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Policy: Labor

Economy defies weather, adds 175,000 jobs in February as the unemployment rate rises to 6.7 percent

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The economy added 175,000 jobs in February and the unemployment rate ticked up to 6.7 percent, the Bureau of Labor Statistics reported Friday, defying warnings that a harsh winter would continue to cloud the picture of the strength of the U.S. economy.

Analysts had expected roughly 150,000 new jobs.

Payrolls for the previous two months were revised up by 25,000.

Friday's report was widely expected to show the effects of harsh winter conditions across much of the U.S. The Federal Reserve's “Beige Book,” which aggregates anecdotes about the economy from the central bank's regional contacts, reported that weather disrupted growth in every district, although most businesses thought that underlying growth was picking up.

The pace of job creation has slowed as an unusually stormy U.S. winter has dragged on, casting doubt on the underlying strength of the recovery. Strong economic growth and jobs numbers, including 274,000 job gains in November, had lifted expectations for a robust recovery in 2014.

Over the past three months, however, monthly non-farm payroll gains have slowed to just 130,000. Whether the slowdown is purely a factor of a weather or yet again the product of a stalling recovery remains to be seen, but Friday's report on February's job market suggests that the recovery was able to persist to some extent through the cold.

The BLS counted 600,000 workers who said they had a job but were not working at the time of the household survey, one of the two surveys used to create the jobs report. That number is relatively high, indicating that weather did hurt job growth. Another 6.9 million said that they were forced into part-time work because of weather, the most in a decade.

Other aspects of the the report contained hints of underlying strength in labor markets.

The labor force grew by 264,000, and the participation rate remained steady at 63 percent (the lowest level since the late 1970s).

That slight increase suggests that the drop in the unemployment rate reflected people finding jobs, rather than workers quitting the job search at high rates.

A broader rate of unemployment, which takes into account those forced into part-time work or only marginally attached to the labor force ticked down by a tenth of a percentage point, to 12.6 percent. That is down from 14.3 percent a year ago.

Average weekly earnings rose by 9 cents to $24.31. Over the past year, average hourly earnings have risen by 52 cents, or 2.2 percent. That improvement in February came despite declining hours, which were likely related to the weather.

One factor that likely put downward pressure on the unemployment rate was the expiration in December of extended unemployment insurance benefits for people out of work for longer than 26 weeks.

Economists generally believe that ending extended unemployment benefits can lower the unemployment rate by making it harder for the unemployed to turn down openings. But the expiration of benefits can also depress the labor force participation rate: Workers who were counted as unemployed because they were searching for work, a requirement for unemployment benefits, might quit the job hunt when benefits run out. In that case, they would be classified as no longer in the workforce.

North Carolina ended its extended benefits program early, in June 2013. The unemployment rate subsequently fell drastically, from 8.8 to 6.9 percent, by the end of the year although it isn't yet clear how much of that decline represented unemployed workers taking jobs and how much was discouraged workers quitting the job hunt.

But there were few signs of the expiration of benefits in February’s data. The number of long-term unemployed increased by 203,000 in February, from 3.6 million in January to 203,000 in February to 3.8 million. That increase is not what would be expected from the benefits cut.

At 6.7 percent, the overall unemployment rate is slightly further from the 6.5 percent threshold set by the Federal Reserve for raising short-term interest rates, which it has held near zero for over five years. It's not certain now when the Fed plans to raise rates, but officials have suggested that it will be months. First, the central bank must wind down its monthly bond purchasing program, which it has been scaling back from $85 billion in increments of $10 billion.

William Dudley, the president of the New York Fed, hinted Thursday that it would take a fairly extreme change in the economic outlook for the Fed to deviate from a $10 billion taper in future meetings.

Dudley told the Wall Street Journal Thursday that “if the economy decided it was going to grow at 5 percent or the economy decided it wasn't going to grow at all, those would be the kind of changes in the outlook that I think would warrant changing the pace of taper.”

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Author:

Joseph Lawler

Economics Writer
The Washington Examiner