Friday, March 04, 2005

Employment and Productivity

The Labor Department reported that the economy added 262,000 new jobs in February, higher than 225,000 consensus. A 'strong' number was generally expected as weekly jobless claims in February had been quite low, skimming just above 300,000.

The unemployment rate rose to 5.4% from 5.2%. The unemployment rate is based on the household survey and the payrolls are based on the establishment survey. The establishment survey is generally more heavily watched but keeping both in mind over time is required to see the overall picture.

Just as important, the Labor Department reported yesterday that Q4 productivity grew at a 2.1% annual rate, and 4.0% for all of 2004. Solid numbers that help rein in inflation but also have a countervailing influence for employment growth. You never want to stifle productivity for higher employment - like a 33 hour workweek! - as the effects are temporary and leads to very bad habits.

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