Jobs Up Solidly In February, Unemployment Remains 8.3%

U.S. employers hired 227,000 workers in February -- the third straight month more than 200,000 workers found jobs -- indicating companies are feeling more upbeat about the recovery. Still, the nation's unemployment rate remained at 8.3 percent.

The gain follows an upwardly revised 284,000 rise in January, the Labor Department said Friday. Economists polled by Thomson Reuters had called for a smaller increase last month of 210,000 jobs.

February's unemployment rate held at a three-year low of 8.3 percent, which was the same as economists' median forecast. The decline in unemployment -- and whether it's sustainable -- has become an economic and political hot-button issue.

Job gains lead to income growth that supports consumer spending, which accounts for more than 70 percent of U.S. economic growth. And Friday's report is a solid boost for President Barack Obama's chances of a re-election.

Private employment rose 233,000, after a 257,000 gain in January, according to the survey. The manufacturing sector added 31,000 jobs in the month, with all of the increase occuring in durable goods manufacturing. This sector has added 444,000 jobs since a trough in January 2010.

It looks like February was another good month for the labor market, said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in February, while the average hourly earnings rose by three cents, or 0.1 percent, to $23.31.

Broad-Based Hiring

It really has been broad-based, Faucher said, referring to the recent trend in hiring.

Macy's Inc. (NYSE: M), the second-biggest U.S. department store chain, plans to hire 4,000 full-time employees in 2012 for high-paying jobs, which matches the number of additions it made last year.

Caterpillar Inc. (NYSE: CAT), the world's largest maker of construction and mining equipment, announced in November it will shift production from Japan and open a new manufacturing facility in North America to produce small tractors and excavators. In February, the Peoria, Ill. company said the new facility will be built in Georgia and produce more than 4,200 jobs.

Top U.S. automakers -- General Motors Co. (NYSE: GM), Ford Motor Co. (NYSE: F) and Chrysler -- added more than 38,000 jobs in 2011 and have plans to hire 13,000 more this year. Another 20,000 workers could be hired if sales top the 15 million mark by 2015.

Decline May Not Be Sustainable

The unemployment rate has tumbled from 10 percent to 8.3 percent in a little over two years. But economists aren't convinced this rapid rate of decline is sustainable.

It's hard for me to say that this is a sustainable pace right now, said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte. I think we are probably going to see a somewhat slower pace of job growth over the next two months.

Federal Reserve Chairman Ben Bernanke told Congress last week the decline in the unemployment rate was somewhat more rapid than would've been expected given that growth had been at or below trend at the same time. He added, however, the job market is far from normal.

Bernanke said the U.S. economy has to show stronger growth to ensure more Americans can find jobs.

Minutes of the Jan. 24-25 Federal Open Market Committee showed forecasts for the unemployment rate at 8.2 percent to 8.5 percent at year's end -- i.e., election time.

Workforce Participation Rate

The unemployment rate, the normal mechanism for understanding the percentage of workers who want to work but can't find work, is telling us less and less each month.

When the recession officially started in December 2007, the labor participation rate was 66 percent and the unemployment rate was 5 percent.

By the time the recession officially ended in June 2009, the labor participation rate dropped to 65.7 percent. The unemployment rate at that time was 9.5 percent (the peak came four months later and registered at 10.1 percent).

The labor participation rate rose slightly in February to 63.9 percent from 63.7 percent in the prior month, but still remains at a relatively high level.

Two major factors contributed to the decline in the participation rate: aging Baby Boomers who've begun to retire and more people giving up the hope of finding a job.

Even though the labor market is heading in the right direction, there are still a lot of people out there who would like to be working but don't have a job now, said Faucher.

The number of people who've been out of work for 99 weeks or more still stands at record levels, and according to Brown, the economist at Wells Fargo, it's a very disturbing trend.

When the economy starts to turn around, those who've dropped out of the workforce may be encouraged by positive headlines to resume their job search. If that happens it could, at least temporarily, increase the unemployment rate.

However, an unemployment rate that's steady, or even moving up a bit, shouldn't be regarded as a negative, as it indicates people are more optimistic about the job market and many new or returning jobseekers are finding work, PNC Financial Services Chief Economist Stuart Hoffman pointed out in a Wednesday research note.

A Far Cry from Pre-Recession Levels

Despite recent declines, the jobless rate in this cycle has been painfully persistent: The unemployment rate has stood above 8 percent for more than three years.

By contrast, the unemployment rate has averaged 5.8 percent since 1948.

According to the jobs calculator available at the Atlanta Fed website, employers will have to maintain the current rate of creating roughly 200,000 jobs per month to get the unemployment rate down to 5.8 percent by November 2014.

Payroll employment is still down by about 6 million from its peak. So we have a long ways to make up and it's going to take us some time to do that, said Faucher.

The problem is that we are digging ourselves out of a very large hole.

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