For the first time in nearly two years, the national unemployment rate fell below 9 percent last month. At 8.9 percent, unemployment is at its lowest rate since April 2009. The Labor Department reported that almost 200,000 new jobs were created last month, leading to a sharp decrease in unemployment and an economic boost many Americans were waiting for. But, despite some saying these new jobs could lead to long-awaited economic health, we shouldn’t get our hopes up too high. The decrease in unemployment does not signify the recovery of our economy, but instead, only an improvement.
Last month’s increase in job creation was the largest since last May, when thousands of temporary workers were hired for the U.S. Census. So far, the increase has been attributed to harsh winter weather conditions affecting the entire country. Gains were made in factory jobs, health care services, auto sales and construction. In the past three months, unemployment has dropped nearly 1 percentage point, a feat that hasn’t been achieved in such a short period of time since 1983. Unemployment claims fell to under 400,000 for the first time in three years, and retail reported gains of almost 5 percent. Yes, the economy does seem to be in a bit of an upswing, but there are a few factors that can slow the momentum down.
First, there’s the crisis in the Middle East. Social unrest in Libya, Tunisia and Egypt caused oil prices to spike to nearly $4 per gallon nationwide, with California prices among the highest, rising 34 cents in only two weeks. The rising cost of oil also affects inflation and consumer demand for other goods. Should the crises in the Middle East continue, oil prices will rise even higher and our chances at a full economy recovery will decrease.
Also affecting our chances at recovery is the likelihood of further job creation. As we enter the spring season, decreases in construction jobs are likely. The Labor Department reported 33,000 new construction jobs in the month of February, but that was only after the winter storms in the Midwest and East led to the loss of 22,000 jobs in January. Despite gains made across the nation, California — where the market for construction is typically the strongest for job creation — is still hurting. Currently, more than 2 million Californians are unemployed and in January, California only added 12,500 jobs.
Unemployment stood at 12.4 percent, a significantly higher rate than that of the national average. So, even as the country at large makes gains in unemployment, those of us here in California are still struggling.
Furthermore, the national unemployment rate only includes those who are actively looking for jobs. Those who are underemployed — employees working below the number of hours preferred — and those who have given up looking for work are omitted. As of now, only 64 percent of adults are working or actively searching for a job. That’s the lowest percentage in 25 years.
While the creation of new jobs certainly has its benefits, it’s not without its drawbacks. Creating new jobs will encourage more people to seek employment. High workforce participation is a telltale sign of a good economy. Once those new employment positions are filled, however, many of those new or returning job seekers will be left without a job, causing the unemployment rate to increase yet again. While the improvements in unemployment are encouraging, we’re not exactly out of the woods yet. Right now, it’s too early to tell whether this economic momentum can or will last. It is only when we can maintain consistently low employment rates that our economy will begin to fully recover.
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