For once, Ben Bernanke delivered a speech that didn’t send the indices tumbling—in fact, the Federal Reserve Chairman’s remarks this morning were bullish enough to sustain a 100-point rise in the Dow. Mr. Bernanke’s basic message was that things are looking up for the labor market. Of course, Bernanke did point out that, “conditions remain far from normal,” so I’d like to dig into the details of how U.S. employment should pan out in the next few months.
Now, not all measurements of the U.S. labor market are improving at the same pace. As I pointed out last week, jobless claims are currently around a four-year low and February payrolls came in better than expected. And, the current 8.3% unemployment rate is significantly better than its 2011 levels.
However, there are still areas of softness in the labor market. Most notably, the average workweek is currently at 34.5 hours—about 4% below the pre-recession peak—so there’s room for improvement. And we have a relatively high number of people who have been unemployed for more than six months. In February, the long-term unemployed made up 3.5% of the U.S. work force, representing just a slight decline from February 2010’s 4% reading.
Right now, the significant improvement to the labor market is not necessarily an uptick in hiring, but rather a moderation of layoffs. I’ve discussed that a recovery in jobs is crucial to the overall economic recovery because it can create a beneficial spiral. The more jobs are created, the faster the economy expands. The faster that the economy expands, the more confident employers are in hiring new employees.
In any event, it was refreshing to hear Bernanke say something moderately positive about the economy. Later this week, we’ll get the third and final revision on fourth-quarter Gross Domestic Product. Currently, economists expect it to remain at 3%, which would represent a good start to 2012. We also have data coming in on durable goods orders, personal income and consumer confidence, and I’ll check in later if there are any other major developments.