The sectors that added the most jobs in March hint at just how much the economic reopening might revitalize the US labor market.
Businesses added 916,000 nonfarm payrolls last month, according to Bureau of Labor Statistics data published Friday morning. The reading handily beat the median estimate of 660,000 payroll additions from economists surveyed by Bloomberg, and signaled that partial reopening, improved vaccination, and new stimulus fueled a strong uptick in hiring.
Job additions were also more evenly spread in March than in the month prior. While February saw leisure and hospitality businesses drive nearly all of the month’s gains, the sector counted for roughly one-third of the March upswing.
Public-sector hiring served as the second-largest source of job additions with 136,000 new jobs, suggesting state and local governments aren’t facing the same stagnant recoveries they endured after the financial crisis.
Job growth in the construction sector also rebounded after harsh winter storms led payrolls to shrink in February.
The utilities industry saw the smallest gain, while information businesses shed 2,000 payrolls through the month.
Here are the sectors that added the most jobs in March.
After months of either meager gains or unexpected losses, March is poised to be a turning point for the US labor market’s recovery.
The Bureau of Labor Statistics will publish its nonfarm payrolls report for March on Friday at 8:30 a.m. ET, providing the most detailed look at how hiring fared throughout last month. The backdrop is promising. March had warmer weather, and a faster rate of vaccinations led some states to partially reopen for the first time since the winter’s dire surge in cases. Coronavirus case counts started to swing higher at the end of the month but largely stayed at lower levels.
Democrats’ $1.9 trillion stimulus plan was also approved early last month and unleashed a wave of consumer demand and aid for small businesses. Sentiment gauges surged to one-year highs, and Americans strapped in for a return to pre-pandemic norms.
Consensus estimates suggest March had the strongest payroll gains in six months. Economists surveyed by Bloomberg said they expected nonfarm payrolls to climb by 660,000, which would be nearly double the 379,000 gain seen in February. The unemployment rate is forecast to dip to 6% from 6.2%.
Some on Wall Street are even more optimistic. March’s release should kick off a “series of extremely strong jobs reports” with payroll additions averaging 950,000 a month through the second quarter, Bank of America economists led by Michelle Meyer said in a note. Unemployment will likely sink to 4.7% by the summer and sink another 0.2 percentage points by the end of 2021, they said.
“It’s hard to keep up with this economy,” the team added. “We think consumer spending is about to take off given the one-two punch of stimulus and reopening.”
UBS holds a similarly encouraging outlook. Economists led by Seth Carpenter see the sharp acceleration in economic activity driving just as strong a jump in hiring. Payroll growth is forecast to average 1 million throughout the second and third quarters as the economy reopens. With roughly 10 million jobs still lost to the pandemic, such a growth rate would recover more than half the country’s missing payrolls.
The bank also said it expected the unemployment rate to decline to 3.6% by the end of 2023, with the drop slowed by a swiftly rising rate of labor-force participation.
Data previewing the headline report showed job growth breaking out of its middling trend. The US private sector added 517,000 jobs in March, according to ADP’s monthly employment report. Though the reading landed just below the median estimate of 550,000, the increase was the largest seen since September and marked a third straight gain.
Separately, weekly jobless claims trended lower through the month, albeit at a sluggish pace. Claims rose to 719,000 last week, according to Labor Department data published Thursday. While that was an increase from the prior week’s total, claims still dropped 3.5% month over month. And the previous week’s reading was revised to 658,000 from 678,000, marking the lowest reading since the pandemic first slammed the labor market.
The Friday report will also highlight whether the recovery is evening out or if a K-shaped trend is growing worse. Unemployment rates for minorities continued to lag those for white Americans in February, and the bulk of early hires were for high-income workers. Preservation of the trend in March’s data could signal that those hit hardest by the pandemic will be some of the last to recover.
The February jobs report shows the labor market in reopening rehearsal.
The US added 379,000 nonfarm payrolls last month, handily exceeding the median economist estimate of 200,000 additions. The unemployment rate fell to 6.2% from 6.3%, labor force participation held steady, and the number of Americans citing COVID-19 for not seeking employment fell by 500,000.
The drivers behind the gains are also encouraging.
While the drop in unemployment seen in January was largely tied to more Americans dropping out of the labor force, last month’s dip was tied to increased hiring across a broad set of sectors. The payroll increase would’ve “easily” topped 500,000 had adverse weather not contributed to construction jobs falling by 61,000, Morgan Stanley economists led by Robert Rosener said.
