By Carlos Guillen
It is indisputable, the jobs situation is improving, and this is giving us a bit more confidence that the overall economy is headed in the right direction, as more jobs being generated in a consistent basis means more capacity for consumption. The most recent snapshot of the jobs backdrop was certainly compelling, providing a further sign that the recovery of the world's biggest economy is becoming more sustainable. While it is clear that the unemployment rate is still much higher than the normal run rates, its improvement is nonetheless welcomed with open arms.
February's jobs data was certainly encouraging, and it served to confirm what other independent surveys had already indicated, that is that the jobs situation is improving. According to the latest data from the Department of Labor, the unemployment rate remained constant in February at 8.3 percent, continuing to represent the lowest level since January 2009, and in line with the Street's estimate. More encouraging, however, was that non-farm payroll employment increased by 227,000, higher than the Street's estimate calling for a 206,000 increase.
Although the unemployment rate remained constant, it was encouraging to see that the jobs market was able to absorb a rather large spike in terms of individuals entering the labor force. As we can see from the Household Survey Data, the Not in Labor Force level decreased by 310,000, yet the Employment level increased by 476,000, suggesting that most of those that decided to join the work force were accommodated by the economy.
Perhaps the most surprising aspect of the report was that the change in nonfarm payroll jobs was much better than expected as it showed an increase of 227,000 jobs while the Street's consensus called for a gain of 206,000. While there have be some fluctuations, the economy has been able to consistently add jobs in each of the last 17 month. This nonfarm payroll figure also came in well above ADP's nonfarm jobs number posted on Wednesday that showed an increase of 216,000 jobs. We should also note that the strong nonfarm increments coincide with the favorable trend currently occurring with weekly applications for unemployment benefits (four-week moving average) as they have fallen to levels last seen in close to four years.
All in all, consumers continue to gain confidence in the direction of employment. Consumer sentiment has been increasing for the last six consecutive months, and most recently it came in ahead of expectations. Clearly, the uptrend in consumer sentiment and the improvement in jobs are very encouraging, Consumers have brushed off threats of higher gas prices and risks of a European recession and have been motivated by stories that more and more people are getting jobs; however, they are still feeling rather pessimistic about their own financial situations. As it stands, according to the Michigan report, more households reported recent income declines than increases, for the 41st consecutive month. Just one-in-four households expect income gains in the year ahead. The majority of households did not foresee any income increase during the year ahead, for the 28th consecutive month. And a mere 8 percent expect an increase in their inflation-adjusted income during the year ahead. So all is not well; the unemployment rate is still very high. There is still a lot to be done to get the unemployment rate back to normal levels. Nonetheless, at least hope is still alive.