WASHINGTON – A sharp fall in the unemployment rate Friday and a fresh all-time record for stocks show the U.S. economy pulling away from its peers, gaining ground while Europe and Japan remain stagnant.
The Federal Reserve’s easy-money policy and the government’s modest stimulus spending appear to be paying off, distancing the country from the depths of recession while harsh austerity programs appear to be holding Europe back.
But the United States still faces headwinds, especially of its own making, after opposition Republicans forced the White House to swallow deep spending cuts that could take the wind out of growth.
And the unbudging level of long-term unemployment seen in the labor data is one of a number of frailties that still dog the country — explaining why the Federal Reserve is not ready to reel in its loose monetary policy.
The February jobs data released Friday was encouraging especially because it came after the government boosted taxes at the end of 2012 and just ahead of the sequester cuts that slashed government spending sharply from March 1.
The unemployment rate fell to 7.7 percent from 7.9 percent a month earlier, on the back of a net 236,000 jobs added during the month. Joblessness was the lowest since December 2008, when layoffs were soaring.
In comparison, unemployment in the eurozone has continued to mount, hitting a record 11.9 percent in January.
“The data add to evidence that momentum in the (U.S.) labor market has strengthened further,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
All the jobs created were in the private sector and were strong in construction, an industry crucial to firming up the recovery from the deep 2008-2009 recession.
Still, the White House said that the new unemployment rate was measured before the $85 billion in automatic budget cuts started taking effect, and that the cuts could have a negative impact on employment and economic growth.
The data accented the record run last week in the U.S. stock markets. On Tuesday the Dow Jones Industrial Average smashed its all-time high of 14,164 — set in October 2007 — having more than doubled in exactly four years from the postcrash bottom.
The index continued to mount throughout the week and topped 14,400 during trade Friday, before pulling back.
Despite this, few economists are prepared to declare victory, with many citing the drag created by Europe’s recession and slow growth in both Japan and China as key hurdles.