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Investing Specialists

Private Jobs Are Half Way Back . . . Almost

The steady employment growth during the last couple of months has Morningstar's Bob Johnson optimistic about where jobs will be within two years.

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The best news of the week was a February jobs report that showed 233,000 private sector jobs and 227,000 total jobs were created in the month. The investment community breathed a collective sigh of relief that February's strong results proved December and January's powerful employment reports weren't a statistical mirage or weather-related fluke. The year-over-year, three-month moving average private-sector employment growth approached 2.1%, much better than the 1.4% growth figure reported in February 2011. The excellent report showed a third-straight month  of private sector growth exceeding 200,000 jobs, tying last spring's string of three great reports. This extra job growth should increase consumers' propensity to open their wallets as well as their ability to spend in the months ahead. 

Unfortunately, this month's trade report seems to indicate some of that extra spending is going toward the purchase of foreign goods, as the trade deficit showed another large increase in January. The problem was not exports, which saw a healthy increase, but a surge in imports--spending on imports does not help the U.S. GDP growth rate. In fact, the weak consumption report for January (driven by poor health-care and utility spending) combined with a swelling trade deficit suggest that GDP growth could slip to as low as 1% if the January trends aren't reversed quickly (my current forecast is for 2% growth in the first quarter).

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.