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The job market showed strong growth in February. But questions about low wages, consumer debt and government austerity cloud the sunny picture.
The job market showed strong growth in February. But questions about low wages, consumer debt and government austerity cloud the sunny picture. Justin Sullivan/Getty Images
If you enjoy having a good argument, Friday's report on the labor market gives you plenty to chew over. Find a debate partner and let's get started.
First, these are the facts: The Labor Department data showed February was a good period for job creation. During the short, cold month, employers added 236,000 jobs — far more than the 160,000 most economists had been predicting. And the unemployment rate fell from January's 7.9 percent to 7.7 percent — the lowest level since December 2008.
OK, we have our facts. Now let's start debating the five points that economists are mulling.
1. Across-The-Board Cuts Haven't Hit — Yet
One Side: The White House noted that the employment numbers were collected before Feb. 16. That was before Congress allowed dramatic, across-the-board budget cuts to launch on March 1 under the "sequester" process.
Liberals fear that as the federal spending cuts fully come into play this spring and summer, job growth will suffer. "Unfortunately, the heavy-handed budget cuts forced by the sequester threaten serious harm to our economy and to our nation's long-term unemployed workers, who are among the Americans who'll feel these stupid and senseless cuts most deeply," said Christine Owens, head of the National Employment Law Project, which advocates for low-wage workers.
The Other Side: Conservatives say the sequester is reassuring businesses that this time, House Republicans will rein in federal debt and get government out of the way of the private sector.
House Speaker John Boehner, R-Ohio, released a statement saying "our spending-driven deficit threatens our economy, and responsible spending cuts are needed."
2. High School Dropouts Are Doing Better
One Side: Finally, the unemployment rate for people without a diploma is dropping — down to 11.2 percent last month from January's 12 percent. In February 2012, that rate was 14.8 percent.
Some businesses argue that Congress should not derail the growth in low-wage jobs by raising the federal minimum wage from $7.25 an hour to $9 or more, as proposed by President Obama. "For every 10 percent increase in the minimum wage, estimates show employment may fall as much as 6.6 percent for young black and Hispanic teens ages 16 to 19," according to the Employment Policies Institute, which is backed by the restaurant industry.
The Other Side: Low-wage workers are concentrated in restaurant work and low-end retail. If those workers had more money to spend, they would buy more food, gasoline, clothes and other goods. That higher demand would stimulate the economy and lead to even more job creation, the argument goes. "Every time we raise the minimum wage, employment goes up. The economy gets stronger," Sen. Tom Harkin, D-Iowa, said Tuesday as he unveiled his legislation to raise the wage.
3. Fewer Are Looking For Work
One Side: The job market is weaker than we'd like to believe because millions of Americans have given up on finding jobs. Last month, only 63.5 percent of adults were in the labor market, down from 63.6 in January, and from 63.9 in February 2012, seasonally adjusted.
"Most of the reduction in unemployment from its 10 percent peak in October 2009 has been accomplished through a significant drop in the percentage of adults working or looking for work," said Peter Morici, an economics professor at the University of Maryland. "Were the participation rate the same as when President Obama took office, it would be about 10.9 percent."
The Other Side: The job market could turn out to be stronger than expected this year because housing is perking up so quickly. "Construction stands out, adding 48,000 jobs, its best month in nearly six years," said Nigel Gault, chief U.S. economist for IHS Global Insight.
4. Wages Are Growing
One Side: Average hourly earnings rose 4 cents to $23.82 in February, up 2.1 percent from a year earlier. That's more than the 1.6 percent rise in the Consumer Price Index over roughly the same time. With wages outpacing inflation, the outlook is bright for consumer spending.
The Other Side: Consumers are still overwhelmed by old debts, so it may be a long time before they can afford shopping sprees. "We still haven't made the reversal in course necessary to start actually paying down what we owe," said Odysseas Papadimitriou, head of CardHub, a credit-card research site. A new CardHub study shows consumers ended 2012 with $36.2 billion in new debt, piled on top of the old bills.
5. Rising Jobs Bode Well For Stocks
One Side: After the jobs report was released Friday morning, stocks continued rising, with the Dow Jones industrial average setting new records.
Many analysts say things are looking up for stocks — corporate earnings are strong, borrowing costs are low, and consumer demand is perking up. This year, housing, autos, agriculture, banking, manufacturing and many other sectors are going to generate strong profits and send share prices even higher, they say.
The Other Side: The Federal Reserve has been keeping interest rates super low, making it easier for people to buy homes and cars and for businesses to expand. But if Fed policymakers see the economy improving too quickly, they could change course and start nudging up interest rates. That would make investments in bonds more attractive, possibly prompting investors to shift money back away from stocks.