For all intents and purposes, the report came in more positive than expected. Investors overwhelmingly thought so, too. Treasurys declined sharply as traders bet on a faster-than-expected economic rebound, bringing the 10-year yield to its highest level since February 2020. The Dow Jones industrial average and S&P 500 gained, led by cyclical and value stocks.
Fanning February’s flames
A deeper dive into the data shows a recovery that’s found its footing. The leisure and hospitality industries – among those hit hardest by the pandemic and resulting restrictions – counted for 355,000 of the month’s payroll additions. Temporary job losses declined, suggesting businesses were able to reopen and rehire workers as COVID-19 case counts fell nationwide.
The overall gains are a “surprise” and can be boiled down to reopening “arriving earlier than expected,” Brian Coulton, chief economist at Fitch, said.
Warming weather, continued vaccination, and even lower daily case counts stand to supercharge job gains into the summer. Plenty on Wall Street agree. The data “suggest that the labor market recovery is accelerating in earnest,” Bank of America economists Joseph Song and Michelle Meyer said Friday.
Michael Feroli, chief US economist at JPMorgan, said investors can expect “even better numbers” as reopening provides an “incredibly powerful tailwind.”
“There is no ambiguity regarding where employment is headed, in our view, but just how long it takes to get there,” Rick Rieder, chief investment officer of global fixed income at BlackRock, said.
Not so fast
Still, the battle is far from won. A handful of datapoints signal the climb to maximum employment will be much steeper than the 6.2% U-3 rate implies.
That “real” rate improved to 9.1% through February, according to Insider analysis. While this is down significantly from the year-ago peak of nearly 24%, the pace of decline slowed significantly through the winter.
The U-6 unemployment rate – which tracks people marginally attached to the workforce and Americans employed part-time for economic reasons – showed no improvement at all and held at 11.1% last month.
These gloomier datapoints practically guarantee Powell will keep ultra-easy monetary conditions in place for the foreseeable future. The Fed chief cautioned on Thursday that it “will take some time” to achieve the central bank’s goal of maximum employment. The healthy decline in baseline unemployment is cause for some optimism, but a broad set of criteria need to be met to ensure the recovery is robust, he added.
“We want to see wages moving up. We’d want to see that the gains in employment are broad-based and that different demographic groups were experiencing it,” Powell said. “We have a high standard for identifying what maximum employment is.”
The still-elevated unemployment rate has also been cited by Democrats as a sign additional stimulus is still warranted. Senate Democrats kickstarted a lengthy amendment process on Friday with aims to pass a $1.9 trillion relief package over the weekend. The deal includes $1,400 direct payments, a $400 supplement to federal unemployment benefits, and funding for state and local governments.
While Republicans have argued the bill is a case of overspending, Democrats have pointed to lasting labor-market pain as justification for the hefty price tag. The bulk of February’s payroll gains can be traced to business reopenings, but an additional stimulus package could boost demand and drive new demand for workers.
The US labor-market recovery accelerated in February as daily COVID-19 cases swiftly declined and the pace of vaccinations improved.
Businesses added 379,000 payrolls last month, the Bureau of Labor Statistics announced Friday. Economists surveyed by Bloomberg expected a gain of 200,000 payrolls.
The increase follows a revised 166,000-payroll jump in January. The labor market has now grown for two straight months after contracting in December as virus cases surged.
The US unemployment rate fell to 6.2% from 6.3%, according to the government report. Economists expected the rate to stay steady at 6.3%. The U-6 unemployment rate – which includes workers marginally attached to the labor force and those employed part-time for economic reasons – remained at 11.1%.
The labor-force participation was also unchanged at 61.4%. A falling participation rate can drag the benchmark U-3 unemployment rate lower, but such declines signal deep scarring in the labor market.
The bigger picture
Jobless-claims data and private-payrolls reports offer some detail as to how the labor market fared through February, but the BLS release paints the clearest picture yet as to how the coronavirus pandemic has affected workers and the unemployed.
Roughly 13.3 million Americans cited the pandemic as the main reason their employer stopped operations. That’s down from 14.8 million people in January.
The number of people saying COVID-19 was the primary reason they didn’t seek employment dropped to 4.2 million from 4.7 million.
About 22.7% of Americans said they telecommuted because of the health crisis. That compares with 23.2% in January.
Roughly 2.2 million Americans said their job loss was temporary, down from 2.7 million the month prior. The number of temporary layoffs peaked at 18 million in April, and while the sum has declined significantly, it still sits well above levels seen before the pandemic.
