Jobs Are Booming

When the scientists said "15 days to slow the spread," some of us actually believed that by Easter the shutdowns would end. That was last year. Now, a full year, and $5 trillion in government spending later, we may finally be getting our wish.

On Good Friday, the Bureau of Labor Statistics released the March 2021 employment data, and payrolls increased a staggering 916,000 for the month, easily beating the consensus expected 660,000. Jobs increased most in leisure & hospitality (up 280,000), construction (up 110,000), and education and health services (up 101,000). Meanwhile, manufacturing jobs increased 53,000, while government jobs rose 136,000 (almost all in education services).

This is what we should expect as unprecedented shutdowns ease. As we wrote weeks ago, the best stimulus is a COVID vaccine (and herd immunity) which gives people confidence to return to more normal life.

We expect similar gains in jobs in the months ahead. In fact, we would not be surprised if some months of 2021 had job gains topping one million. We need it. In spite of the surge in jobs in March, total payrolls are still 8.4 million short of where they peaked pre-COVID, with the leisure & hospitality sector, all by itself, accounting for 3.1 million of that deficit. Most of those gaps should be closed by the end of this year.

But, completely closing those gaps won't mean the labor market has fully healed. Jobs would have been growing in the past year if COVID-19 had never happened, perhaps adding two million new jobs or more. Nonetheless, this is the world we have created, and we have a hole to dig out of. And we are digging rapidly, indeed.

The payroll data comes from a survey of businesses, while the household employment data is captured by talking directly to workers. As a result, it includes small-business start-ups that haven't yet made it into the business payroll survey. This alternative measure of employment increased 609,000 in March and the unemployment rate dropped to 6.0%, even as the labor force (people who are either working or looking for work) grew 347,000 and the labor force participation rate ticked up to 61.5%.

The March data was also lifted by the fact that February was held back by harsh winter weather. We can see this in the length of the average workweek, which fell in February, but rebounded strongly in March. Total hours worked (the average workweek x total employment) rose 1.9% in March – that is a huge lift to overall economic output.