Again, the perception of the strength of the labor market depends on which measure you use. The establishment survey, based on employer employment filings with the government, has shown weaker than forecast job growth the past two months. Analysts have credited the weather with inhibiting employment expansion. The household survey, based on telephone interviews, jumped by over 600,000 in January. This measure is more volatile and is somewhat suspect as a household may claim employment, when it might be, more accurately, termed underemployment or self-employment. Officially, the unemployment rate is 6.6 percent as of the February jobs report. The labor participation rate also increased, although this was a move off the 35-year low.
Previously, the Federal Reserve had sent a soft target of 6.5 percent unemployment before acting on short-term interest rates. Recent comments from Fed members have added additional softness to this rate, allowing that the official rate may not be a true indicator of the health of the job market. A tighter jobs market would lead to faster wage growth, fairly anemic over the past decade. Wage growth can be a major factor in increasing inflation as measured by both the CPI and PCE as the U.S. economy is dominated by service industries.
Depending upon which measurements are used, perception of the economic recovery will be similarly colored. At some point, employment numbers will rebound and inflation will increase. Spring may begin with the flip of the calendar, but that alone does not melt the mountains of snow and ice. For me, spring brings warmer temperatures and, of course, weeds.
David Helscher is a senior vice president and trust officer with Clinton National Bank.