Is It Really that Time Again
Really? It hardly seems possible, but we’re just around the corner from yet another propaganda-filled, negative campaign-riddled, yet hopefully exciting, presidential primary season.
In near Ironman-like fashion, the primaries require both endurance and patience in taking nearly two years to reach conclusion. Then, they give us just another two years to recover and prepare for its onslaught all over again.
At the half-way point of President Obama’s, dare I say, first term, there’s no denying that short of an unforeseen catastrophic event, the economy will once again be the dominant issue on the forefront of voter’s minds. And why shouldn’t it be?
Despite all we’ve been hearing about an improving economy, for millions of Americans the reality is it simply hasn’t hit home yet. Or maybe it has but we just don’t realize it? After all, the U.S. economy is comprised of a rather complex and complicated set of variables. Depending upon one’s circumstance, who we talk too or what we read, it’s difficult to know exactly where things truly stand.
I’ve written several times about the unemployment rate being a lagging economic indicator, yet it tends to be the most popular, media-driven barometer used to gauge the success, or failure, of the nation’s economy. Be it right or wrong, Democrats rejoiced last week, as the U.S. Labor Department announced that American companies added more workers in February than in any month in nearly a year with 192,000 new jobs created. It finally pushed the unemployment rate below the 9% barrier, to 8.9%, its lowest level since April, 2009.
If not for 30,000 jobs cut by financially challenged state and local governments, the total number of new jobs would have been even stronger, as the private sector accounted for 222,000 jobs in February, the highest number since November. Businesses are obviously becoming more confident about hiring additional employees. In the last three months, 68% of those businesses tracked by the Labor Department have added jobs, representing the broadest gain in this sector in over a decade.
Other positives: Hiring was broad-based in February, and included significant gains in manufacturing, trucking companies, health care providers, construction firms, hotels and restaurants. In the past year, manufacturers have created 190,000 jobs, the highest 12-month total for that sector since 1998.
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. At least they had, until recent uprisings in Egypt and Libya caused oil and gas prices to rise and stocks to fall. That impact however, is expected to be short term.
Sharp declines in job losses and first-time unemployment benefits have also helped the unemployment picture. Since November, the number of people having lost their jobs has dropped by 1.1 million, the largest decrease since the Labor Department began tracking that figure in 1967. In addition, the number of first-time jobless claims hit a 3-year low during the last week of February.
Overall, the unemployment rate has fallen almost a full percentage point since December, the sharpest drop in nearly a generation. Most economists believe the stronger hiring trend should continue throughout the year.
Many would argue the economy has now entered a healthier phase of sorts, what economists have called a virtuous cycle, where Americans have started to spend more, causing corporate profits to raise, leading to additional hiring, subsequent increased spending and ultimately to overall economic growth.
Before breaking out the champagne, however, understand that other forces continue to work against the economic recovery. State and local governments facing record deficits and tax burdens are expected to keep cutting jobs, and inflation and higher oil and gas prices, resulting from the uprisings in the Middle East, also pose serious threats.
Plus, the market is still difficult for the long-term unemployed. Nearly six million Americans have been out of work for more than six months, while the average length of unemployment reached 37 weeks in February, a post-World War II record. The unemployment rate will likely rise again, however, as the labor market continues to improve and those who had simply given up on finding work, start returning to the work force.
Still, many economists are increasingly confident that private companies will start adding approximately 200,000 jobs a month through the rest of this year, a substantial increase from the average created over the past three months.
While this is certainly positive, it takes an estimated 125,000 new jobs per month just to keep up with population growth and hold the unemployment rate stable. Given that figure, it will take up to 300,000 new jobs per month to reduce the unemployment rate significantly.
All that being said, 8.9% unemployment is still high by historical standards. Economists predict it will take four to five years for it to drop to something more normal, near 6%. But for the moment, the jobs picture looks brighter than most people would have expected just three months ago.
Just as 9/11 defined President (George W.) Bush’s first-term, the economy has already defined Obama’s. With a host of individuals about to announce their candidacy’s to unseat the President, we’re likely to be inundated with more information about the economy than we could ever want to hear. Regardless, whether blue or red is your favorite color come election time, looking at this Great Depression in the rear view mirror should be something we can all agree upon.
Chris Beagle, a realtor in Rehoboth and former mortgage loan officer, serves on the Board of CAMP Rehoboth. Email Chris Beagle.