These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
The Labor Department reported Friday that the economy added 216,000 jobs in March. After adding 194,000 jobs in February, this indicates the economy is finally gaining momentum. First-quarter growth will likely be a bit higher than 3%.
Unemployment ticked a notch lower to 8.8% on the strength of jobs growth. Unlike past months, this improvement could not be attributed to adults leaving the labor force.
These gains are in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private-sector jobs growth.
As measured by gross domestic product, the economic recovery began in July 2009; however, the economy did not begin adding jobs until January 2010, and gained only 76,000 jobs a month through January 2011. Too many of those job gains were created by stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector–private employment less temporary business services, and health care social services and temporary business services–averaged only 47,000 a month.
Core private-sector jobs are so important, because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In March and February, this barometer of private sector vitality gained 183,000 and 157,000 new positions, respectively. Similarly strong core private-sector gains will be needed to continue adding 200,000 or more new jobs each month going forward.
The jobs drought may finally be over but important challenges remain.
Gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels. Continued dependence on foreign oil, the growing trade deficit with China, and health care and tax policies that penalize the location of businesses in the United States are responsible for slower jobs creation than has been accomplished during past recoveries and that could still be achieved.
The economy must add 13 million private-sector jobs over the next three years–360,000 each month–to bring unemployment down to 6%. Core private-sector jobs must increase at least 300,000 a month to accomplish that goal.
The economy is expanding at a 3% annual rate and this is barely enough to hold unemployment steady, because the working age population increases 1% a year, and productivity advances about 2%. Growth in the range of 4% to 5% is needed and possible to get unemployment down to 6% over the next several years.