WASHINGTON (MarketWatch) — There’s a growing sense among economists that the U.S. recovery is gaining steam, a view heavily supported by a marked improvement in jobs data.
Yet there’s also some lingering doubt about whether the labor market has improved as much as the data suggest. While hiring has accelerated since the end of last summer, businesses are still not rushing to add workers.
“What’s driving the payroll growth is fewer firings,” said Neil Dutta, an economist at Bank of America/Merrill Lynch.
“Hiring hasn’t picked up in any major way.”Economists — and Americans looking for work — will get a better idea of whether hiring is truly on the upswing with Friday’s monthly employment report for February.
Democrats and Republicans will also pay close attention as they jockey for political advantage ahead of the 2012 election.
The jobs report is the highlight of this week’s economic calendar, which also includes the monthly U.S. trade deficit and factory orders. Economists surveyed by MarketWatch forecast the U.S. added 208,000 jobs in February, with the unemployment rate holding steady at 8.3%.
If hiring meets or exceeds the forecast, financial markets may react with good cheer on Friday when the data is released. It would mark the third straight month of job growth above 200,000 and probably pull the unemployment rate down slightly.
“The labor market has definitely gotten stronger,” said Gus Faucher, senior economist at PNC Financial Services. “Everything is looking good for job growth.”
Labor market still laboring
Even the more optimistic economists, however, are quick to downplay talk of a rapid recovery. Faucher points out the U.S. has about 6 million fewer jobs in the aftermath of the 2007-2009 recession. It will take a long time to gain them back based on the current trajectory of job creation.
At 200,000 new jobs a month, for example, the economy can easily absorb the natural increase in labor force of around 125,000 a month.
Yet the U.S. would need to add 250,000 to 300,000 jobs a month to pull the nation’s 8.3% unemployment rate back down to precession levels, and even that would take three to four years.
“I don’t expect that to happen,” Faucher said.Dutta is more pessimistic. While his firm estimates that 215,000 jobs were created in February, Dutta is skeptical the current U.S. growth rate can sustain a faster pace of hiring.
Job growth has actually outstripped economic growth lately — a point Federal Reserve Chairman Ben Bernanke made last week — a situation that rarely lasts. Read story about Bernanke’s comments.
Dutta also notes that consumer spending has flattened out over the past few months, a potentially big drag. Consumer spending accounts for as much as 70% of U.S. economic growth. Read more about consumer spending.
That’s not all. Last week’s closely followed ISM manufacturing index took a surprising dip while home prices fell again and orders for durable goods contracted sharply in January.
It was the first batch of data this year that contradicted the prevailing view of an economy gaining traction. See a graphical review of the week’s economic data.
A temporary blip? Maybe, but it will take a few more months to find out.
Some analysts also wonder whether an unusually warm winter has given the economy a temporary boost whose effects could fade with the arrival of spring.
“The mild winter across the U.S. has also benefited the economy as the traditional lull from cold weather ‘hibernation’ has been alleviated,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors. See story on weather impact.
Slower start to 2012
Lingering caution about the recovery, even among bulls, is evident in economic forecasts for the first three months of the new year.
The MarketWatch survey shows growth tapering off to 1.9% from 3.0% in the fourth quarter, as companies trim inventories and consumers rebuild savings after a spending spree in the late stages of 2011.
Still, most economists believe growth will accelerate after the first quarter once companies rebalance their inventory levels and consumers feel free to spend again.
Second-quarter growth, for example, is forecast to rise to 2.5%, according to the MarketWatch survey.
In that view, higher spending begets rising demand for goods and services and companies will have to add workers to keep up. That’s how hiring in the 200,000-plus range each month is achieved.
“On the whole, we’ve had a good run of data,” said economist John Canally of LPL Financial.” The overall economy is doing better and people are starting to feel better.”
marketwatch.com
Yet there’s also some lingering doubt about whether the labor market has improved as much as the data suggest. While hiring has accelerated since the end of last summer, businesses are still not rushing to add workers.
“What’s driving the payroll growth is fewer firings,” said Neil Dutta, an economist at Bank of America/Merrill Lynch.
“Hiring hasn’t picked up in any major way.”Economists — and Americans looking for work — will get a better idea of whether hiring is truly on the upswing with Friday’s monthly employment report for February.
Democrats and Republicans will also pay close attention as they jockey for political advantage ahead of the 2012 election.
The jobs report is the highlight of this week’s economic calendar, which also includes the monthly U.S. trade deficit and factory orders. Economists surveyed by MarketWatch forecast the U.S. added 208,000 jobs in February, with the unemployment rate holding steady at 8.3%.
If hiring meets or exceeds the forecast, financial markets may react with good cheer on Friday when the data is released. It would mark the third straight month of job growth above 200,000 and probably pull the unemployment rate down slightly.
“The labor market has definitely gotten stronger,” said Gus Faucher, senior economist at PNC Financial Services. “Everything is looking good for job growth.”
Labor market still laboring
Even the more optimistic economists, however, are quick to downplay talk of a rapid recovery. Faucher points out the U.S. has about 6 million fewer jobs in the aftermath of the 2007-2009 recession. It will take a long time to gain them back based on the current trajectory of job creation.
At 200,000 new jobs a month, for example, the economy can easily absorb the natural increase in labor force of around 125,000 a month.
Yet the U.S. would need to add 250,000 to 300,000 jobs a month to pull the nation’s 8.3% unemployment rate back down to precession levels, and even that would take three to four years.
“I don’t expect that to happen,” Faucher said.Dutta is more pessimistic. While his firm estimates that 215,000 jobs were created in February, Dutta is skeptical the current U.S. growth rate can sustain a faster pace of hiring.
Job growth has actually outstripped economic growth lately — a point Federal Reserve Chairman Ben Bernanke made last week — a situation that rarely lasts. Read story about Bernanke’s comments.
Dutta also notes that consumer spending has flattened out over the past few months, a potentially big drag. Consumer spending accounts for as much as 70% of U.S. economic growth. Read more about consumer spending.
That’s not all. Last week’s closely followed ISM manufacturing index took a surprising dip while home prices fell again and orders for durable goods contracted sharply in January.
It was the first batch of data this year that contradicted the prevailing view of an economy gaining traction. See a graphical review of the week’s economic data.
A temporary blip? Maybe, but it will take a few more months to find out.
Some analysts also wonder whether an unusually warm winter has given the economy a temporary boost whose effects could fade with the arrival of spring.
“The mild winter across the U.S. has also benefited the economy as the traditional lull from cold weather ‘hibernation’ has been alleviated,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors. See story on weather impact.
Slower start to 2012
Lingering caution about the recovery, even among bulls, is evident in economic forecasts for the first three months of the new year.
The MarketWatch survey shows growth tapering off to 1.9% from 3.0% in the fourth quarter, as companies trim inventories and consumers rebuild savings after a spending spree in the late stages of 2011.
Still, most economists believe growth will accelerate after the first quarter once companies rebalance their inventory levels and consumers feel free to spend again.
Second-quarter growth, for example, is forecast to rise to 2.5%, according to the MarketWatch survey.
In that view, higher spending begets rising demand for goods and services and companies will have to add workers to keep up. That’s how hiring in the 200,000-plus range each month is achieved.
“On the whole, we’ve had a good run of data,” said economist John Canally of LPL Financial.” The overall economy is doing better and people are starting to feel better.”
marketwatch.com
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