Sunday, March 6, 2011

If U.S. unemployment is dropping, why doesn’t it feel like an economic recovery?

On Friday, the U.S. Department of Labor announced that the unemployment rate fell to 8.9%, from 9.0%, and payrolls increased by 192,000 in February – the lowest level since April 2009. Strength in the manufacturing and service sectors was offset by increasing layoffs by state and local governments.

MY TAKE: While the unemployment rate is improving, the Labor Force Participation Rate (people in the US either working or looking for work - 16 years and older) is 64.2% - the lowest level since 1984, and 2) hourly wage growth continues to be muted. (click on chart for expanded view). As discussed in the past, many economists believe job growth of at least 250,000 per month is needed to sustain an economic recovery. Additionally, a period of elevated oil prices has the potential to negatively affect both consumer and business spending, with the potential of weakening economic growth and accelerating inflation trends.

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