Unemployment rate drops to 8.9% in February on sharp increase in new jobs
The unemployment rate dropped in February to 8.9% as the U.S. economy created 192,000 net new jobs, the Labor Department reported Friday, a sharp increase that could signal the recovery is starting to produce the large-scale hiring needed to repair the damage from the deep recession.
It was the largest increase in new jobs since June, when the effects of the Obama administration's massive stimulus package were at their peak. The unemployment rate was 9% in January, when just 63,000 jobs were created, partly because of severe winter weather in much of the country.
The unemployment rate has plunged nearly 1 percentage point in three months -- it was 9.8% in November -- and had not been below 9% since April 2009. The new jobs numbers build off a series of positive reports this week.
"The news on economic momentum is good," said Nigel Gault, chief U.S. economist for IHS Global Insight.
But he cautioned that February's job numbers probably reflected some slack picked up by employers after January's rough weather. The economy has created an average of about 128,000 net new jobs the past two months, which still isn't enough to make a huge dent in unemployment, Gault said.
"It is still the case that there’s a lot of good news out there," he said. "We’re just waiting to see it show up in a big way in the payroll report."
The Labor Department said February's job gains came from factories, construction and several service areas, including healthcare. For example, there were 33,000 net new construction jobs in February after a loss of 22,000 jobs in January, probably because of the weather.
The gains were offset by continued loss of jobs in state and local government, the Labor Department said.
Fed Chairman Ben S. Bernanke told lawmakers this week that there was “increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold.”
Initial claims for unemployment insurance fell last week to 368,000, the lowest level in nearly three years, the Labor Department reported. Large retailers reported sales up 4.2% in February compared with the same month last year.
The Fed projects the economy will grow between 3.5% to 4% this year. But unrest in the Middle East looms as a potential problem for the recovery as oil prices have risen substantially in recent weeks. A sustained rise in prices for oil and other commodities would threaten the recovery, Bernanke said.
But he added he did not expect the spike in oil prices caused by the Middle East turmoil to last. On Thursday, oil prices dipped slightly, helping fuel a strong market rally.
Gault noted Friday that February's jobs numbers, and much of the other new data, don't reflect the higher gas prices.
"But it does suggest that going into the oil shock we had momentum, which suggests the oil shock may dampen things a little bit, but not derail the recovery," he said.
-- Jim Puzzanghera