On Friday the Bureau of Labor Statistics released the unemployment report for February. 236,000 jobs were created and unemployment fell to 7.7% (a .2% decrease from January). This is good news for the slowly recovering economy … we think.

One aspect that contributed to the lower unemployment rate was a rise in discouraged workers. These are workers that are unemployed and looking for work, but then stop looking because they believe there are no good job prospects. These people are not included when calculating unemployment rates because they have removed themselves from the job market.

It is unlikely that we will see a decrease again in the unemployment rate for the month of March. With the sequester taking effect, employers are furloughing and laying off employees. Current uncertainty in funding availability is also discouraging employers from hiring new employees. Many federal agencies already implemented a hiring freeze earlier this winter in preparation for the sequester.

The Maryland, Virginia, and D.C. areas will be hit especially hard by federal cuts. Of the 3.1 million people that work in the Washington area, 14% of them work for the federal government or the military. The Washington Post reports that local leaders should encourage diversification in the work force, so that the immediate area is not so vulnerable to federal budget cuts. The New York Times estimates that without the sequester the labor market may have been able to add 300,000 jobs a month, which will cause sluggish growth in April and May.

Another factor affecting job creation is the Affordable Care Act. Certain provisions of the act discourage small businesses from hiring above 50 employees, or they are no longer considered a small business and have to provide additional coverage. Some employers worry they might have to lay off workers due to the cost burden of providing additional health coverage.

With little room for job creation in the coming month, it is unlikely that next month’s unemployment report will be quite so rosy. The unemployment rate will probably stagnate for the next couple months, and local D.C. unemployment may even go up slightly. Overall though, the economy is slowly growing and there should be more room for job creation in a few months … at least in markets outside the military and federal government.