Labor market analysis from CMC
Tuesday, March 8, 2011 at 7:42PM Positive labor market news - proof of private sector expansion
Abdur Chowdhury, Ph.D.
Chief Economist
Private sector jobs grew by 222,000 in February with a decline of 30,000 public jobs in state & local government.Gains in the private sector were widespread with improvement in manufacturing and services. This marks the fourth straight month that government payrolls have subtracted from the total and we expect this trend to continue given the budgetary stress at the Federal, state and local levels. The unemployment rate fell by 0.1% to 8.9%. The labor force participation rate remained steady at its 27 year low of about 64%. The underemployment rate, including discouraged workers and part-time for economic reasons, also declined to 15.9%, down from a peak of 17% in November.
With this pace of hiring, the U.S. economy can now begin to make more serious headway in replacing the 8.7 million jobs lost during the recession. We expect to see more than 2 million jobs created in 2011 alone. Nonetheless, as discouraged workers rejoin the labor force - the unemployment rate will decline more slowly than this growth would suggest. We expect the unemployment rate to remain at or above 8.5% by the end of 2011.
A high unemployment rate along with increasing price pressures does not make the Federal Reserve's management of this expansion any easier. Labor market slack has contributed to the decline in core inflation seen so far. Now with job growth picking up, higher food and energy prices become a risk to the inflation outlook. Today's employment figures are consistent with our view that the economic expansion continues with the outlook for about 3% growth in real GDP in 2011. As we have stated before, this appears to be more evidence of a virtuous economic revival.
Dr. Abdur Chowdhury is the Chairman of the Department of Economics at Marquette University, the Chief Economist at Capital Market Consultants, Inc. (CMC) and a member of the Federal Reserve Board of Chicago's Academic Advisory Council.
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