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Can our growth survive the sequester?

Payrolls expanded by 236,000 last month and the jobless rate ticked down to 7.7%, its lowest rate since late 2008, outperforming analysts expectations.  Hours worked per week increased and hourly pay rose as well, suggesting a potential improvement in employer demand (though, as noted, some indicators in the report point the other way—these monthly reports are never an analytical slamdunk).

Whether the better-than-expected results signal a faster underlying trend in job growth, and whether it can withstand the fiscal drag from the sequester, is yet to be seen, a point I return to below.

Since we want to avoid reading too much into any one month in these volatile data, the smart move is to average the last few months of payroll gains to smooth out the noise.  Doing so reveals some acceleration in hiring: over the past three months, average monthly gains were 191K; over the prior three months, 182K; and over the three months before that, 135K.

Unemployment is also down from 8.3% a year ago to 7.7% last month, as noted.

I’ll work up the details throughout the day* but for now, let’s think a bit about what this report may be telling us:

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