Jobs Report Likely To Be a Disappointment

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Friday, forecasters expect the Labor Department to report the economy added 204,000 jobs in February, down from 243,000 in January. My estimate is 180,000.

Despite anecdotal reports of new hiring and consumer optimism, weaker jobs gains are likely for the next few months, because real consumer spending, the largest component of economic growth, was flat November, December and January. Auto sales are doing well but higher gasoline prices are crowding out most discretionary purchases.

Unemployment is expected to remain at 8.3% in February, as jobs creation barely outpaces population growth. Over the past three years, the percentage of adults participating in the labor force -- those employed, self-employed, or unemployed but looking for work -- declined significantly. If the adult participation rate was the same today as when Barack Obama became president, unemployment would be 11%.

Adding adults on the sidelines, those who say they would reenter the labor market if conditions improved and part-time workers who would prefer full-time positions, the unemployment rate becomes 15.2%. Factoring in college graduates in low-skill positions, like counterwork at Starbucks, and unemployment is closer to 20%.

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Too Little Economic Growth

Fourth quarter economic growth was 3.0%, but for all 2011 it averaged only 1.7%.

Stronger real consumer spending in September and October, plus a surge in inventory investment and multi-family home construction, pushed up fourth-quarter growth. However, the increase in household spending outpaced disposable income, debt piled up, and consumer activity stalled the next three months. In addition, higher gasoline prices are absorbing too much of the modest advances in nominal household income.

Sluggish consumer spending indicates businesses will have trouble unloading unsold goods and slow inventory investments, and together those will lower first-quarter growth. A bit stronger non-residential construction and auto sales will help, but overall GDP will grow at or below 2% in the first quarter -- hardly enough to inspire businesses to add many more workers.

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