Slow and steadyMonday, February 4th, 2013
Also noteworthy were the 28,000 jobs added by the construction sector, an indication the housing market is recovering. Since the trough in January 2011, construction employment has grown by 296,000, with one-third of the increase generated in the last 4 months. Still, the level of construction employment remains about 2 million jobs short of the peak in April 2006, a sign the housing rebound has a long runway before a full recovery is achieved.
Federal, state, and local governments shed 9,000 jobs in January. That follows a loss of 6,000 jobs in December. The declines aren’t surprising. Last Wednesday the Commerce Department reported that fourth quarter gross domestic product (value of goods and services produced within the country) fell 0.1%, largely due to a 15% decline in real federal government consumption expenditures and gross investment. Although the decline came as a shock to many economists, the report was overshadowed by strength in consumer spending, which rose at an annualized rate of 2.2%, up from 1.6% in the previous three months. Consumer spending, which represents 70% of the economy, was led by automotive sales.
The closely-watched unemployment rate stands at 7.9% and has held steady since September. While this is below the 10% level hit in October 2009, it’s well above the 4.4% rate in May 2007. The Federal Reserve is targeting an unemployment rate of 6.5%, and has pledged to keep interest rates at record lows until that happens. So, how realistic is this goal? We estimate the 6.5% target can be achieved by December 2014, assuming the economy adds 200,000 jobs per month, or the average witnessed during the past three months. However, if the economy adds just 157,000 jobs per month (as was true in January) we estimate the 6.5% goal won’t be reached until late 2015.