Tuesday, March 11, 2014
By DON LEE
Tribune Washington Bureau
WASHINGTON — The pace of job growth has begun gathering steam as the last missing piece in the recovery -- the housing market -- comes back to life nationwide and employers start to look past government budget battles and add to their thinned ranks.
New housing under construction on Munjoy Hill, as seen in this aerial photograph Wednesday, Feb. 6, 2013. Construction is expected to be complete by the spring.
Gabe Souza/Staff Photographer
The Labor Department said the economy generated 236,000 net jobs in February, much more than analysts had expected.
The improvement was enough to help drive the nation's unemployment rate down to 7.7 percent, the lowest point in President Obama's tenure. Employees put in more hours of work last month, and their average hourly earnings edged higher.
Although the employment situation remains far from robust -- people continued to drop out of the labor force, and millions of workers are stuck in part-time jobs -- Friday's report adds to evidence that the recovery is picking up momentum. Job growth has averaged 205,000 monthly since October, up from 152,000 a month in the third quarter last year and 108,000 last spring.
The report eased analysts' concerns about the federal government's new spending cuts, which started taking effect this month, and it lifted the spirits of investors, who pushed the Dow Jones industrial average up to a fourth straight day of record highs.
"The labor market has hit a turning point and is finally healing more rapidly," said Diane Swonk, chief economist at Mesirow Financial in Chicago, although she cautioned in a research note that "we still have a long way to go."
Obama's chief economic adviser, Alan Krueger, who typically has been guarded in comments about the monthly job numbers, said the report Friday indicated a recovery that "is gaining traction."
In prior business cycles, the construction sector was among the earliest to recover and lift the broader economy and job growth. This time around, the housing bust was a prime factor in the Great Recession that wiped out trillions of dollars of household wealth and wreaked particular havoc on small businesses.
But in recent months, the housing market finally started to strengthen, with new-home building nearing 1 million units a year after falling to a low of almost half that. The widely watched Case-Shiller home-price index, which calculates price changes for 20 cities, jumped 6.8 percent in December compared with a year earlier. "It's all adding nice chunks to the expansion," said Karl Case, co-founder of the index.
A burst of hiring in the construction sector that reflected stronger home-building was among the biggest gains in February, adding 48,000 jobs.
Real estate and office leasing added 9,000 positions, and hiring at furniture makers and woodworkers helped the American manufacturing industry surpass the half-million new-jobs count since the recovery. There also were payroll gains at architectural and engineering firms as well as other building services.
The rebound in housing has boosted sales and optimism, spurring smaller companies to bulk up after several years of operating as leanly as possible. The American Institute of Certified Public Accountants said its recent survey of nearly 1,400 senior executives and other members found that one-third admitted to having too few employees.
"People are going to start loosening up a little," said James R. Blake, an executive committee member at the institute. "They almost have to because they're bare-bones."
One major reason many employers held back, Blake said, was the uncertainty related to the political situation in Washington. Although the fighting over taxes and spending is not over -- another debt ceiling deadline looms this summer -- Blake and others believe that the worst may be over.
"Businesses will be moving forward and making decisions," he said.
The increase in hiring also pushed stocks higher on Wall Street. The Dow Jones industrial average gained 67.58 points, or 0.5 percent, to 14,397.07. The Standard & Poor's 500 index rose 6.92 points, or 0.5 percent, to 1,551.18. The Nasdaq composite advanced 12.28 points, or 0.4 percent, to 3,244.37.
Friday's jobs report was based on the government's survey of employers and workers in mid-February, two weeks before $85 billion in across-the-board cuts to federal agencies' budgets started to take effect.
The nonpartisan Congressional Budget Office has estimated that the cuts, known as a sequester, could cost 700,000 jobs over time and slow the economy. The pain probably would be felt particularly in places with a large military or government presence, including San Diego; Washington, D.C.; and Colorado Springs, Colo.
"If it weren't for the sequester, I think the strength of the home-building recovery would lead to powerful growth in 2013," said Richard K. Green, a real estate expert at the University of Southern California. Still, he said, the housing market "will absolutely" cushion the blow from the budget cuts.
In February, government employment dropped by 10,000 jobs, all of which came at state and local offices. Federal payrolls were flat.
The jobs report was not entirely glowing. Part of the drop in the unemployment rate, from 7.9 percent in January, resulted from workers' leaving the labor force. Jobless people who are not actively seeking work are not counted as unemployed.
Among the 12 million officially unemployed in February, about 40 percent have been without work for six months or more, a historically high figure that has raised concerns about a large population who may see their skills erode and stay permanently unemployed.
But analysts were overwhelmingly encouraged by the report, which exceeded their average forecast for about 160,000 new jobs in February.
Given the weak and inconsistent pattern of recovery, economists were mindful of past spurts of job growth that fizzled out after a few months. But the new report raised hopes that the step-up in hiring was for real.
"I don't think this is a false start," said Carl Tannenbaum, a senior vice president at Northern Trust Corp., a Chicago wealth-management and banking company.