Economists Pleasantly Surprised By February Jobs Report

The jobs report for February came in surprisingly strong this morning. Employers added 236,000 jobs to payrolls and the unemployment rate fell to a four-year low of 7.7 percent.

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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

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And I'm Audie Cornish. 7.7 percent is the latest unemployment rate. That's the number for February, according to the Labor Department's report out this morning. Economists were expecting a ho-hum job survey. Instead, they got a pleasant surprise, as NPR's Dan Bobkoff reports.

DAN BOBKOFF, BYLINE: There's a lot to like in these jobs numbers. The U.S. gained 236,000 jobs in February, far more than anticipated. Many thought the unemployment rate would hold steady at 7.9 percent. Instead, it dropped two-tenths of a percent, to levels not seen since late 2008.

BRIAN JONES: I thought it was an excellent report.

BOBKOFF: Brian Jones is a senior economist at Societe Generale in New York.

JONES: I think it's a sign of not only an improving economy, but a labor market that's starting to gather some steam.

BOBKOFF: The job increases were across the board. Health care has long been a bright spot and it gained jobs, but so did hard hit sectors like retail and construction. In Lincoln, Nebraska, Mike Rezac builds custom homes as president of Rezac Construction. He's seen housing's rebound firsthand.

MIKE REZAC: We did more work last year than we've done in 35 years of business.

BOBKOFF: Construction was one of the worst hit sectors during the economic crisis, but it gained 151,000 jobs since September, about a third of those just last month. For all workers, the average work week rose slightly, as did average hourly earnings. Alan Krueger, the top White House economist, says President Obama liked what he saw.

ALAN KRUEGER: As a general matter, I don't discuss my meetings with the president, but I did for the first time get a fist bump.

BOBKOFF: Krueger says the report is a good sign for the recovery.

KRUEGER: We're not all the way back, but we have done a lot of healing.

BOBKOFF: Today's numbers don't take into account the across-the-board budget cuts known as the sequester. Those took effect March 1st and are expected to cut economic growth. Cary Leahey, of Decision Economics, agrees today's report is positive. But he warned that the sequester, combined with higher payroll taxes, could change things.

CARY LEAHEY: The worry, of course, is that maybe things will unravel a bit as we deal with the restraint from the government sector, but it's certainly not a blip.

BOBKOFF: And Leahey warns that job gains early in the year sometimes fizzle out in the summer. So we've reached that part of the jobs story where you hear things like this...

RANDALL KROSZNER: Wouldn't quite pop the champagne corks yet.

BOBKOFF: Randall Kroszner of the University of Chicago is a former Federal Reserve governor. Once economists get over the euphoria from this jobs report, there are some reasons for concern. For one, January's numbers were revised down and then there are the long term unemployed and those underemployed. Kroszner says neither saw much improvement in February.

KROSZNER: With so many discouraged workers, so many workers who are long term unemployed, it's hard to say that we've turned a corner.

BOBKOFF: It's simple math. We are still way below employment levels from before the financial meltdown. Heidi Shierholz is a labor market economist at the Economic Policy Institute. She says we still need 9 million more jobs to get back to healthy levels.

HEIDI SHIERHOLZ: It's a little sobering 'cause you start to think, okay, but even if we got a report this strong every single month from here on out, given how large the job deficit is in our labor market, it would still take until the middle of 2017 to get back to the pre-recession unemployment rate.

BOBKOFF: And Shierholz says much of the drop in the unemployment rate can be attributed to job seekers dropping out of the labor force. But enough with the naysayers, says Brian Jones of Societe Generale.

JONES: I think the people that are trying to put a pessimistic spin on this report, they're really stretching it.

BOBKOFF: In recent months, corporations have seen record profits, but it hasn't translated into hiring. Now, some are hoping February's jobs report is a sign that could be changing, bringing Wall Street's gains to the labor market. Dan Bobkoff, NPR News, New York.

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