Unemployment for February – Good News, Bad News

This morning, the government released statistics for the unemployment situation in February – a strong jobs growth of 192,000 new jobs across both the private sector and the public sector with a drop in the unemployment level to 8.9%  Yet, the market responded as if this was bad news, with a drop of 150 points on the Dow as of mid-afternoon.  Let us add a little color:

In fact, the jobs growth was exactly what economists had predicted while simultaneously predicting a steady unemployment figure.  The drop in the latter, in fact, is more driven by folks leaving the job market completely.  In effect, just giving up and either learning a new role in life or entering very early retirement  The jobs growth over the past few months is not enough to both repair the economy and accommodate folks just entering the work force for the first time.  We are slipping in this task – not gaining ground.

The second bit of news is the wage growth figure, which remained flat for February at $22.87/hour.  That is bad news, because of increases in the real costs of living.  While core inflation may be tame, things like oil and gasoline are going up quickly with the events in the Middle East.  This is very bad news – especially for folks on fixed wages or in retirement.  If there isn’t a correction in energy prices, the economy could be at risk of stalling.

So again we have to wait and see if there really is a strong recovery taking hold, if we’re just treading water, or if we are on the edge of another slide downwards.  It wouldn’t be a hard slide like 2008, but it would be enough to truly discourage folks.

Regards,

David B. Matias, CPA
Managing Principal