A very positive report overall. Here are four main points about today’s release:
1. Private payrolls increased by 222,000 jobs in February; government employment decreased once again, so total payrolls increased by 192,000. Oh, and the job gains, which have been pretty widespread, were revised upward by 58,000 jobs from the previous two months. Not too shabby.
Friday’s jobs report will tell us how many new jobs were added to payrolls in February as well as the unemployment rate. Analysts will also closely watch for changes in the labor force participation rate, which measures the share of the population that is working or looking for work.
Today’s blog post focuses on youths (age 16-24) in the labor force. Notably, we find that, facing a tough job market, many youth have increasingly invested in developing their skills and education, which will make them more productive and help them earn more when they do re-enter the labor market.
Today’s release covers personal income and consumer spending for the month of January. The big news is on the income side where personal income increased 1.0 percent in January -- the largest increase since May 2009 and substantially higher than private expectations of 0.4 percent. Why did income go up so much? The bottom line is that income was substantially boosted by the tax cuts the President signed in December. More specifically, the jump in income in January from December was driven by the reduction in the withholding rate for social security from 6.2 to 4.2 percent. Wages and salaries, the largest component of income, rose a modest
The bottom line is that January’s data on durable goods orders and shipments wasn’t as strong as expected, but we should keep in mind two facts. First off, last year these series did pretty well. Second, as I'll discuss below, several fundamental factors should boost the demand for durable goods through 2011, so let’s make sure not to place too much emphasis on a single month’s data point.
The bottom line is that consumer spending gathered steam late last year, and according to today’s Retail Sales data release, consumer spending is on track to post a moderately strong gain in Q1, a trend consistent with other indicators of consumer spending. [1]
Today’s release fills out the trade picture for 2010, and what a year it was from the foreign trade perspective: economic growth around the world was mixed (as the IMF recently put it, "Global Recovery Advances but Remains Uneven”), several commodity prices shot up, and some foreign exchange rates swung around (hello euro).
Today’s jobs report has some good news, but we continue to look for better news, with the bottom line being that the unemployment rate fell again and by a lot but payrolls didn’t increase as much as we would have liked. I’m not trying to wear rose-colored glasses here, but most of the other recent economic indicators have been much more positive than the stubborn payroll numbers would suggest, and economists and commentators have been talking about what the numbers all mean and looking for analogs.
Here’s what I take away from today’s GDP release:
1. A bit of good news is that the headlines about GDP appear to be more positive than I thought they would be, as they are emphasizing that the economy gained some steam and that consumer spending picked up.
2. GDP growth in Q4 came in at 3.2 percent, and the market was expecting 3.5 percent. Statistically speaking, there really is no difference between these numbers, so any blather about GDP being weaker than expected is, well, blather.
What do forecasters say about how the economy will fare in 2011? This is a difficult question to answer as there are lots of changing forecasts of the U.S. economy. What is true is that in recent months, most forecasters have become increasingly optimistic about the economic outlook for the U.S. economy. This increased optimism stems in large part from the December signing of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
New Residential Construction in December 2010
The bottom line is that the housing market continues to bounce along the bottom (at least in terms of national totals). Today’s data did have a quirky permits number, but that could have been the result of builders rushing to file permits before the end of the year to avoid some new regulations in the states of Pennsylvania, New York, and California. Therefore, next month expect permits to retrace most of today’s gain.
