Improved U.S. Jobs Numbers Could Take A Hit From New Budget Cuts

The White House is cheering a better than expected jobs report. But economists caution that automatic government spending cuts could lead to slower job growth in the months to come.

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And I'm Melissa Block. The White House hailed today's jobs report as a sign the economic recovery is gaining traction. U.S. employers added 236,000 jobs in February. That was better than expected, and the unemployment rate fell to 7.7 percent. The celebration in Washington was muted, though. As NPR's Scott Horsley reports, there are concerns that the new automatic budget cuts will weaken job growth in the months to come.

SCOTT HORSLEY, BYLINE: The monthly report from the Labor Department far surpassed analyst expectations. Job gains have now topped 200,000 in three of the last four months. And February also saw gains in workers' hours and wages.

NIGEL GAULT: All around, there does seem to be some momentum gathering in the private sector of the economy.

HORSLEY: Economist Nigel Gault of IHS Global Insights says lots of different kinds of businesses were hiring last month, including manufacturers, retailers and service providers. The construction industry added 48,000 workers, its biggest gain in nearly six years.

GAULT: Housing is recovering, business investment seems to be picking up and consumer spending is holding up pretty well, given the loss of the payroll tax cut and high gasoline prices.

HORSLEY: Unemployment fell by two-tenths of a percentage point in February, although only part of that drop was thanks to people finding new jobs. Some of the decline came from people dropping out of the workforce. Still, this measure of unemployment is now the lowest it's been since President Obama took office, and the overall report was strong enough to earn a presidential fist bump for White House economist Alan Krueger.

ALAN KRUEGER: I think it's important that we build on this progress, that we don't go on a course which sets up speed bumps for the recovery and that slows us down, that we try to build on the growth that we've seen.

HORSLEY: And yet, Global Insights' Gault says Washington interferes with that progress by creating one deliberate fiscal crisis after another.

GAULT: Speed bumps, roadblocks, however you want to describe it, it's like the government seems to be trying to get in the way of what looks like a pretty decent recovery at this point.

HORSLEY: As an employer, government in general is getting smaller. State and local governments continued to shed jobs last month. And with lawmakers and the White House unable to reach agreement on a long-term deficit cutting plan, the federal government began to cut spending across the board last week. White House spokesman Josh Earnest says this so-called sequester is just the latest in a series of Washington's self-inflicted wounds.

JOSH EARNEST: The manufactured obstacle that is the sequester is posing a challenge to our economy in much the same way that the fiscal cliff was, in much the same way that uncertainty around the payroll tax cut was, in much the same way, to a different degree, that the debt ceiling debate was.

HORSLEY: The sequester is widely disliked since it cut some programs favored by both Republicans and Democrats, but does nothing to address the long-term drivers of the government's debt. On the other hand, it's harder to say the sequester is damaging the economy when the stock market is hitting new highs each day and the Labor Department is reporting solid job gains.

White House economist Krueger stressed the jobs report is based on surveys from mid-February, before the spending cuts began. Gault agrees that while, so far, those cuts are largely invisible, stay tuned.

GAULT: The sequester, we know, is only going to have an impact that will build through time. Fears that it would be an immediate big shock to the economy, those really were overblown. But it is going to build in coming months. It will be particularly heavy in the defense sector and particularly hard on all those government workers who are going to be furloughed.

HORSLEY: Gault says the automatic spending cuts are an unnecessary dose of cold water at a time when the economy would otherwise be gathering steam. Scott Horsley, NPR News, the White House.

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