Filling the hole
The Friday reading affirms that while the economy is far from fully recovered, the pace of improvement is picking up, most likely tied to the steady decline in daily new COVID-19 cases. The US reported 54,349 new cases on the last day of February, down from the January peak of 295,121 cases. Hospitalizations and daily virus deaths have similarly tumbled from their early-2021 highs, according to The COVID Tracking Project.
All the while, the country has ramped up the distribution and administration of coronavirus vaccines. The US has administered more than 82.6 million doses, according to Bloomberg data. The average daily pace of vaccinations climbed above 2 million on Wednesday and has held the level. At the current rate, inoculating three-quarters of the US population would take roughly six months, but the Biden administration has a rosier outlook.
The president on Tuesday announced the US would have enough vaccine doses for every adult by the end of May. While distributing the shots will most likely last beyond May, the new timeline marks a two-month improvement to the administration’s previous forecast.
Still, other data tracking the labor market points to a sluggish rebound. Initial jobless claims totaled 745,000 last week, according to Labor Department data published Thursday. That was below the median economist estimate of 750,000 claims but a slight increase from the previous week’s revised sum of 736,000. Weekly claims counts have hovered in the same territory since the fall as lingering economic restrictions hinder stronger job growth.
Continuing claims, which track Americans receiving unemployment benefits, fell to 4.3 million for the week that ended February 20. The reading landed in line with economist projections.
Other corners of the economy are faring much better amid the warmer weather and falling case counts. Retail sales grew 5.3% in January, trouncing the 1% growth estimate from surveyed economists. The strong increase suggests the stimulus passed at the end of 2020 efficiently lifted consumer spending in a matter of weeks.
All signs point to another fiscal boost being approved over the next few days. Senate Democrats voted to advance their $1.9 trillion stimulus plan on Thursday, kicking off a period of debate before a final floor vote. President Joe Biden has said he wants to sign the bill before expanded unemployment benefits lapse March 14. The new package includes $1,400 direct payments, a $400 supplement to federal unemployment insurance, and aid for state and local governments.
The bill isn’t yet a done deal. Sen. Ron Johnson of Wisconsin forced a reading of the entire 628-page bill on Thursday, as Republicans seek to at least drag out its passage into law. Not a single Republican senator voted to advance the bill Thursday.
A process known as “vote-a-rama” will start after the 20 hours of debate and give Republicans the chance to further impede a final vote by introducing potentially hundreds of amendments to the bill.
The number of Americans filing for unemployment benefits declined more than expected last week, signaling the labor market recovery is still recovering, albeit at a modest pace.
New jobless claims reached an unadjusted 730,000 for the week that ended Saturday, the Labor Department announced Thursday morning. Economists surveyed by Bloomberg expected the reading to come in at 825,000 claims. Last week’s total is also below the previous period’s revised count of 841,000 claims.
Continuing claims, which track Americans currently receiving unemployment benefits, dropped to 4.4 million for the week that ended February 13. Economists projected continuing claims to decline slightly to 4.5 million.
While down significantly from spring 2020 levels, jobless claims wavered around 800,000 for weeks amid slowed hiring activity. Weekly counts still exceed the 665,000 filings made during the worst week of the financial crisis. And the roughly 80 million claims made since the pandemic hit the US is more than double the 37 million filings seen during the previous downturn.
Labor-market indicators haven’t fared as well as some other economic data in recent weeks. Retail sales leaped 5.3% in January, according to Census Bureau data published last week, trouncing the 1% gain expected by economists. The data signals stimulus passed by President Donald Trump late last year efficiently lifted household spending during one of the worst months of the pandemic.
More recently, IHS Markit reported US business activity improved the most in almost six years in a preliminary February reading. The firm’s index of output across the service and manufacturing industries rose 0.1 point to 58.8, marking the strongest rate of growth since March 2015. The bulk of the improvement came from the service sector, while the manufacturing industry continued to expand at a relatively strong pace.
Pandemic data has similarly shown encouraging trends. Daily case counts are less than a third of their early January peak, and hospitalizations have also steadily declined. The US is administering 1.3 million vaccines per day on average and has so far administered 65 million doses, according to Bloomberg data.
The recovery is set to receive a boost from Washington in the coming weeks. House Democrats on Wednesday indicated they’ll hold a floor vote on President Joe Biden’s $1.9 trillion stimulus proposal on Friday. The legislation would then be sent to the Senate, where Democrats aim to pass the bill through budget reconciliation and send it to the president’s desk by March 12.
That timeline would allow for expanded unemployment benefits to continue instead of expiring on March 14. The package also includes $1,400 direct payments, aid for state and local governments, and an increase of the federal minimum wage to $15 an hour.