Up against lowered expectations it is a good report. But zooming out, it is another mediocre labor report. The pace of job creation is still subpar. —Sean Snaith
"Expect more winter blues," warned CNN Money on Thursday before the monthly jobs report was issued by the Bureau of Labor Statistics. The consensus among economists surveyed was for 150,000 new jobs, with many saying that extreme weather would once again cast a shadow and it would require another month of data to unravel a trend.
But when the report arrived Friday morning, the 175,000 new jobs pleasantly surprised observers. Even better was that many of those jobs were in the higher-paying business and professional services.
But while most observers were surprised, the enthusiasm was tempered.
"If anyone who wants to celebrate this it’s because they’ve become accustomed to a .150 batting average," said Mark Hamrick, Washington bureau chief at Bankrate.com.
"Up against lowered expectations it is a good report," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. "But zooming out, it is another mediocre labor report. The pace of job creation is still subpar."
"It's just a steady-as-she-goes recovery. Not fast enough, but not easy to derail," tweeted the Brookings Institution's Justin Wolfers.
"We’re getting better, but we are still a long way from being healthy," said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. "One way to see that is the shocking fact that 1 in 6 men in prime working age don’t have a job, some unemployed and some simply out of the workforce."
The civilian labor force participation rate has increasingly become a point of focus during the drawn-out recovery from the Great Recession. The participation rate is now often paired with the official unemployment rate in measuring economic progress. Official unemployment counts only those actively looking for work, ignoring those who have given up looking for a job and are now on disability or otherwise off the grid.
The CLPR in February's report remains at 63 percent, still at historic lows after falling steadily from 66 percent in October of 2008.
To some degree, this reflects an aging of the baby boom population, Wessel notes, but even restricting the analysis to men in their prime working years, the participation numbers are discouraging.
Wessel worries that short-term thinking tends to dominate, with the month-to-month report card of jobs attracting undue attention while deeper trends in workforce training and global competitiveness are easily ignored.
"We might be looking at a lost generation," Wessel said, pointing to long-term trends that underlie continued weakness. "The fraction of prime age men who are working was coming down well before the Great Recession."
The short-term recovery concerns, Wessel said, are "superimposed over a much longer-term and harder to solve problem, and that is, what is happening to demand for unskilled or semi-skilled labor, and what do we do about the fact that the pace of technology and globalization is so rapid that people become obsolete long before they reach retirement age."
Political leaders in both parties are beginning to pay more attention to the structural issues, Wessel added, but they are, of course, "very vexing and hard to fix."
Snaith sees continued hesitation on both on the supply and demand side as consumers hold down their home equity loan balances and show an unwillingess to spend. That hesitation then contributes to business hesitation to expand.
"It's a chicken and egg proposition," Snaith said. "You need consumer enthusiasm and you need businesses to be hiring. You need movement on one side or the other. But consumers are not plunging money back into the economy, and employers are not going on hiring sprees."
One reason for all this uncertainty, Snaith argues, is that there is an unusually high level of policy uncertainty affecting business. He points particularly to Dodd Frank regulatory requirements and the costs imposed by the Affordable Care Act, with the "ad hoc implementation of various mandates."
"These laws are the rules of the game," Snaith said, "and when you are trying to plot out a strategy of how to play the game, you have to know what the rules are. The Affordable Care Act is a large law, and uncertainty there affects those trying to decide weather to hire."
Taper to continue
Still, the better-than-expected report led most observers to conclude that the Federal Reserve Board would continue to pull back its heavy market interventions that have shored up the stock market since 2008.
It would take a "borderline disastrous" turn in the economy to get the Fed to scuttle its tapering move and return to its high-spending stimulus ways, Hamrick said, in part because there are concerns about unintended consequences of continuing to buy assets to prop up the market.
So even though the jobs growth continues to be weak by historic standards, experts doubt the Fed can do more to make things better and that it may make things worse if it doesn't back down.
"You can't throw a pebble in a $4 trillion pond and make a ripple," Hamrick said. "Balance sheets are so high. The Fed is saying, 'Let's get out of this game and hope the economy is migrating to something more normal.’ ”