National Unemployment Rate Lowest In 2 Years

In a report from Washington we recieved word that the nation’s unemployment rate dropped to its lowest level in two years in March. The outlook is seeing an upswing in jobs coming on the market as major companies plan to add more jobs. The increased amount of hiring has help cut into the unemployment rate, which currently sits at 8.8 percent. This is an encouraging sign for those who still find themselves currently unemployed.

Still, the job gains haven’t led many people who stopped looking for work during the recession to start again. Less than two-thirds of American adults are either working or looking for work — the lowest participation rate in 25 years.

In the report made on Friday by the government it stated that the economy saw the addition of 216,000 jobs during last month. Those who found their payrolls grow by adding more workers were those of the factory, retail, education and health care sectors, and professional and financial services. The employment gains by those sectors outweighed those that were of the local government, construction and telecommunications firms all of which saw losses in employment during the last month.

The private sector added more than 200,000 jobs for a second straight month. It was the first time that has happened since 2006 — more than a year before the recession started. And it could mark a big turning point in job creation as many of America’s largest companies plan to step up hiring, a March survey of CEOs found. Google Inc., Siemens Corp. and Ford Motor Co., among others, have said they plan to add workers.

Economists expect the stronger hiring to endure throughout the year, producing a net gain of about 2.5 million jobs for 2011. Even so, that would make up for only a modest portion of the 7.5 million jobs wiped out during the recession. The economy must add about 300,000 new jobs a month to significantly lower unemployment.

Stepped-up hiring

The unemployment rate has fallen a full percentage point since November, the sharpest four-month drop since 1983. Stepped-up hiring is the main reason. But a more sobering factor is that the number of people who are either working or seeking a job remains surprisingly low for this stage of the recovery.

People without jobs who aren’t looking for one aren’t counted as unemployed. Once they start looking again, they’re classified as unemployed, and the unemployment rate can go back up. That can happen even if the economy is adding jobs.

Just 64.2 percent of adults have a job or are looking for one — the lowest participation rate since 1984. The number has been shrinking for four years. It suggests many people remain discouraged about their job prospects even as hiring is picking up.

A falling unemployment rate is important for Obama, who is 19 months from a re-election vote and faces a lineup of potential Republican challengers who may make his moves to revive the economy the dominant issue.

President Ronald Reagan had low job-approval ratings in his first term, when unemployment surged to 10.4 percent. By Election Day 1984, the unemployment rate had fallen to 7.2 percent. Reagan won a landslide victory.

“Although we got good news today, we have to keep the momentum going,” Obama told workers at a UPS shipping facility in suburban Maryland. “There are still millions of Americans out there that are looking for a job that pays the bills.”

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Housing Recovery Complicated By Oil Prices

The high price of oil has brought many negative views into the U.S. outlook. One consequence being more double dippings in housing on the table.

January’s home sale perfomance fluxuated as purchases of existing homes saw a surprising gain of 2.7% up to 5.36 million while sales of new homes plummeted 12.6% to just 284,000. Both sections were at historic lows that are being kept down by the high unemployment rate, strict mortgage standards and the unctertainty of future trends in home prices. That being said, housing in 2011 was supposed to benefit, if only diminutively, from the U.S. recovery that has seen traction being gained and from government policy remaining very accomodating.

Although housing wasn’t anticipating a surge in 2011, there was also not expectation for this large of a drag on growth, that is along the lines of the past 3 years. Household formations should increase as the national unemployment rate continutes to drop. Affordability should also benefit from the Federal Reserve’s focus on keeping mortgage rates low.

The outlook has changed in response to the rise in oil prices that correspond with the protests in the Middle East. All of a sudden businesses and consumers are uncertain where their energy bills are going, but if the trend continues we can only surmise that going up will stay the norm.

Higher bills for fuel have made this Winter even more harsh for many homes. The Energy Information Administration has estimated that the average household in the Northeast, which has been wracked with storm after storm this year, will spend $2,431 on heating oil along this Winter which is an increase of nearly 24% from last year’s total. The rise in price is also affecting many airlines and chemical making businesses.

Most economics believe the rise in fuel costs will slow output growth rather than boost inflation. These thoughts are based on higher energy costs leave less money available to be spent on other goods. Given the slack in labor markets and capacity, higher fuel costs won’t translate much into wages rising or prices that would, consequently, push up core inflation.

The oil-related drag on output, however, means fewer jobs. And faster job growth was a key support for housing in 2011. Every $10 rise in oil prices, if sustained, subtracts a one-half percentage point from gross domestic product growth. Every 1% increase in GDP translates into about one million new jobs. So, if oil prices don’t reverse, the drag on GDP growth could mean 500,000 fewer new jobs created over the course of 2011.

Of course, fewer jobs mean fewer new workers going out on their own. Household formation is the main determinant of housing demand. Curb formation and you curb home sales. That is why the housing outlook looks more precarious than it did just a few weeks ago.