Investors and consumers have a host of economic indicators to chew over. But undoubtedly the most important right now is the employment picture — or put another way, the unemployment picture.
Jobless Americans can’t spend money on goods and services. They can’t pay their mortgages, adding more trouble to an already battered housing market. They rely heavily on government services at a time when federal debt is simply crushing in size.
It’s not an oversimplification to say without an improving job market, nothing else matters.
Yes, we have seen persistently high unemployment — with a headline rate that remains above 8%. Yes, there are countless anecdotes about folks working for a fraction of their former salary, or about out-of-work Americans who have just flat-out given up hope of ever finding another job.
But there are signs of hope, too.
Here are five recent indicators that the job market may not be as bad as you think right now:
Manufacturing Is Making a Comeback: A host of jobs have disappeared over the last several years, but none more painful than American manufacturing jobs. After all, not everyone can be a software engineer — and we need decent-paying trade jobs in the U.S. to ensure everyone with less than a master’s degree doesn’t wind up working at McDonald’s (NYSE:MCD).
That makes it very encouraging to see that after losing millions of good manufacturing jobs in the years before and during the recession, the economy has added 429,000 manufacturing jobs in the past two years. Most recently, the February employment report showed that manufacturing gained 31,000 jobs — with employers that produce primary metals such as steel adding 1,200 jobs and businesses that fabricate that metal into products creating 11,400 jobs. Who would think the U.S. steel industry would be making a comeback in 2012?
Job Growth Momentum Is Gaining: The country added 227,000 jobs in February — topping forecasts of 210,000. Additionally, December and January numbers that were already strong were revised upwards even more, making this the strongest three-month stretch of job growth since before the recession. True, the unemployment rate has remained above 8% since February 2009, and we are a long way from a “good” job market. But the momentum is certainly encouraging.
More People Are Looking for Work: The stubbornness of the unemployment rate — now at 8.3% — is seen negatively by many. But if you want to put a positive spin on things, consider that part of the reason the rate remains stagnant is because so many more people are confident enough to actually look for work.
In the February jobs report, the Labor Department reported that half-a-million Americans entered the labor market to find work. So while the headline rate may not be going anywhere, don’t think that means jobs aren’t out there. In fact, more jobs are available than there were before — there just happen to be more job-seekers, too. If you’re a qualified applicant, then the headline 8.3% rate shouldn’t scare you off in the least.
Fewer Jobless Benefit Claims: A different twist on that same factor is that fewer new jobless benefit applications are being filed. Just the week before last saw the number of people seeking unemployment benefits fall to the lowest point in four years. Yes, the lack of new jobless benefit filings isn’t proof that jobs are being created — just that fewer Americans are being put out of work. However, overall improvement in the labor market depends not just on job creation but also a stop to layoffs.
Productivity Hits a Wall: This is another metric that you have to think critically about. On the surface, a lack of productivity growth is a bad thing. We want our economy to be efficient, right? Well that’s true. But on a basic level, it’s impossible to see any hiring happen if productivity continues to march upwards. Why not just ask your current workforce to do more rather than add new employees?
Viewed this way, it’s a positive sign that U.S. worker productivity — that is, the amount of output per hour of work — has stagnated recently. Productivity rose at an annual rate of 0.9% in the October-December quarter, according to recent reports. That was just half the growth in worker output estimated in the July-September quarter. Clearly employers can’t do more with fewer workers. If they want true growth for their business, they have to eventually grow payrolls, too.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.