February Private Sector Job Growth Is The Highest In 10 Months

Today’s employment report for February suggests that the stock market rally that began last September correctly anticipated rebound 2.0 in the post-recession period. Private sector employment rose by a net 222,000 last month, the most since last April and a sharp rise from January’s feeble 68,000 advance. Even better, job growth was widespread across the economy. Only retail trade suffered a setback in the private sector. In short, today’s employment news is good—the best, in fact, in nearly a year.

But today’s report is also a reminder that it’s going to take even higher levels of job growth to make a substantial dent in the elevated jobless rate. Unemployment barely budged last month, falling to 8.9% in February from January’s 9.0%. That’s a big yawn, and more than a little frustrating when you consider that we just received word of the best month for the labor market since last spring. The implication: If the economy maintains a monthly pace of job growth at February’s rate, that’s probably enough to keep the jobless ranks from rising, but it’s well short of pulling down unemployment in the short run by anything more than a modest amount.

Keep in mind, too, that expecting job growth of 200k a month on a sustained basis requires a fair amount of thinking optimistically relative to recent history. An average of 127,000 new private sector jobs were created over the past 12 months. Bumping that up to 200,000 would be a substantial improvement, but it would still be modest relative to what’s needed to repair the deep employment losses in recent years.
It doesn’t help that there’s still some doubt if today’s report, which was more or less expected, has legs. February’s numbers look good, or at least materially better than what we’ve seen lately. The fact that the labor market has been growing for 12 straight months is encouraging as well. But as everyone knows, the rate of increase has been sluggish, and at times erratic, and so it’ll take a few more reports to make a stronger case that there’s real improvement here.
That said, there’s mounting evidence for thinking that job creation may accelerate in the months ahead. But that’s not a free lunch, since anything less would, at this late date, constitute a major disappointment. Indeed, the market is probably expecting at least 200k a month from here on out at a minimum, and so the risk of falling short comes with higher stakes.