Job Gains Cut Unemployment to 7.7 Pct., 4-Year Low

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Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent over the past year, slightly ahead of inflation. Higher pay is vital to the economy because consumer spending drives 70 percent of economic activity.

Hotel chain Cambria Suites expects business and leisure travel to rise 5 percent to 8 percent this year and next. Cambria, a unit of Choice Hotels International, is building nearly 20 hotels around the country, doubling its total. It plans to add 110 jobs this year and 400 next year to its work force of 600.

The improved job market can also benefit countries that sell goods and services to U.S. consumers and businesses.

“All you have to do is look at the trade numbers,” says Bernard Baumohl, chief global economist at the Economic Outlook Group. “The strength in the U.S. economy is leading to faster growth in imports.”

Imports rose 2 percent in January from December. Those from China surged 7 percent.

A stronger U.S. economy, Baumohl says, will also help a battered Europe, which is contending with high unemployment and a debt crisis. The United States is the No. 1 market for exports from the 27-country European Union.

“The extent to which the U.S. is recovering and potentially the labor market is improving is potentially an important dynamic that Europe would welcome,” said Nick Matthews, an economist at Nomura in London.

The U.S. economy is benefiting from the Federal Reserve’s drive to keep interest rates at record lows. Lower borrowing rates have made it easier for Americans to buy homes and cars and for companies to expand.

The Fed and key central banks overseas have taken extraordinary steps to pump money into their financial systems to try to spur borrowing and spending, boost stock prices and stimulate growth.

The Fed has said it plans to keep the benchmark rate it controls near zero at least until the unemployment rate has fallen to 6.5 percent, as long as the inflation outlook remains mild.

Friday’s jobs report isn’t expected to move up the Fed’s timetable for any rate increase.

The brighter hiring picture has yet to cause a flood of out-of-work people who aren’t looking for a job to start seeking one. The proportion of Americans either working or looking for work dipped one-tenth of a percentage point in February to 63.5 percent, matching a 30-year low.

Even though the recession officially ended in June 2009, many Americans have remained discouraged about their job prospects and have given up looking. Others have returned to, or stayed in, school. And the vast generation of baby boomers has begun to retire; the oldest are now 67. Their exodus reduces the percentage of adults working or looking for work.

The pickup in hiring hasn’t yet benefited the long-term unemployed. Nearly 4.8 million Americans have been out of work for six months or longer, nearly 100,000 more than in January.

Further strong hiring gains will hinge, in part, on healthy consumer spending. So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven’t caused Americans to sharply cut back on spending. But if the economy can continue to add 200,000 or more jobs a month, it means that many more people with disposable income to spend.

A big source of strength has been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.

The year-over-year increase in home prices in January was the biggest in six years. Higher prices tend to make homeowners feel wealthier and more likely to spend. So do record-high stock prices.

“If my house is worth a little more, my 401(k) is going up … maybe I can afford to go buy that car, or continue to spend,” says Ed Hyland, investment specialist at JPMorgan Private Bank.

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