Insights and Perspective

 

Insights and Perspective

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By Phillip Sprehe

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for March 2021 on Friday, April 2nd. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 13 months since the Covid-19 economic lockdown and signal that job growth is approaching one million per month which has not been seen since the first few months of the pandemic recovery. Strong growth will continue as more Covid-19 vaccinations are administered throughout 2021.

Employment in the U.S. rose by 916,000 jobs, nearly double the 462,000 jobs expected in the Geographic Solutions, Inc. (GSI) forecast. The WSJ Economist Survey forecast at 675,000 jobs was closer but still short by more than 35%. The lower miss by the GSI forecast was partially due to an over-consideration of the delays and disruptions in supply chains that occurred over the last month.  Explosive job growth was expected in the service-providing sector but subdued increases in the goods-producing sector. January and February 2021 also experienced large upward revisions.  February job growth increased from 379,000 to 462,000.  January was originally reported at 49,000 new jobs but finalized at 233,000, underscoring the elevated volatility and unpredictability of employment. The GSI forecast was derived from internal data on job severances and the number of applications for unemployment benefits filed on GSI state client sites. The forecast used unemployment claims data from the U.S. Department of Labor (USDOL) as an external indicator in the forecast.

The unemployment rate fell to 6.0%, matching the WSJ’s estimate and a little under GSI’s estimate of 6.3%. The unemployment rate forecast used internal data on job openings, job severances, job searchers, and the number of applications for unemployment benefits filed on GSI state client sites. The forecast uses unemployment claims data from the USDOL.

Contrary to expectations, goods-producing industries had its largest increase in employment since June 2020. Employment in the service-providing industries continues to accelerate.

Job market gains came from a strong performance in the Leisure & Hospitality sector in March that totaled 280,000 new jobs, an encouraging sign for the most beleaguered sector since the onset of the pandemic. Construction jobs also provided a significant source of growth, increasing 110,000. After Government lost jobs in February, it added 136,000 in March, buoyed by state and local education.

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Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 18.5% below March 2020. No other major industry has employment more than 10% below its March 2020 total.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate declined to 6.0% from the previous month.

The labor force participation rate edged up to 61.5% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.4% to 10.7%. The declining U-3 rate along with a sustained or increasing labor force participation rate demonstrates that more unemployed persons, both discouraged and job-seeking, are becoming employed.

Overall, the March labor market report shows that we have entered a new phase in the recovery that returns to the job increases of summer 2020. Approximately 15% of the U.S. population is fully vaccinated from Covid-19.  As vaccinations proliferate and consumers feel more comfortable venturing out, job growth will improve across the board.  Leisure & Hospitality will especially grow when the summer tourism season arrives.



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