Archive for Friday, March 4, 2011

Burst of hiring could mark turning point

March 4, 2011


Companies added more workers in February than in any month in almost a year — a turning point for the economy that finally pushed the unemployment rate below 9 percent. Economists say the stronger hiring should endure all year.

The 222,000 jobs the private sector created more than offset layoffs by financially squeezed state and local governments. They slashed 30,000 jobs, the most since November.

The unemployment rate sank to 8.9 percent, the lowest since April 2009. The rate has now fallen almost a full percentage point in just three months — the sharpest drop in a generation.

Hiring last month was broad — factories, trucking companies, health care providers, construction firms, hotels and restaurants all added jobs.

“Bottom line: The labor market is turning the corner,” said Michael Darda, chief economist at MKM Partners, an economic research firm.

The figures suggest the economy has entered a healthier phase typical of what economists call a virtuous cycle: Americans are spending more, which raises corporate profits, which leads to hiring and then more spending and growth.

During the recession, the cycle was more vicious than virtuous: Waves of layoffs suppressed consumer spending, which lowered corporate profits and triggered more job cuts.

On Wall Street, another spike in oil prices rattled investors and overshadowed the good news on hiring. The Dow Jones industrial average fell 88 points, one day after posting its biggest gain of 2011.

Other forces are still working against the economic recovery. State and local governments are expected to keep shedding jobs. And inflation and higher gas prices resulting from the Middle East unrest pose threats.

Still, economists now think private companies will feel comfortable enough to add 200,000 jobs a month through the rest of this year. That would be an improvement from the average of 150,000 jobs created during the past three months.

It takes about 125,000 new jobs a month just to keep up with population growth and hold the unemployment rate stable. It could take up to 300,000 to reduce the unemployment rate significantly, economists say.

Stronger job growth should put the economy on track to grow at a roughly 4 percent annual rate in the first three months of this year, economists said. That would be much better than the 2.8 percent pace in the final three months of 2010.

Job creation has been the missing ingredient in the economic recovery. The economy’s service sector, which employs most of the work force, is expanding at the fastest pace in more than five years. Shoppers are spending more. U.S. exporters are selling more abroad. Stock prices have surged.


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