The unemployment rate declined 0.1% in February, bringing the rate to 8.9%, according to statistics released today [.pdf] from the Labor Department. This is the first time the unemployment rate has been below 9% since April 2009. The US economy added 192,000 jobs in February, with an increase of 222,000 jobs in the private sector and a decline of 30,000 government jobs.
This is the greatest job growth for a month since May of 2010, when temporary employment for the US Census peaked. Excluding this surge of temporary employees for the 2010 census, February job growth was greater than any month since November 2007, or forty months ago. Almost all major industries recorded job growth in February, including:
- Manufacturing: 33,000 jobs.
- Professional and business services: 47,000 jobs.
- Health care: 34,000 jobs.
- Transportation and warehousing: 22,000 jobs.
- Construction: 33,000 jobs.
Aside from the decline in government workers, retail was the only other industry with a decline in February, with 8,100 fewer jobs. As these facts generally show, the domestic demand for labor turned up in February and slightly boosted the US economy.
However, job growth in February was ultimately modest and only decreased the unemployment rate 0.1%. At this rate, several months in 2011 would need to feature similar results in order to decrease the unemployment rate to 8% by 2012. Also, with rising oil prices and an army of marginally attached workers, these two factors alone may partially offset job growth in 2011.
In the last ten days, the cost for a barrel of oil has risen about 15%. On Monday, February 21st, the cost for a barrel of oil closed at about $90. As of today, a barrel of oil costs $105. With this increase, gas prices and energy services in the US economy will certainly go up in coming weeks.
As of Monday, February 28th, the average national price for a gallon of gas increased in twelve of the last thirteen weeks. Moreover, the average price increased nineteen cents last week, bringing the current average to $3.43 per gallon. This is the second greatest weekly increase in gas prices since the US Energy Administration began recording the average national price in 1993, as the chart below shows. These rising gas and oil prices could result with a lower demand for domestic labor and prevent a significant drop in the unemployment rate.
Aside from rising energy prices, another factor that could hurt the unemployment rate in 2011 is the 2.7 million unemployed individuals who the Labor Department excludes from the unemployment rate because they are “marginally attached” to the work force. Marginal attachment refers to individuals who looked for a job in the past twelve months, but not in the past four weeks. As these individuals begin to look for work again, the Labor Department will include them in the unemployment rate, which could partially offset job growth and prevent a significant drop in the unemployment rate.
Lastly, with a pending army of workers in the marginally attached work force, job growth in 2011 must continue at the February level for the unemployment rate to hit 8% by 2012. Though, rising energy prices threaten the domestic demand for labor. While the February results show improvements for domestic labor, a historically acceptable unemployment rate remains in the distance.