- Tom Silva
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As Spring Arrives, Companies Are Hiring Again
January’s big snowstorms on the East Coast contributed to the creation of just 63,000 jobs nationally in that month. In February, however, businesses started to hire workers. The economy added 192,000 jobs, the best showing since May of last year, the Bureau of Labor Statistics reported Friday. The unemployment rate – which is politically important — fell from nine percent to 8.9 percent. Economists said the employment numbers were “solid” but not “ebullient.”
The optimistic view is that the economy has at long last turned the corner. “I think the economy has not only turned the corner: I am expecting the employment gains to accelerate slightly,” said Sung Won Sohn, a professor of finance at California State University, Channel Islands. “We have definitely reached the point where the economy is self-sustaining.” Sohn thinks that the Federal Reserve can halt its monetary stimulus program for the economy. “There is a growing possibility they will cut short their bond-buying program before the end of June,” he said. Improved job growth would also help cut the federal budget deficit, since income-tax revenues would rise and requests for unemployment benefits will be reduced. States and cities would get a boost for the same reasons. “The chances are the revenue projections may be slightly better than the government anticipates,” according to Sohn.
Other economists were not as sanguine about the pace of recovery. “If we see 200,000 jobs added in March, April, and May, that will convince market participants that the recovery is self-sustaining,” said John Canally, economist at LPL Financial in Boston. “You can’t make that call just by looking at February, because the numbers may have been distorted by the weather.” According to Canally, the most accurate indications of how the weather affected the numbers were in construction, which gained 22,000 jobs in February after falling 33,000 in January; transportation, which added 22,000 jobs compared with losing 44,000 in January; and leisure and hospitality, which added 21,000 jobs after dropping 3,000 the previous month. “All of those swings are because of the weather,” he said.
Manufacturing added 33,000 jobs in February, primarily in producing durable goods such as washing machines and refrigerators. This comes as no surprise to Frank Fantozzi, president of Planned Financial Services in Cleveland. “In talking to our corporate clients, we were hearing there was definitely hiring going on and activity improving,” Fantozzi said. “My litmus test is when our corporate clients from manufacturing to services send me e-mails saying they are looking to hire someone and asking if we have anyone in our network who would qualify.”
Not surprisingly, the Obama administration was cheered by the February numbers. “We are seeing signs the initiatives put in place by this Administration – such as the payroll tax cut and the investment tax credit – are creating the conditions for sustained growth and job creation,” said Austan Goolsbee, chairman of the Council of Economic Advisers. Republicans countered, suggesting that the improvement was because they had convinced the Obama administration to extend the Bush-era tax cuts for two years. “Removing the uncertainty caused by those looming tax hikes provided much-needed relief for private-sector job creators in America,” said House Speaker John Boehner (R-OH).
According to Esmael Adibi, an economist at Chapman University in California, “Three sectors – construction, financial activities and government – are taking the oomph out of the recovery. Job creation is what is going to bring housing back, but with this pace of job creation, we’re not going to see a quick turnaround.”