Unemployment Rate Down to 6.0%; Strong Labor Market Recovery

• Employment rose by 916,000 in March, above consensus expectations for an increase of 630,000.
• The unemployment rate fell to 6.0% in March, from 6.2% in February.
• Job growth will be very strong through the rest of 2021 and into 2022 thanks to stimulus and vaccines.

Employment increased by 916,000 in March, according to a survey of employers. This was the strongest job growth since August 2020. It was also well above the consensus estimate of 630,000. There were net upward revisions to job growth in January and February of 156,000. The pace of hiring has accelerated dramatically over the past few months. Job growth in the three months through March has averaged 539,000, up from 64,000 in the three months through January 2021.

The U.S. labor market will rapidly improve over the course of 2021 and into 2022. With vaccination efforts ramping up, and households receiving hundreds of billions of dollars in stimulus payments this year, consumer spending growth will be very strong. Job growth will be especially strong in services industries, including leisure/hospitality services. The housing market is booming thanks to extremely low mortgage rates and strong demand for single-family homes, and business investment is picking up as the overall economy soars. Job growth will average around 600,000 per month through the rest of this year and could be even stronger. The unemployment rate is set to end 2021 at around 5% and 2022 at around 4%.

Employment fell by a combined 22 million in March and April of 2020 as consumer stayed home, states imposed restrictions on economic activity, and businesses closed. Job growth resumed in May and was very strong for a few months as businesses reopened. Job growth averaged more than 2 million per month between May and October 2020. Job growth then slowed dramatically in late 2020 and early 2021 as coronavirus cases started to climb and states re-imposed restrictions but has picked up over the past few months. As of March, employment is down by 8.4 million, or 5.5%, from its precession peak.

The unemployment rate fell to 6.0% in March, from 6.2% in February. The unemployment rate, which was 3.5% in early 2020, before the pandemic came to the United States, jumped to 14.8% in April 2020 and has fallen steadily since then. However, unemployment is still much higher than it was before the pandemic.

The private sector added 780,000 jobs in March, while public sector employment increased by 136,000. Goods-producing industries added 186,000 jobs over the month, with big increases for construction (+110,000) and manufacturing (+53,000). Private services-providing industries added a huge 597,000 jobs in March, included an increase of 280,000 in leisure/hospitality services, which was very hard-hit by the pandemic. That industry has added more than 660,000 jobs over the past two months as consumers feel more comfortable venturing out.

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