Last month’s spike nearly doubled February’s gains, but employment remains below pre-COVID-19 highs.

By Manuel Gutierrez, Consulting Economist to NKBA

U.S. employers continued to add jobs in March, marking the third consecutive month of gains and adding to the strong performance so far this year.

In the 1st quarter, 1.62 million jobs were created, bringing the total number closer to the pre-pandemic figure of 152.5 million. The private sector added 780,000 jobs in March, or 85% of the 916,000 total.

Despite the gains, total employment remains 8.4 million below pre-pandemic highs.

Recent aggressive government economic policies, including increased spending, stimulus checks for most Americans and maintaining low interest rates, are boosting economic activity short-term, and also improving the employment situation.

More than 900,000 jobs were added in March, almost doubling  February’s pace.

The strong March jobs numbers suggest that, barring another pandemic setback, the economy is on its way to recovery. March’s job performance nearly doubled February’s pace.

Regardless of employment gains during the last few months, total employment is still 8.4 million jobs short of the historically high number recorded in February 2020.

At the same time that government policies seem to be boosting the economy, the cash handouts and extended unemployment benefits are, for some, acting as a disincentive toward working. A large portion of workers are finding that their benefits, with the additional extensions, are greater than their lost earnings. Ironically, some who had been low-income earners may be reluctant to rejoin the labor force because it can lead to a drop in income.

Additionally, a monthly survey by the Census Bureau revealed that over 4 million people have remained out of the labor force for fear of contracting COVID-19. One visible result is that labor participation has fallen nearly two percentage points since January 2020, to the current rate of 61.5%. Labor participation is the proportion of “working-age” population who are either working or looking for a job. This means that fewer people are willing to work, theoretically making it harder for employers to fill positions.

Despite the drop in the participation rate, other metrics of employment improved last month. The unemployment rate, for instance, is down 0.2% from the prior month to 6%.

Although the rate has fallen steeply from the 14.8% at the pandemic’s peak in April 2020, it is currently still 2.5 points higher than the pre-pandemic low of 3.5%.

Encouragingly, the unemployment rate has fallen among all age groups. The left panel in Figure 2 displays the rate for each segment by age, with the figures in white at the bottom indicating how much higher each is compared to its level in January 2020.

The right panel displays the latest unemployment rate for selected professional groups. Second highest on the list is Construction, despite the booming residential construction sector. Nonresidential has been declining for most of last year, putting many people in that sector out of work, bringing the overall industry rate higher.

Virtually all industries and economic sectors contributed to March’s strong job numbers. Figure 3 displays the number of jobs added by industry, with Hospitality again easily leading all others, adding 216,000 jobs for the month. It represents nearly a quarter of all monthly jobs added. However, employment in the industry is still nearly 17% below what it was back in February 2020, before the initial shutdowns went into effect.

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