The big question being debated by analysts on Friday is whether the modest improvement in U.S. payrolls and unemployment last month means that the labor market — which has stubbornly remained troublesome even other parts of the economy have rebounded -- is now firmly on the road to recovery.
Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, was encouraged by the new data that shows the United States added 216,000 jobs in March after adding 194,000 jobs in February. She wrote in a research note that two years after the recession was officially over, “the labor market appears to finally be picking up”
Others were more cautious at declaring victory. Stephen Stanley of Pierpoint Securities called the numbers “solid” and “workmanlike.” Michael Gapen of Barclays Capital Research called the report “an encouraging sign.”
“At this point, we believe that the jobs expansion is sustainable, though the pace of this expansion is still rather disappointing,” Guy LeBas, chief fixed-income strategist at Janney Capital Markets, wrote in a note to clients.
Peter Morici, a business professor at the University of Maryland and former chief economist at the U.S. International Trade Commission, noted that important challenges remain. He estimated that the economy must add 13 million private-sector jobs over the next three years—360,000 each month—to bring unemployment down to a more healthy level of six percent.
“Gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels,” Morici said. “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.”
Rising consumer costs and inflation are also major issues that could be a drag on the economy.
“Consumers worry about how much more it will cost to fill up the gas tank or the grocery cart as wage gains remain too sluggish to provide an offset. So while this latest jobs report is good news, the road to full recovery remains uphill,” the Conference Board’s Bostjancic wrote.
The outlook may be further complicated by what actions the Federal Reserve takes or doesn’t take to encourage growth in the coming months to fulfill its dual mandate to pursue maximum employment and price stability. Few expect the Fed to back down from its bond-buying program aimed at keeping interest rates low. But Pierpoint Securities’ Stanley said the latest unemployment numbers support his prediction that Fed will begin to raise interest rates in November—which would add more uncertainty to an already unclear economic picture.