The US economy added 916,000 jobs last month, March’s hotly-anticipated nonfarm payrolls report showed.
That was considerably higher than the 650,000 consensus expected, and underscored the notion that, assuming vaccine rollout continues apace and no more black swans come splashing down, the world’s largest economy may be on the cusp of a historic hiring spree.
The range of estimates from more than six-dozen economists was 350,000 to 1 million. The official number thus came in near the top-end of the distribution and marked the best headline print since August (figure below).
Revisions added 67,000 and 89,000 to the totals for January and February, respectively.
That brings the total number of jobs added in 2021 to 1.62 million. That’s good news, to be sure. But the labor market remains 8.4 million jobs short of pre-pandemic levels (figure below).
With stimulus and herd immunity, some contend the gap could close faster than many market participants (not to mention the Fed) believe. Labor market slack is one argument against the idea that “excessive” stimulus could trigger an inflationary overheat. At the same time, policymakers are more than willing to chance an inflation overshoot if it means restoring the economy to “full employment,” a concept which was arguably rendered obsolete when the Fed tweaked the language around its mandate late last summer.
For context, March’s print stands out historically. Outside of the pandemic, a 900,000+ print would be almost entirely anomalous (figure below).
All eyes were, of course, on the services sector. Leisure and hospitality added 280,000 jobs in March, a solid encore after February’s sizable gains, but perhaps not as large as one might have expected given the headline print. Food services and drinking places comprised 176,000 of that total.
Education was a boon. Employment rose by 76,000 in local government education, by 50,000 in state government education and by 64,000 in private education. There remains quite a bit of ground to make up in those areas, and that’s an understatement.
Construction added 110,000 jobs last month, while manufacturing chipped in 53,000, near the high-end of the forecast range.
The unemployment rate dropped to 6%, in line with estimates. Average hourly earnings ticked lower MoM and came in well shy of consensus YoY (4.2% versus 4.5%). Whenever you parse those figures, you need to take account of what types of jobs are being added back and how much those jobs pay.
Overall, the gains looked widespread, and the BLS described them as such.
From a 30,000-foot perspective, this bolsters the recovery narrative and clearly shows that “whispers” of a 1 million gain for March were generally accurate. There’s more nuance, which you can read about here.
One possibility worth noting is that gains now could mean less upside later. “A material upside surprise closer to +1 million will have the initial impact of raising expectations for a larger share of the workers displaced by the pandemic being reintegrated into the labor force, and this occurring more quickly,” BMO’s Ian Lyngen and Ben Jeffery said Friday. “We’ll argue caution is warranted as a speedier rehiring could also serve to bring forward job creation that one might have otherwise anticipated over the summer months.”
