WASHINGTON: The American job market isn’t just growing. It’s accelerating.
Employers added 236,000 jobs in February and drove down the unemployment rate to 7.7 percent, its lowest level in more than four years. The gains signal that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts.
Last month capped a fourth-month hiring spree in which employers have added an average of 205,000 jobs a month. The hiring has been fueled by steady improvement in housing, auto sales, manufacturing and corporate profits, along with record-low borrowing rates.
Before the spree, employers added an average of 154,000 jobs from July through October and only 108,000 from April through June.
The unemployment rate dropped to a large degree because 296,000 people dropped out of the labor force, said Ken Mayland, head of ClearView Economics in Pepper Pike.
The payroll gain for February was better than expected even as job gains for January and December were lowered by 15,000, Mayland said in a note to clients.
Another positive in the report was the increase in the average length of the workweek by 0.1 hours, he said.
“That may not sound like a lot, but at constant hours, it is the equivalent of growing payrolls by 329,000 workers,” Mayland wrote. “The arithmetic says February was a good month for income generation from compensation.”
Overall, the economy “is being run very lean and it wants to grow,” Mayland said.
The gains could boost consumer spending, adding momentum to the U.S. recovery and helping troubled economies in Europe and Asia.
“The recovery is gathering momentum,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.
The U.S. economy is forecast to grow a modest 2 percent this year. Growth will likely be held back by uncertainty about the federal budget, higher Social Security taxes and across-the-board government spending cuts that kicked in March 1. And unemployment remains high nearly four years after the end of the Great Recession. Roughly 12 million people remain out of work.
The last time unemployment was lower was December 2008, when it was 7.3 percent.
Spending cuts
The unemployment rate is calculated from a survey of households. The number of jobs gained is derived from a separate survey of employers.
Hiring would be rising even faster if governments weren’t shrinking their work forces, as they have been for nearly four years. Governments cut 10,000 jobs in February.
Some $44 billion in spending cuts kicked in last week after Congress failed to reach a budget deal.
The cuts are expected to shave about a half-point from economic growth this year and lower total hiring by about 30,000 jobs a month from April through September, according to Moody’s Analytics.
And most workers have had to absorb higher Social Security taxes this year. Someone earning $50,000 has about $1,000 less to spend in 2013. A household with two high-paid workers has up to $4,500 less.
Robust auto sales and a steady housing recovery are spurring more hiring, which will trigger more consumer spending and could lead to stronger economic growth. The construction industry added 48,000 jobs in February; it’s added 151,000 since September. Manufacturing gained 14,000 jobs last month and 39,000 since November.
Among industry categories, the biggest job growth in February was in professional and business services, which added 73,000.
This category includes higher-paying jobs in accounting, engineering and information technology as well as temporary positions that typically pay less.
Retailers added 24,000 jobs. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.
Higher-paying jobs
The economy is generating more higher-paying jobs. That trend is raising average pay, which will help offset the hit that Americans took from higher Social Security taxes and gas prices.
Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent over the past year, slightly ahead of inflation. Higher pay is vital to the economy because consumer spending drives 70 percent of economic activity.
Hotel chain Cambria Suites expects business travel to rise 5 percent this year and next. Cambria, a unit of Choice Hotels International, is building nearly 20 hotels around the country, doubling its total. It plans to add 110 jobs this year and 400 next year to its work force of 600.
The improved job market can also benefit countries that sell goods and services to U.S. consumers and businesses.
“All you have to do is look at the trade numbers,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “The strength in the U.S. economy is leading to faster growth in imports.”
Imports rose 2 percent in January from December. Those from China surged 7 percent.
A stronger U.S. economy, Baumohl said, will also help a battered Europe, which is contending with high unemployment and a debt crisis. The United States is the No. 1 market for exports from the 27-country European Union.
Beacon Journal business writer Jim Mackinnon contributed to this report.
