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PNC’ Chief Economist Gus Faucher: Larger-Than-Expected Job Gains in February

March 5, 2021

Michigan Business Network

Small Drop in Unemployment Rate; Job Growth Set to Pick Up

Employment increased by a better-than-expected 379,000 in February. However, job growth over the past four months has averaged a disappointing 125,000.
Employment remains more 9 million below its pre-recession peak.
The unemployment rate fell slightly to 6.2% in February. Although it is down from almost 15% in April, it is far above the pre-recession rate of 3.5%.
PNC expects much stronger job growth through the rest of 2021 as vaccine distribution accelerates and economic activity surges.

Nonfarm employment increased by 379,000 in February, according to the Bureau of Labor Statistics, based on a survey of employers. This was almost double the consensus expectation for an increase of 200,000. This was the strongest month of job growth since October. Employment growth in January was revised higher, to 166,000 from the initially reported 49,000. But job losses in December were revised to 306,000, from the previously reported net loss of 227,000. Thus there was a total net upward revision to employment in January and December of 38,000. The private sector added 465,000 jobs in February, while government employment fell by 89,000.

The unemployment rate fell to 6.2% in February, from 6.3% in January. The unemployment rate peaked at 14.8% in April, its highest level since the Great Depression, but has fallen steadily since then. However, it remains far above the pre-recession rate of 3.5% in early 2020.

Employment fell by 22 million in March and April of last year as the coronavirus pandemic came to the United States and businesses closed. The economy added back more than 12 million jobs between May and October, an average of 2 million per month, as businesses reopened and consumers started to venture out again. But job growth slowed dramatically in late 2020 and early 2021 as coronavirus caseloads hit record highs and winter weather curtailed outdoor activities. Job growth over the months four months has averaged just 125,000. With employment still down by more than 9 million, or 6%, from before the pandemic, at this pace employment would not return to its pre-recession peak for almost 7 years.

The good news, however, is that job growth is set to accelerate in the months ahead. Job growth in February was much better than expected, thanks to falling coronavirus caseloads and stimulus payments in early 2021 that boosted household spending. Further stimulus, accelerating vaccine distribution, better weather, very low interest rates, and falling coronavirus cases will lead to a surge in economic activity through the rest of 2021. PNC expects monthly job growth of better than 600,000 in mid-2021, and employment is expected to return to its pre-recession level in the second half of 2022.

Employment in goods-producing industries fell by 48,000 in February, with job losses of 61,000 in construction; these were likely tied to the weather and will prove temporary, given that homebuilding is very strong in early 2021. Manufacturing employment increased by 21,000 over the month. Private services-providing industries added 531,000 jobs in February. Employment in the hard-hit leisure/hospitality services industry rose by 355,000 over the month, although the number of jobs in the industry is still down by almost 4 million, or 23%, from before the pandemic. Almost all of the government job losses were in state and local governments.

Average hourly earnings rose 0.2% over the month, while the average workweek fell by 0.3 hours to 36.6. The big decline in the workweek came from job gains concentrated in leisure/hospitality services employment, which is more part-time. The drop in the average workweek offset the increases in jobs and average hourly earnings, and total earnings fell by 0.3% over the month.

The unemployment rate fell because of an increase in jobs. Employment in a survey of households (different from the survey of employers) rose by 208,000 in February. The labor force increased by a modest 50,000 over the month, and the labor force participation rate (share of adults either working or looking for work) held steady at 61.4%. The labor force participation rate was 63% before the pandemic.

Employment remains more 9 million below its pre-recession peak The unemployment rate fell slightly to 6.2% in February. Although it is down from almost 15% in April, it is far above the pre-recession rate of 3.5%.PNC expects much stronger job growth through the rest of 2021 as vaccine distribution accelerates and economic activity surges. The unemployment rate fell slightly to 6.2% in February. Although it is down from almost 15% in April, it is far above the pre-recession rate of 3.5%.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.