The latest employment report from the Bureau of Labor Statistics (BLS) saw yet another gain in U.S. jobs, but there are still plenty of reminders that the road to economic recovery will be a rocky one.
With another month of solid employment growth, the job market looks increasingly healthy. However, getting back to a more normal economy -- one with consistent growth, a lower unemployment rate and savings account rates above inflation -- is going to take more time, and perhaps a little luck.
Encouraging employment news
The BLS report indicated that the U.S. economy added a net total of 227,000 jobs in February, continuing the steady employment growth of previous months. Adding to this encouraging news was the fact that the previously released job growth figures for December and January were revised sharply upward. In all, the economy has added nearly 750,000 jobs in the last three months.
Despite all the new jobs, however, the unemployment rate remained unchanged at 8.3 percent in February. This is because even as new jobs were created, more people chose to enter the labor pool. But the fact that more people are again looking for work could also be an encouraging sign.
Impact on the Federal Reserve
Encouraging though the news on employment is, expect it to have little immediate impact on Federal Reserve policy. The Fed has painted itself into a corner to some degree with a multi-year commitment to low interest rates, which it certainly is not going to suddenly reverse at this week's Federal Open Market Committee meetings. The Fed has taken the clear stance that the economy is better served by giving borrowers a break than by allowing savings account rates to provide a decent rate of income.
If nothing else, though, perhaps the solid employment trend will lessen the pressure on the Fed to come up with still more gimmicks to lower interest rates.
Employment remains perhaps the most significant indicator to watch in this economy. It is important not just as a sign of the economy's current health, but as a potential source for future growth as more people re-enter the workforce.
However, no aspect of the economy operates in isolation, and right now there are two outside forces that could throw employment -- and the U.S. economy in general -- off track:
The long-playing European crisis
Europe's troubles continue to threaten to spill over to the United States, in the form of financial system disruptions and/or weakening demand.
The Iranian nuclear situation Tensions with Iran have helped drive oil prices up sharply, which could act as a drag on the economy. The more saber-rattling there is, the more Americans can expect to pay at the pump.
For the sake of everything from jobs to savings account rates, the quieter the above two situations remain, the better off things will be. They are both cases in which no news is good news.