Last Friday, the Bureau of Labor Statistics report on February
job growth provided a sliver of hope for the economy. Can that thin
bit of hope survive
A trend toward stronger employment could put some real momentum
behind the economic recovery. That would be good news for a wide
range of people, including those looking for work, employees
wishing for better wage growth, and savers who've been living with
microscopic interest rates on savings accounts and other deposits.
However, there have been false hopes before, and this time the
economy will have to overcome the obstacle of Federal budget
Strong job growth
Total non-farm employment grew by an estimated 236,000 jobs in
February. That's nearly double January's number, and one of the
best job growth figures in the past seven years. Of the past 84
monthly jobs reports,
only six have shown stronger employment growth
That sporadic job growth is part of the problem, though. The
employment market got off to an even stronger start last year, but
soon faded. This year, the job market will have to sustain its
momentum against the tide of sequestration.
Behind the grandstanding of sequestration
There is a certain amount of hype associated with sequestration.
The automatic budget cuts that went into effect on March 1 will
cause belt-tightening across a range of government departments, and
the people in charge of those departments have a vested interest in
making sure the public feels their pain.
At the high end, there's the Obama Administration's persistent
publicity campaign, including calling a halt to White House tours,
in an attempt to avert sequestration in favor of a negotiated
package of less immediate budget cuts and tax increases.
This effort is then echoed by a series of individual
departments, each trying to make it clear to the public that the
country simply cannot live with cuts to their budgets. After all,
while an efficient administrator could simply look for ways to make
do with less, the fact is these departments are fighting to
preserve their budgets, and have no interest in implying that any
expense is unnecessary.
The resulting PR blitz may be designed to hype the impact of
sequestration, but behind the grandstanding there are a couple of
realities that genuinely could slow the economy. The first is that
all the publicity about sequestration could have a negative
psychological effect on the private sector. Stories about the dire
effects of budget cutting don't exactly make individuals spend
optimistically, or encourage businesses to get aggressive about
Beyond the psychology, there is the reality that the deficit
will have to be addressed. Whether it's spending cuts, tax
increases, or both, some kind of drag on the economy is
In short, February's employment growth was good news for
job-seekers, and possibly good news for interest rates on
savings accounts and other deposits
. Whether it can survive both the hype and the reality of the
budget mess remains to be seen.