WASHINGTON, March 3, 2011 – Rising oil prices and looming government spending cuts are rattling US business confidence, giving this Friday\’s unemployment report card added importance.
Since the US recession ended in June 2009, it has seemed like the world\’s largest economy has taken two steps forward and one step back.
Last year, debt crises in Europe threatened to derail the recovery on both sides of the Atlantic.
Today, rising global oil prices and cuts to government spending at home threaten to make life tougher for Americans, just as they begin to get back on their feet.
In the interim US unemployment has remained stubbornly high and the housing market has been moribund, leaving two pillars of the economy looking like Corinthian relics — no longer fit to carry the load.
Amid these worries the Labor Department will on Friday release its unemployment figures for February. The closely watched indicator will be even more heavily scrutinized than usual.
A strong jobs report would raise optimism that price rises can be absorbed without doing too much damage to vital consumer spending.
The Federal Reserve said in a recent report that a slight improvement in the jobs market had already helped limit the impact of price rises in the first two months of the year.
"Labor markets modestly improved across the country," allowing manufacturers "greater ability to pass through higher input costs to customers," it said.
With oil prices still rising, news of unemployment falling from the current rate of 9.0 percent would bolster confidence.
A strong report would also increase confidence that looming government layoffs can be offset by a resurgence in private sector hiring.
But after watching some 8.75 million jobs disappear during the recession, many experts fear the economy remains vulnerable.
According to outplacement firm Challenger, Gray and Christmas, the number of job cuts announced by US-based firms increased for the second consecutive month in February.
"It is too soon to say whether the increases in January and now February represent a trend," said chief executive John Challenger.
"Certainly the specter of rising gas prices could impact employers\’ staffing decisions over the next six months," he added.
Despite the gloom, Federal Reserve Chairman Ben Bernanke said Tuesday there were "grounds for optimism" that the ailing US jobs market will pick up this year.
He cited a drop in unemployment over the last two months, figures showing fewer Americans have claimed jobless benefits in recent weeks, and "an improvement in firms\’ hiring plans," as positive signs for the medium term.
That positive view got some backing this week when data showed that firms added 217,000 jobs in February.
Private payrolls firm ADP reported a 15 percent increase in job creation from January, much better than the hiring slowdown expected by economists.
Payrolls are now at their highest level since May 2009, and some economists believe that will be seen in the official job creation figures.
"I think we will get a much better February number than the pathetic January 36,000 gain initially estimated," said Joel Naroff of Naroff Economic Advisors.
Economists believe around 183,000 jobs were created during the month.
"I expect a pretty decent labor market report which should make people feel good, except that we have oil overhanging the economy," Naroff said.