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Janet Yellen seems to be right: all the U.S. economy needed was a tiny bit of warm weather to thaw.
A February jobs report from the U.S. Labor Department confirms what the Federal Reserve chairwoman noted recently in her Senate testimony: recent soft economic data may not be indicative of potential economic strength this year. With an increase in new job creation for the second straight month, it seems all that was needed was a short spurt of warm weather.
Although the three-month average for new jobs is the lowest in the past two years (at 129,000 per month), economists are optimistic. As Capital Economics' Paul Dales notes, "If the economy managed to generate 175,000 new jobs in a month when the weather was so severe, once the weather returns to seasonal norms ... employment growth is likely to accelerate further."
By the numbers
With recent numbers showing closed factories, lower automotive sales, and lagging home sales, there was a fair amount of fear that the U.S. economy would continue to slow. Yet recent figures showed that consumers are regaining confidence in the market.
Even more positive is the nature of the new job creation. Construction, which would usually be at its lowest levels during bad weather, has added 15,000 jobs. Manufacturing added an additional 6,000 jobs, and government added a six-month best 13,000. Of these, only a couple thousand are listed as "short-term, at-will" positions, meaning that the bulk of the newly employed will have sustained income to invest in the economy.
Wages are also up, rising by 9 cents to a national average of $24.31 per hour. By itself, it is the largest monthly wage gain in over two years.
Keeping things in perspective
This is not to say that the news was all good. The addition of 175,000 jobs is still below the average 205,000 new jobs per month benchmark last fall, and almost 7 million workers said their hours were at least temporarily reduced due to bad weather conditions.
Also, while most industries added new positions, three sectors (shipping, warehousing, and retail) cut jobs. While this in and of itself does not spell doom for a recovery, it does remind us that there are sectors still weakened in the wake of slower winter sales.
Finally, long-term unemployment remains persistently high, despite new job figures. As of the end of February, 8 million of the 8.7 million jobs lost in the wake of the Great Recession (as the financial event of 2009 is now called) have been recovered. Yet, this fails to take into account population growth, which means that the recovery still has a long way to go.
The end result?
The U.S. economy continues to recover, albeit somewhat slowly. Though things are far from completely recovered, the fact that the market has managed to regenerate itself is a positive sign. With inflation lagging in a perfect 2%-2.3% range over the last several months, the market is able to grow without fear of a bubble, at least for now.
And, if reality remains as positive as projections intend, a warmer spring will only increase the prospects for U.S. businesses.
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