Is the Recovery for Real? Economists Are Beginning to Think So

Julie Shenkman
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Expectations are running high that the U.S. government’s jobs report this Friday will again show more than 200,000 new jobs were added to the economy last month. If it turns out the predictions are true, not only would it be the third consecutive month of 200k+ growth, it would strengthen confidence in the still-nascent recovery.

“The labor market has definitely gotten stronger,” Gus Faucher, senior economist at PNC Financial Services, told MarketWatch. “Everything is looking good for job growth.”

Every major survey of economists found them expecting the U.S. Department of Labor report on Friday will show more than 200,000 jobs were created in February. Bloomberg News puts the median at 210,000; Dow Jones Newswires says 213,000; and, says 220,000. The 8.3 percent unemployment rate is not expected by most consensus estimates to change.

Despite still-mixed economic reports, economists and the public, generally, are growing more confident that the recovery is both real and sustainable. The Associated Press issued a report today that said economists now predict the unemployment rate will fall to 8 percent by November, an improvement over the initial 8.4 percent prediction. The AP Economy Survey also said the economy will grow a bit faster than earlier thought: 2.5 percent for the year versus 2.4 percent in an earlier survey.

Naturally, not everyone is convinced. The MarketWatch article cited B of A economist Neil Dutta, who says the rate of hiring is unlikely to increase as much as many believe, in part because consumer spending, which fuels the majority of economic growth, has slowed.

“What’s driving the payroll growth is fewer firings,” Dutta says, “Hiring hasn’t picked up in any major way.”

Economists are cautious, however, Dutta’s pessimism is extreme. Most see the recovery gaining steam, though slowly. Today, in fact, The Conference Board reported a rise in online labor demand of 39,000 new listings in February. It’s the first February since 2008 to show a rise in the Help Wanted On-line Series published each month by the non-profit business research group.

The closely watched Consumer Confidence Index, also compiled by The Conference Board, took a big leap forward in February, rising to 70.8 from January’s revised 61.5.

“Consumers are considerably less pessimistic about current business and labor market conditions than they were in January,” says Lynn Franco, director of The Conference Board Consumer Research Center. “And, despite further increases in gas prices, they are more optimistic about the short-term outlook for the economy, job prospects, and their financial situation.”

In another positive sign, the Institute for Supply Management’s service sector index rose to 57.3 percent in February from 56.8 percent in January. A MarketWatch survey found economists had expected the index to fall. Last week, the ISM reported its manufacturing index fell.

On Wednesday, ADP’s National Employment Report will be released, offering a preview of what the official government may show on Friday. Although the ADP report tracks only private payrolls and rarely agrees with the Labor Department report, it reliably reflects the general direction of job growth and provides some sense of what the government report will show.

Reprinted with permission of ERE Media


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