Unemployment at 4-Year Low as U.S. Hiring Gains Steam

Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.

“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.”

The Labor Department reported that the economy added 236,000 jobs in February as the unemployment rate sank to 7.7 percent, down from 7.9 percent in January and the lowest level since December 2008.

Wall Street expected no more than 165,000 additional jobs in February, and the surprise helped lift the Dow Jones industrial average to another new nominal record, its fourth for the week. It closed at 14,397.07.

But many experts said if it weren’t for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead.

“It does suggest a bit more cushion heading into the spring, when we will see the bulk of the impact from the sequester and fiscal pullback,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “This was a good report. It’s hard to poke holes in it. But we think we’ll see some slowdown in April and May because of the sequester.”

Mr. Gault estimated that the economy would achieve a 1.5 percent growth rate in the first half of 2013. Without the spending cuts and a rise in Social Security taxes that went into effect in January, he said, the economy would probably advance at double that pace.

As a result, he and other economists expected that the pace of job creation would slow, leaving the unemployment rate not much lower than where it is now. If jobs were added at February’s pace for the rest of 2013, the unemployment rate would crack the closely watched 7 percent level by the end of the year. Instead, Ms. Meyer predicted that unemployment would remain near 7.5 percent.

Macroeconomic Advisers, an independent forecasting firm, predicted that the federal spending cuts would cost about 700,000 jobs this year, with most of the damage occurring in the second and third quarters.

While the economy is expected to continue to add enough jobs to keep the jobless rate from rising significantly, estimates like these suggest that without the drag from Washington the labor market might have added, on average, a robust 300,000 jobs a month or so.

The data for February, adjusted for normal seasonal variations, don’t reflect the federal cuts, which are expected to affect not just government jobs but also industries that rely on public spending.

Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.

On Friday, the White House was quick to point to the new data as a sign that the economy is strengthening even as it warned of the impact from the squeeze on spending.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

In some respects, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

Private hiring last month was broad-based, with healthy job gains in several areas, including business services and manufacturing.

Article source: http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?partner=rss&emc=rss