The February jobs report came in hot Friday, suggesting the US labor market is on the mend again after stumbling during a vicious winter COVID surge.
Critics of the Biden administration’s stimulus plan will almost surely cite the numbers as “evidence” to support the case that injecting another $1.9 trillion in stimulus into the veins of the economy risks an overheat.
Of course, anyone who fell asleep in, say, December of 2019, and woke up today, wouldn’t even recognize most of the charts one can conjure to depict the state of America’s jobs market. In other words, nothing is “fixed.”
For example, four-fifths of the 355,000 jobs added in leisure and hospitality last month came in food services and drinking places, one of the hardest-hit areas of the economy. That’s great, but even with those gains, the situation is still dire (figure below).
February’s gains didn’t even manage to make up for the jobs shed in November and December, which amounted to around 10% of those regained from May through October.
Leisure and hospitality as a whole remains 3.5 million jobs short of pre-pandemic levels.
I suppose this goes without saying, but the reason leisure and hospitality was able to stage a recovery is that the nation’s virus caseload has plunged (figure below). Joe Biden suggested this week that a few states’ decisions to relax containment efforts are “the last thing” the country needs with just months to go before the White House says enough vaccines will be available to cover all US adults.
Most commentators on Friday suggested February’s report presages a series of blockbusters as the economy reopens further and vaccine rollout proceeds apace.
“A very strong jobs report for February is just the start,” ING said. “Construction is set to rebound next month after winter storms and with more state governors relaxing COVID containment measures we expect to see even better numbers in March and April.”
“This is a bit of a down-payment on a reopening report,” one PM at BlackRock remarked.
Still, the structural damage is done. For example, the percentage of total unemployed jobless for 27 weeks or longer is now approaching record highs. It hit 41.5% in February (figure below).
It’s hard to imagine those folks are feeling better about the situation.
Meanwhile, permanent job losers barely budged in February. At 3.5 million, the total is 2.2 million higher than pre-pandemic levels (figure below).
In a testament to the urgency of the Fed’s efforts to help foster a more inclusive labor market, African Americans didn’t see the benefits from the February jobs surge.
In fact, the African American unemployment rate rose from January to 9.9%.
When coupled with the decrease in the White unemployment rate, you end up with a 0.8 percentage point jump in the employment gap (figure above). That’s tied for the second-largest of the pandemic.
At the end of the day, the February progress is welcome, but it’s clearly not enough. Ron Klain underscored as much.
“If you think today’s jobs report is ‘good enough,’ then know that at this pace, it would take until April 2023 to get back to where we were in February 2020,” he said Friday.
Is the Mona Lisa supposed to be upside down? I feel like there’s some metaphor I’m missing.
Actually, I’ve always been curious: do you do the artwork for the top of each post yourself? I always enjoy their visual style.
October 2018, from James Bullard: “If you put it in a murder mystery framework—‘Who Killed the Phillips Curve?’—it was the Fed that killed the Phillips curve”.
He also said: “policymakers have to look elsewhere to discern the most likely direction for inflation.”
Here’s a recent bit from Fed on inflation direction: https://www.clevelandfed.org/our-research/indicators-and-data/inflation-expectations.aspx
It seems to me that there isn’t going to be an explosion of new jobs through this year, simply because the labor market is now more efficient in producing stuff. That lack of labor demand will tamp down inflation, possibly spinning things towards stagflation and slower output, snuggled up to a lame duck Congress and a burned out population that isn’t gonna suddenly go crazy because the pandemic ended in Texas.
A lot of very new virus variant models point to a far more extended linger bout of Covid-like flu that may be a part of the new brave world, which will tend to make most people cautious.
If anything, the main word for the future will be caution (maybe fatigue). That’s apparently why Mona is upside down?
The numbers were good- but your headline is accurate. Labor participation rate is still awful. Also what is sustaining the labor market is partly a result of vaccination aid/help, partly a result of extra unemployment and checks going out plus the economy adapting. However, the aid comes to an end unless a new package is approved. If a robust package is not approved you can bet the employment and consumption numbers go right back down. Stimulus is really the wrong term here. It is economic bridge payments. The aid is meant allow the country to withstand the worst economic effects of the pandemic until the vaccines get to 60-80% of the population and we can take reasonable chances to open up. Like sending the kids all back to school in the fall, going to restaurants and cultural events etc. Very few proposals in the US get a 70% approval rating. In this case, the public is better informed than many of our federal politicians….
For most persons laid off from hospitality and food service jobs, unemployment is largely replacing their lost income and their skills do not atrophy even after a prolonged period of unemployment.
As hotels and restaurants continue to reopen, job recovery in those sectors will initially be very rapid. Restaurant owners tell me that they are actually struggling to find workers when they expand hours or indoors dining.
However, many such businesses have permanently shut. New ones will open – there are a lot of vacant locations whose rent is lower than before – but maybe not by the time UE runs out.