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Issues and events that shape Long Island's economic and legislative landscape.

Wednesday, August 20, 2014

LIA Monthly Economic Report: U.S. Economy Shrugs Off Potential Impact of Sequestration

The U.S. economy seems to have shrugged off the potential impact of sequestration.  Employers are adding jobs at a faster pace and consumers are again borrowing and spending.  The housing market is also rebounding more rapidly.   Sales of existing homes reached the highest level in more than three years and home prices rose at the fastest pace in more than six years during January.  The Conference Board's index of leading economic indicators rose 0.5% between January and February suggesting improved economic conditions during the next three-to-six months.

The economy added an estimated 236,000 jobs in February, driving the unemployment rate down from 7.9% to 7.7%.  In the prior three months, average monthly employment gains totaled only 195,000.  This marks the third time since the recession ended that job growth accelerated, only to fizzle again after three months.  However, this time job gains were more broadly based and hourly wages also rose, giving consumers more spending power.  Combined with rising home prices and stock prices, this could lead to a "virtuous" cycle of continued job growth.

Nevertheless, the labor market is far from healed.  The unemployment rate fell in part because 130,000 workers left the labor force in February and were no longer counted as unemployed.  Of these, 80,000 were discouraged workers who stopped looking for work because they thought they couldn't find a job.  Long-term unemployment actually rose in February.  The average unemployed American has been out of work for more than eight months.  The share of the population holding jobs is only 58.6% and this ratio has not risen in the past year.

For complete report click here.