On the one hand, Friday morning's jobs report is the best report in three years. The unemployment rate fell to 8.9 percent in February, as the economy generated 192,000 new jobs. Granted, job growth was more robust in the spring of 2010. But that was due to the government hiring more than a million Census workers. This time, businesses are doing the hiring, finally comfortable that the recovery is self-sustaining, if sluggish. The private sector added 222,000 jobs in February, and has added 1.5 million workers in the past year.
On the other hand, the unemployment rate is woefully high by historical standards, and 13.7 million Americans remain out of work. At the current rate of job growth, it would take more than a decade for the United States to get back to a normal rate of unemployment of about 5 percent. There are 6.6 million fewer Americans working today than there were three years ago. Blacks, whites, teenagers, the elderly, women, men, high-school dropouts, grad-school graduates—every demographic group has unemployment close to historical highs. About 6 million Americans form a new pool of the long-term unemployed, whose prospects in the labor market remain very dim.
That said, every major economic indicator has looked better in the past few months. New claims for unemployment benefits are dropping. The stock market is headed up, making people feel a bit wealthier. Companies are advertising more positions. Business and consumer confidence is up. Corporate profits are at all-time highs, meaning America's businesses have plenty of capacity to hire. Domestic manufacturing expanded for the 19th consecutive month in February. Gross domestic product continues to rise, and global demand continues to increase.
Nevertheless, there are dark clouds on the horizon. State and local governments, loath to raise taxes and under extraordinary fiscal pressures, look certain to continue layoffs. Already, local governments have shed 377,000 jobs since September 2008. The federal government looks certain to slash spending, by billions, immediately. The question is not whether there will be layoffs but rather how many. Federal Reserve Chairman Ben Bernanke estimates the House Republicans' current spending bill would cost the economy "a couple hundred thousand" jobs. The housing market continues to sputter, and might even be in the midst of a double dip. And the price of oil, the economy's lifeblood, for better or worse, is flirting with $104 a barrel, spelling higher costs for businesses and families. Already, increases in earnings are not keeping pace with increases in the cost of food and energy.
Still, there seems to be momentum, finally, in the labor market. The Labor Department did not just announce a rosy February report today. It revised December and January's reports for the better, bumping December jobs up from 121,000 to 152,000 and January's from 36,000 to 63,000. The last time the unemployment rate fell for three consecutive months, it was 2003. The last time unemployment fell so much year-on-year—0.8 percent—it was 1998. And the last time the unemployment rate fell so much in 90 days, it was 1983.
But wait: the report shows that many fundamentals have not improved. It uses the phrases "little or no change" and "unchanged" a half-dozen times. The average duration of unemployment rose to a new high of 37.1 weeks. The labor-force participation rate is at a 25-year low. Unemployment has never been so high for so long, not since the Great Depression.
Then again, it is hard to argue the job market is not improving. The government tends to underestimate job growth and the number of new businesses added coming out of recessions, so it is reasonable to expect upward revisions of today's number. And all measures of unemployment are looking up. The U-6 rate—including people out of work, looking for full-time work, and discouraged from looking for work—fell to 15.9 percent, down from 16.1 percent in January and 17 percent in November. Most important, in the past few months, the unemployment rate has declined not because people are leaving the labor force, but because more people are getting jobs.
There we have it: On the one hand, things are getting better. On the other, they're still really awful.