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The sequester vs. the jobs recovery

Unemployed people talk with a prospective employer (L) from the California State Parks department during a Job Fair at the Convention Center in Los Angeles.

Updated (10:10am EST): The Bureau of Labor Statistics reports that the U.S. economy added 236,000 jobs in February, and the unemployment rate declined to 7.7 percent. Job gains were broad-based: in construction, retail, health care, professional services, and hospitality. Government shed another 10,000 jobs, primarily at the state and local level.”

Economists expect a status-quo jobs report from the Bureau of Labor Statistics this morning -- 150,000 to 175,000 jobs added in February, depending on which economist you check with, and unemployment sticking around 7.9 percent. That would be, more or less, the same slow, steady labor-market pulse we’ve seen for months. Any underperformance in February will probably be due to weather -- a powerful winter storm that hit the Northeast and might have delayed hiring -- rather than the result of government fiscal policy.

But what about the sequester, budget cuts, hundreds of thousands of layoffs and furloughs at government agencies and private contractors?

We’re not seeing employers dampen their hiring yet. But the job cuts will come, says John Canally, economic strategist at LPL Financial in Boston.

“750,000 [job losses] if the full extent of the sequester remains in place throughout the whole year,” says Canally, citing recent figures from the Congressional Budget Office. “That’s a pretty big number -- when you’re only creating 150,000 to 200,000 jobs per month, and you’re going to give back 60,000 or 70,000 [per month] of those because of the sequester -- that’s a big deal.”

And Canally says there’ll be leakage from people’s paychecks -- both direct government workers and those indirectly dependent on government contracts -- at everything from aerospace and defense companies, to hospitals, schools, and national parks.

“So if civilian and non-civilian employees are furloughed -- which means basically being told not to show up to work a couple days per month -- that might reduce hours," says Canally. "You might see more part-time work instead of full-time work.”

Weep for the well-paid government bureaucrat?

“I think the notion that it’s mid-wage professional government workers is one of the real misconceptions,” says Steve Bell of the Bipartisan Policy Center in Washington. He predicts that a lot of the jobs lost will be at private contractors -- some guy named ‘Joe,’ he says, whose construction firm is fixing a state courthouse roof, or whose tool-and-die shop makes parts for Lockheed Martin’s F-35 fighter jet.

“And Joe’s either going to let people go -- mechanics and sheet-metal people -- or he’s going to not hire people he otherwise would hire,” says Bell.

Assuming Congress doesn’t revise or cancel the sequester budget cuts, we can expect to see these job losses start to show up in the employment numbers over the next several months.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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