At Last, Some Job Creation

The economy added jobs across most sectors in March, including manufacturing with 17,000 more jobs and retail with 15,000 more jobs. Even the construction industry added 15,000 jobs, its biggest gain in three years.
Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).

The gloom is dissipating. It might be because Congress is in recess, and therefore unable to add any billions to the burgeoning government debt, at least for a few weeks. It might be because spring is sprung. And it might be because most people are focusing less on the economy and more on the NCAA basketball finals, and on the opening of the baseball season Sunday night than on the economic news.

More likely, it is because the jobs market is improving. Not much, but at least the declines seem to be over: 162,000 new jobs were created in March. Back out the 48,000 hired temporarily to help with the census, and you still have positive growth. Employment in the hard-hit construction industry, which lost 864,000 jobs in the past twelve months, held steady, while jobs were added in manufacturing, mining, health care, and temporary services. And for technical reasons these official figures probably understate job growth.

But no economic silver lining comes without a cloud these days: the number of people out of work for 27 weeks or more increased by 414,000 to 6.5 million, the unemployment rate remains stuck at 9.7%, and the total unemployed, involuntarily underemployed, and too discouraged to look for work now constitute 16.9% of the work force. That's a lot of people in distress.

Still, the resumption of job creation is good news, and only one of the signs that the recovery continues. Share prices in the just-concluded first quarter were up about 5%, their best start in more than a decade, as corporate profits came in better than expected after rising by 8% in the fourth quarter of 2009, and corporate balance sheets remained strong. Bonds also did well, with investment-grade U.S. debt and junk bonds up from their 2008 lows by 35% and 82%, respectively. So far, the fear that massive fiscal deficits will trigger inflation, a rise in interest rates and therefore a fall in bond prices, seems to be confined to a minority of investors. The majority are ignoring what might be the canary in the coal mine -- a rise in interest rates demanded by purchasers of U.S. government bonds. The yield on the Treasury's 10- year bond is hovering around the psychologically important 4% level, the highest since June 2009.

The performance of share and bond prices contributed to a recovery in consumer confidence after a sharp drop in February -- it rose from 46.4 to 52.5 in March (1985=100). Which might explain last month's spurt in car sales.

General Motors' sales of brands it intends to continue were up 43% year-on-year, Ford sales were up 40%, Toyota's rose 41%, and although Chrysler's sales fell by 8%, the company expects to break even this year after years of losses, a performance CEO Sergio Marchionne attributes to ridding the company of consultants: "We had more consultants in our place than God knows." Some portion of Toyota's sales spurt was due to what the industry calls "incentives" (aka discounts) of $2,256 per vehicle offered in order to win back customers the car maker had lost over safety issues. These incentives were up from $1,565 last March, according to True Cost of Incentives report.

The good news was not confined to the auto sector. Overall consumer spending seems to be growing at an inflation-adjusted annual rate of 3%, the highest since the first quarter of 2007. Rosalind Wells, chief economist at the National Retail Federation, described in the Financial Times as "a near-ubiquitous presence in US shopping malls," says "consumers are coming back to life a little," the sort of measured statement that I hope she learned when working as my talented research assistant decades ago. It might at first seem counter-intuitive, but the wave of mortgage defaults and personal bankruptcies are leaving consumers with more cash to spend as they relieve themselves of the burden of paying off loans and mortgages.