Morici: Jobs Growth Doesn’t Prove US Has Begun Bull Run

Friday, 08 Mar 2013 06:46 PM

By Glenn J. Kalinoski and David Nelson

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Higher-than-predicted jobs growth in February wasn’t enough for economist Peter Morici to say the nation has embarked on a bull-run in job creation.

Forced government budget cuts could stall such growth in the future and prove that Friday’s unexpected strong bounce was a one-time fluke.

“I don’t know that we have a trend yet. March is an open book,” the economist and professor of international business at the Robert H. Smith School of Business at the University of Maryland told Newsmax TV in an exclusive interview.

Watch our exclusive video. Story continues below.



Employment increased 236,000 during February following a revised 119,000 rise in January that was smaller than first estimated, Labor Department data showed, according to Bloomberg News. The median forecast of 90 economists surveyed by Bloomberg predicted a gain of 165,000. The unemployment rate fell to 7.7 percent.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Friday’s jobs report was the first since President Barack Obama last week signed an order that launched across-the-board budget cuts known as the "sequester" after he and congressional leaders failed to find an alternative budget plan. Government agencies have begun hacking a total of $85 billion from their budgets between now and Oct. 1.

“There was no indication that sequestration had any effect whatsoever on February numbers. There was no anticipatory laying off either in the government or among contractors. There might have been some marginal slowing down of hiring. So we haven’t seen the effect of sequestration and we will likely not see its full consequences until April,” he said.

“It’s hard to say whether this is a one-off or not.”

He also didn’t think forecasters will be boosting their job-creation predictions.

“A lot of economists have been pushing up their forecasts over the last two weeks, now we have to factor in sequestration, so it’s probably a wash,” he said. “I don’t think we’re going to see a lot of upward revision.”

“There was a downward revision for January,” he said. “If you average the two months together, they come in awfully close to what we were forecasting for this month. They were within about 25,000. In my world, 25,000 is not a lot.”

He also warned of the “big” trade deficit numbers that “were up a lot.” The Commerce Department said Thursday that the U.S. trade deficit deficit rose to $44.4 billion, an increase of 16.5 percent from December, reflecting a big jump in oil imports and a drop in exports.

“That’s the subtraction of GDP,” he said. “Consumer spending has been depressed,” he said.

Consumer spending data for February will be a crucial indication because in December and January, consumer spending slowed markedly, he cautioned. “If that doesn’t pick up, then GDP growth is not picking up as economists think, and then hiring will start to slow.”

Morici said the sequester cuts should shave about “three-tenths of a percent” off U.S. gross domestic product this year.

“By next year, maybe half a percent. I anticipate that this is going to be a more or less-permanent thing, that the government has just been cut by this much because the president is absolutely disinclined to ever talk about anything when it relates to fiscal policy without talking about a tax increase.”

Morici said President Barack Obama is being “very foolish by digging in” on the tax issue.

“Taxes are much higher now than they were during the Clinton period for upper-income folks and he’s got an agenda. And he’s spending his mandate by dwelling on this.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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