US February Jobs Gains Seen Strong, Keeping Fed at Bay
Employment likely grew solidly for a third straight month in February, a sign the economic recovery is becoming more durable and in less need of further monetary stimulus from the Federal Reserve.
The economy probably created 210,000 jobs last month, according to a Reuters survey, following January’s tally of 243,000. The unemployment rate is expected to have held at a three-year low of 8.3 per cent.
If the forecasts are accurate, the government’s jobs report on Friday would mark the first time since early 2011 that payrolls have grown by more than 200,000 for three months in a row – an outcome that could bolster President Barack Obama’s chances of winning re-election.
“The improving labour market is another sign that the recovery is broadening and reduces the urgency for the Fed to act now,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.
The Labor Department will release the employment report at 8:30 am Friday.
Although the job market is gaining some muscle, the pace of improvement remains too slow to do much to absorb the 23.8 million Americans who are either out of work or underemployed.
Fed Chairman Bernanke last week described the labour market as “far from normal” and said continued improvement would require stronger demand for goods and services.
Still, he suggested the outlook would have to deteriorate in order for the central bank to launch another round of bond buying to drive interest rates lower. Officials said in January they expected growth this year to be no higher than 2.7 per cent.
The jobs report, which sets the tone for financial markets worldwide, would add to the list of data highlighting the economy’s underlying strength.
It would also provide a hopeful sign for the global recovery at a time that growth is slowing in China and the Eurozone appears to be sliding into recession. The jobless rate in the 17-nation Eurozone area rose to 10.7 per cent in January, the highest since the euro started circulating in 2000.
In contrast, the unemployment rate has dropped 0.8 percentage point since August, providing some relief to Obama, who faces an election battle in which the economy has been taking centre stage.
Economists predict the jobless rate could fall below 8 per cent by November, even if the recent firming in the jobs market lures Americans who have given up the search for work back into the labour force.
The possibility that discouraged workers resumed the hunt for a job raises the risk that unemployment rose in February.
The labour force participation rate – the percentage of working-age Americans either with a job or looking for one – is near a 29-year low. If it were to rise, it would put upward pressure on the jobless rate.
Employers have added about 1 million jobs since August, according to the government’s main payroll survey. The separate survey of households that is used to measure the jobless rate has shown even brisker hiring.
While some parts of the jobs market, such as construction, have benefited from unseasonably warm winter weather, economists say a genuine improvement is under way, even though they expect a slight pull back in March.
Private companies are expected to again account for all the job gains in February, with government employment seen falling for a sixth straight month.
Manufacturing, which in January recorded the largest gain in a year, is expected to dominate job creation in February, reflecting stepped up auto production.
Most auto companies are taking on new workers and adding shifts and overtime to meet pent-up demand after production was disrupted early last year following the tsunami and earthquake in Japan.
With the anticipated job gains in manufacturing, average hourly earnings are expected to have increased 0.2 per cent in February after a similar increase in January. The overall work week is expected to hold steady at 34.5 hours.
Earnings will be closely watched for signs of wage inflation after unit labour costs grew much more strongly than initially thought in the third and fourth quarters of 2011.
Outside manufacturing, construction payrolls are expected to show another month of sizeable gains after adding a total of 52,000 jobs in December and January.
Although hiring has quickened, the economy faces persistent long-term unemployment. In January, about 43 per cent of the 12.8 million unemployed Americans had been out of work for more than six months.
“We are not yet there in terms of getting everybody back to work, that’s going to take a while,” said Steve Blitz, chief economist at ITG Investment Research in New York.