broadest measure of unemployment reported by the BLS, the U-6 number, is actually an important one to look at, and it dropped, from 12.7 percent to 12.6. You hear a lot around CPAC that that’s the “true” measure of unemployment (Donald Trump told conservatives yesterday that’s still too low, that the real unemployment rate is 22 percent), which isn’t really the case. But it is important whether marginally attached workers are staying in the labor force or not, and today’s report is some indication they are.

There’s some evidence that the weak jobs growth of December and January was due to exceptionally bad weather (the jobs numbers are seasonally adjusted), though that probably can’t explain all of it. In that light, February’s numbers could be even better, because the weather certainly hasn’t let up (a point Danny Vinik also makes in his take on today’s report).

The unemployment rate rose because the number of Americans unemployed but in the labor force — they want a job and are looking for one, but don’t have one, in other words — rose. This is a healthy sign, in fact, as it suggests they’re more optimistic about the economy, and not giving up on labor-force participation altogether. One downside to that is that a tragic measure, the number of Americans out of work for more than 27 weeks, rose substantially in February, by more than 200,000 workers, but that isn’t as bad as members of that cohort, who number almost 4 million, leaving the labor force altogether.

UPDATE: Matthew Boesler of Business Insider argues that today’s report and other increasingly solid jobs data are pushing markets to believe the Fed might raise rates somewhat soon. And he’s right, which is good: Markets aren’t seriously concerned that the Fed will feel obligated to do anything when unemployment hits 6.5 percent, even though Ben Bernanke sort of said it would.

That’s a problem for the Fed and the way it articulates monetary policy, but markets are surviving anyway: They understand that the Fed is going to look at broader labor measures, and while the labor-market recovery has real problems, it’s firming up. When that happens, the Fed’s job is to tighten monetary policy.



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