Is the Stimulus Beginning to Work?

Long before the election of 2008, I repeatedly said that the GOP would lose and would attempt to regain power by blaming Democrats for the effects of their own mismanagement of the economy.  To a large extent, that plan has been working, but there may be light at the end of the tunnel.

After losing eight million jobs since the recession began in December 2007, payrolls finally surged in March, the Labor Department reported on Friday. Employers added 162,000 nonfarm jobs last month. Nationwide, the unemployment rate held steady at 9.7 percent.

“We are beginning to turn the corner,” said President Obama, speaking in Charlotte, N.C., calling it “the best news we’ve seen on the job front in more than two years.”

Though everything seems to be moving in the right direction, he was careful not to raise expectations too high. “It will take time to achieve the strong and sustained job growth that we need,” President Obama said.

The economy needs to add more than 100,000 jobs a month just to absorb new entrants into the labor market, let alone provide a livelihood for the 15 million Americans already looking for work. Without constant, robust growth, the unemployment rate won’t budge. Indeed, the Congressional Budget Office has projected that the rate will hover around 10 percent for the rest of the year.

Still, economists saw signs in the latest report that the economy was poised to make steady, if slow, progress.

“Every major industry, except financial services and information, showed gains in employment,” John Ryding, chief economist at RDQ Economics, said. “From manufacturing, to construction, to retail, it really didn’t matter. They’re all hiring now.”

Private-sector job growth was again strongest in temporary help services and health care. The nation added 40,000 temporary service jobs last month, indicating that many employers were testing the waters before taking the plunge with a permanent hire. The health care industry, which grew steadily even during the depths of the recession, expanded by 27,000 jobs in March.

The March report may have been inflated, though, by a rebound from February when many people could not work because of snowstorms. Additionally, nearly a third of the hiring in March was temporary work on the 2010 census…

Inserted from <New York Times>

The apparent growth may be overly optimistic, because of the temporary census jobs included in the total, but it takes no rocket science to see the trend in the chart above.  As long as the GOP held power, the jobs picture plummeted.  Democratic policies have turned the trend around.

Expect the GOP to harp on the high official unemployment rate.  There is little likelihood of significant gains in that benchmark this year, but to cut through the propaganda, you need to understand the mechanism.  The rate makes no distinction between full and part time positions.  As the economy improves, it will be easier and less expensive for employers to upgrade part time employees to full time than to hire and train new employees.  While this will improve the lots workers, that improvement will not be reflected in the unemployment rate.  Also, the rate does not count so-called ‘discouraged workers’, whose unemployment  have expired.  Although not counted, there are millions still seeking employment.  When these people find jobs, their employment does not improve the unemployment rate.

Therefore there is room for ample improvement in the well being of American workers, before that improvement effects the official unemployment rate.  We should concentrate on the increase in jobs.