Good Unemployment Report... But Economy's Still at Risk?

We ran into quite the pleasant surprise this morning. Believe it or not, unemployment dropped last month!

The economy in February added 236,000 jobs, with the unemployment rate dropping to 7.7% from 7.9%. As is usually the case, austerity measures undermined the employment landscape -- America's private sector added 246,000 jobs in December, the public sector lost 10,000 jobs. (It'd be easy for Washington to improve the latter number and lower the unemployment rate, but congressional Republicans still won't allow it.) Update: the 7.7% jobless rate is the lowest in the U.S. since December 2008.

While we're accustomed to looking at jobs reports relative to where we've been --figures only look heartening when compared to how dismal they were at the height of the Great Recession -- today's report is genuinely good news on its own terms. The 236,000 jobs created in February is the second best total in a year, and the seventh best month of the last five years. Glancing through the report, it was also encouraging to see improving data from the construction and housing sectors.

The stronger job creation comes immediately on the heels of January's tax increases. I'll look forward to Republicans explaining how this is even possible, or whether there's been some kind of tear in the space-time-economic continuum.

What's more, we've now created 2.23 million jobs overall in the last year, and 2.33 million in the private sector alone. All Congress has to do is stop punishing the country on purpose, and 2013 may very well deliver a more robust economic recovery.

So what happened? Simple: Consumers kept spending. And because consumers continue to spend, private sector employers continue to hire.

However, it wasn't all great news. As usual, public sector employers continued shedding jobs last month. Remember that this was before Congress' latest manufactured crisis became law.

The numbers offer ample support for the idea that some of the headwinds that have held the economy back since the technical end of the recession in mid-2009 are finally abating. The construction sector added a whopping 48,000 jobs, the most in a single month since March 2007. That is a sign that the housing market is finally surging enough to start to put construction laborers back to work.

And the American consumer, having made progress reducing debt burdens over the last several years and benefiting from higher prices in the stock market, apparently kept spending enough that retailers added 23,700 jobs. That despite an increase in payroll taxes Jan. 1 that economists have feared could wallop consumer spending.

A third major area for job creation was professional and business services, which added 73,000 jobs, with the strongest gains in a category that includes workers for temporary employment services; that could presage more improvement in the private sector to come, as companies often bring on temporary workers before adding to their permanent staff.

The data show a continued schism between the private sector, which is growing nicely, and government, which is still shrinking its employment level —even before the sequester took effect. The federal government excluding the post office shed 4,200 jobs in February, state governments cut 8,000 jobs, and local governments cut 2,000.

Again, keep in mind that this was before the manufactured crisis officially kicked in. So we don't know yet how hard it's hitting the economy. And it may especially hit hard depending on how much the private sector is affected by public sector driven austerity. January's Nevada casino winnings (off 12.5% from January 2012) were not pretty, so we'll have to wait and see if that was just a temporary blip on the radar... Or if increased austerity is leading to less travel & gaming.

Still, today's national unemployment report is an encouraging sign. The private sector overall continues to improve. It's just frustrating to see that constantly hampered by public sector austerity. If it weren't for austerity, our economy would be recovering more quickly without so much risk of dipping back into recession.