The Corner

The Latest Unemployment Report

The February report showed that, although the labor market is still treading water, there is room for optimism. After all, almost every industry except for construction is either adding jobs or is flat. Job growth in the service sector was positive thanks to health care and temporary services. Manufacturing and retail trade were basically flat over the past month. The economy still shed jobs, but this reduction was the result of steep job cuts in the construction industry, many of which can likely be attributed to last month’s epic blizzards. Overall, the employment picture continues to improve; job creation is occurring in more and more business sectors.

Another sign of improvement is that, in addition to the continued surge in temporary services, the household survey showed solid employment growth. In the household survey, the number of new jobs created was enough to keep the unemployment rate constant, despite an increase in the labor force. In other words, job creation was equal to the number of new workers in the labor market.

While the official unemployment rate was flat at 9.7 percent, the unemployment rate of discouraged workers went from 10.3 percent to 10.4 percent. In the last two months, over 250,000 workers dropped out of the labor force to become “discouraged workers” — the largest two-month increase since the survey’s creation in 1994. This increase in discouraged workers is likely one of the main reasons that the number of workers unemployed by 27 weeks fell by 180,000 last month.

This report reinforces my prediction that the labor market will turn positive in the spring. However, this coming labor market recovery is likely to be sluggish as job creation numbers remain low — the result of business’s reluctance to add to payroll in the current economic and political climate.

Rea Hederman Jr. is assistant director of the Center for Data Analysis and senior policy analyst at the Heritage Foundation.


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