Total nonfarm employment in America rose by 379K payrolls in February, according to a report out this morning from the Bureau of Labor Statistics. That was much better than the consensus forecast and the December and January figures were revised higher by a net 38K payrolls. Altogether this means that roughly 58 percent of the 22 million jobs lost during March and April of last year have been recovered to date. Although clearly a substantial improvement this also shows that there is still a long way to go in the labor market rebound. Additional evidence of this is seen in the weekly initial jobless claims figures, which show that roughly 18 million Americans are still collecting some form of unemployment benefit, nearly 10 times the pre-pandemic level.
Elsewhere, data out this week from the online jobs board Indeed showed that total vacancies ended February 5.7 percent above the pre-COVID baseline. Although an encouraging sign that aggregate job creation has already rebounded significantly, the year-over-year growth rate remains severely depressed, i.e. annual growth in openings is roughly half what was seen in February 2020. One factor curtailing the job creation recovery could be the numerous companies that learned throughout the pandemic how to operate with fewer employees on the payroll thanks to investments in productivity and/or incorporating automation wherever possible. Businesses that have found success with such initiatives are unlikely to suddenly abandon them once the economy is finally able to fully reopen, and instead decisions to boost staff size will change more gradually based on customer demand. Fortunately the majority of the prevailing labor market headwinds remain directly linked to lingering activity restrictions and should therefore quickly dissipate as the vaccine rollout continues and the economy can further reopen. Some states have already started easing social distancing rules, which should nudge other governors to move up their timelines. However, even if all government-imposed restrictions are lifted this does not necessarily mean customers will rush back out to their favorite brick-and-mortar establishments.
Of course many will, due to pent up demand and other factors, but lingering concerns may cause others to be more hesitant. In fact, a new Bankrate survey found that roughly a quarter of U.S. consumers would still feel at least “somewhat uncomfortable” about “going out in public, visiting businesses including locations such as retailers, restaurants, grocery stores, and malls” even after being vaccinated themselves. On the other hand, due to trillions of dollars in fiscal stimulus and improved household balance sheets the surge in spending that does occur among those Americans that are willing to venture out could still be more than enough to offset any drag from reluctant consumers, at least for a short while after restrictions are fully lifted. For some this is becoming their base case, such as J.P. Morgan in a research note this week which argued that the stimulus-fueled consumer demand rush will drive job growth in the years ahead. Specifically, they see job growth averaging 675,000 payrolls per month going forward. That may sound like a lot but it would still mean all of the employment losses from March and April 2020 would not be fully recouped until April 2022 at the earliest, yet another reason to believe Federal Reserve chair Jerome Powell when he says the FOMC is “not even thinking about thinking about raising rates.”
Sources: Econoday, U.S. DoL, Bloomberg, Indeed, Bankrate, FRBSL