Q & A: The February Unemployment Report and What It Means for the Economy
Chad Stone, the Center’s Chief Economist, discusses the employment report for February:
1. Chad, the jobs report came out today. What did it show?
Today’s employment report shows that the economy is creating jobs, especially in the private sector, which created 222,000 jobs in February, but the unemployment still remains very high. It ticked down to 8.9 percent but that’s still way above what a normal labor market would have.
2. How should we regard these numbers?
Well the fact that the private sector has been creating jobs for 12 straight months is definitely good news but that’s not been enough to really make much of a dent in the huge jobs deficit that was created by the recession and it’s certainly good that the unemployment rate has come down almost a point in the past 3 months, but it’s still at a very high level and it will be a lot more encouraging to see that kind of an unemployment drop with people coming back into the labor force.
But we’re not seeing that yet so there’s still discouragement about job prospects.
3. So you mentioned people coming back into the labor force; what about the long-term unemployed, what can we say about them?
Well we definitely have a problem with long-term unemployment. More than 2 out of every 5 workers has been unemployed for more than half a year and many of those for very much longer than that. Some of them have even run out of their 99 weeks of unemployment insurance.
So long-term unemployment is a major concern and we really need to keep an eye on the long-term unemployment rate as a measure of whether we’re really in a robust jobs recovery and we’re not there yet.
4. So what’s the bottom line? How could the current policy debate affect the growth in the economy and job creation?
Well even under fairly optimistic assumptions about how fast we could be creating jobs the Congressional Budget Office thinks it will take until 2016 to get the unemployment rate down to 3 percent. The Federal Reserve is doing its part by keeping monetary policy as accommodative to growth as possible with very low interest rates.
But the proposals in the House of Representatives, from the House Republicans, for substantial, sharp cuts in spending, they go the opposite direction. At his congressional hearings this week, Fed. Chairman Bernanke has agreed that such sharp cuts in spending would be detrimental to economic growth and could cost a couple hundred thousand jobs, which he pointed out is a non-trivial amount of job loss.
So we have monetary policy in place to support the recovery but if the House Republicans get their way with sharp spending cuts we’re going to be going backwards and that’s not what we need.