Leading up to today’s employment report, we’ve had our appetite whetted by a stronger than anticipated ADP Employment report and lower than expected initial jobless claims, leaving high hopes for this release. Today’s report didn’t disappoint, although it also didn’t provide an upside surprise. It’s better than it’s been, but it still signals job creation that is more restrained than would be ideal for the economy.
The economy added 192,000 new jobs in the month of February, positive news when you consider the slow trend that provided less than 150,000 cumulative new jobs in the eight preceding months combined. Private sector jobs increased 222,000 for the month, while the state and local government sector continues to shrink.
Other factors have been a pleasant surprise for the economy. Manufacturing is experiencing a bit of a renaissance, with job creation in the sector in the past year being its strongest in over a decade. Even the construction sector posted a surprisingly strong result. Consumer confidence, while still low for an expansionary economy, is improving and is at a three year high. As the pace of productivity growth continues to subside, continued growth in the broad economy will continue to prod companies to break out of their hiring hold.
Businesses in general are financially positioned to hire, with strong balance sheets and growing revenue and earnings. A deeper sense of confidence about the strength and durability of the expansion would seem to go a long way at this point toward a meaningful pickup in job creation. While risks certainly remain, the broad economic momentum that appears to be taking hold affords us reason to be reasonably optimistic on the near-term economic outlook.