Job creation bounced back higher than any month since last August, but does that mean that the economy has returned to recovery? Economists predicted a gain of 615,000 jobs in March, but the Bureau of Labor Statistics reports that the number was 50% higher than estimates at 916,000. The unemployment rate dropped down to 6%, all good signs.
However, the question remains whether this is a product of organic economic growth, or simply a reaction to two massive infusions of short-term government stimulus:
Total nonfarm payroll employment rose by 916,000 in March, and the unemployment rate edged down to 6.0 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic. Job growth was widespread in March, led by gains in leisure and hospitality, public and private education, and construction. …
Among the unemployed, the number of persons on temporary layoff declined by 203,000 in March to 2.0 million. This measure is down considerably from the recent high of 18.0 million in April 2020 but is 1.3 million higher than in February 2020. The number of permanent job losers, at 3.4 million, was little changed in March but is 2.1 million higher than February 2020. (See table A-11.)
In normal times, that gain of 203K alone would make a fairly decent month’s job gains. It’s a bit curious that we didn’t see more of those jobs return rather than only being a quarter of the new jobs reported, however. If that’s accurate (these are all estimates, but fairly expert estimates), then we’re seeing new jobs spring up while workers remain sidelined in other areas. That may just be a process that happens as we return to normal, but it also might indicate that government stimuli and supports are warping the jobs markets, too.
Another odd indication, perhaps a good one, is the pattern within the decline of the sidelined workers. Long- and short-term sidelined workers are in stasis, but the medium-term returners made up a third of last month’s gains:
The number of long-term unemployed (those jobless for 27 weeks or more), at 4.2 million, changed little over the month but is up by 3.1 million since February 2020. In March, these long-term unemployed accounted for 43.4 percent of the total unemployed. The number of persons jobless 5 to 14 weeks declined by 313,000 to 1.9 million. The number of persons jobless less than 5 weeks, at 2.2 million, was essentially unchanged over the month. (See table A-12.)
Another intriguing data point is the stasis in part-time work. It didn’t budge in March, which is unusual for a recovering jobs market. Usually this metric shows significant movement as labor markets heal and grow:
The number of persons employed part time for economic reasons, at 5.8 million, changed little in March but is 1.4 million higher than in February 2020. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
If we were experiencing a broad recovery in jobs markets, part-time workers should be the first to experience it. The overall data here suggests a sugar high from government stimuli, and in targeted industries rather than a more broad growth pattern. However, the Establishment survey shows a pretty normal distribution among the classes of created jobs — heavy in the service industries, but that’s normal for the US economy.
Notably, though, 136,000 of the new jobs came in the government sector. That’s likely a result of the bloc-grant aid to the states. Education grew by 101,000 as well, which again could be an impact of spending within the two massive relief/stimulus bills authorized by Congress within 60 days of each other.
Interestingly, wages actually declined slightly from February, although hours increased. That might just be a hiccup — hourly earnings are still higher than January — but it also might be a sign that there’s too much competition for too few jobs.
For now, though, economists are happy to focus on the toplines. NBC offers this sunny report:
“We can see the light at the end of this very dark tunnel,” said Steve Rick, chief economist at CUNA Mutual Group. “In many states, all adults will be eligible for the vaccine shortly with more to follow in the next few months. This means more permanent, widespread reopening can occur across the board and really start to work to right the ship of the economy.”
The U.S. is now averaging close to 3 million vaccinations a day, with more than one-quarter of all U.S. adults having already received at least one dose and 16 percent fully vaccinated, according to the Centers for Disease Control and Prevention.
Economists and Federal Reserve officials have long stressed that widespread vaccination is the key to economic recovery.
“In a nutshell, it’s a combination of better developments on Covid, particularly the vaccines, and also economic support from Congress,” Fed Chairman Jerome Powell told NPR’s “Morning Edition” in a live interview last month. “That’s going to enable us to reopen the economy sooner than might have been expected.”
The AP’s reliable Christopher Rugaber echoes the optimism, but he also points out that the growth might have been spiked by stimulus checks doing what stimulus checks do:
The $1,400 checks in President Joe Biden’s $1.9 trillion economic relief plan have sharply increased consumer spending, according to Bank of America’s tracking of its debit and credit cards. Spending jumped 23% in the third week of March compared with pre-pandemic levels, the bank said.
Spending had begun to rise in March even before the stimulus checks arrived as viral case counts have tumbled from their heights in January. Americans are increasingly willing to venture out from home to travel and eat out, though not yet at their pre-pandemic pace. Roughly 1.5 million people traveled through airports on March 28, according to the Transportation Services Administration. That was roughly eight times the figure of a year ago, although it was still down sharply from 2.5 million on the same day in 2019.
The transportation analytics firm Inrix has calculated that daily car trips returned to pre-pandemic levels late last month. Many of those trips have likely been to restaurants, where the volume of seated diners was just 25% below pre-pandemic levels, on average, in the last week of March, according to OpenTable, a restaurant software provider. That’s up from 50% below pre-pandemic traffic just six weeks earlier.
That’s what we expect from stimulus spending, but that spike can rapidly peter out, too. It did over the summer after the April checks went out, and a new wave of COVID-19 in the fall put us back at square one. This time we have vaccines, but with the White House urging governors back into restrictions and potential lockdowns, that stimulus effect might dissipate again. And since it’s already been spent, the effects were going to decline in the next couple of months anyway.
Still, this is far more better news than worrisome. The big jump in employment will produce its own stimulating effect, which will help boost consumer spending and create more sustainable jobs growth. With 8 million jobs still missing, however, we need a lot of great months to get back to normal, and sugar highs aren’t a sustainable strategy.