The U.S. economy added 379,000 jobs in February, roundly beating economists’ estimates of 210,000, and indicating that one year into the pandemic, the labor market is finally showing signs of recovery.
In the first full monthly employment report under President Joe Biden, the unemployment rate fell to 6.2 percent,from 6.3 percent in January, according to data released Friday by the Bureau of Labor Statistics.
"The ship is pointed in the right direction, and the additional stimulus coming from Congress should be the wind in the sails to get the economy back on track," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.
The latest jobs report comes after a month of stumbles in Covid-19 vaccine deployment and frigid weather that plunged Texas and large parts of the South into a deep freeze that froze oil rigs, ruptured household plumbing and cost lives.
The January's jobs report, which showed just 49,000 jobs were added, was revised upwards on Friday to 166,000.
Although the economy has clearly been adding jobs, those gains mask the extent to which the labor market is still being held back, and the number of people who have been sidelined for a diverse array of reasons, from child care obligations to health concerns to a lack of job opportunities in fields still devastated by the pandemic.
Although monthly job gains have surged and ebbed wildly over the past year, an overarching pattern of slowing employment gains worries labor market observers.
“The unemployment rate itself is a bad descriptor of the current labor market conditions,” said Andrew Stettner, senior fellow at the Century Foundation.
Dan North, chief economist, North America at Euler Hermes, said that although nearly 60 percent of the jobs lost since the onset of the pandemic have been recovered, the labor force participation rate shows another story. “When you go and look at the participation rate, we’ve recovered about 41 percent of what was lost — so it is slower,” he said.
“When you look at the participation rate, we’ve recovered about 41 percent of what was lost."
The discrepancy arises because of how the government tallies who has a job, and who is actively looking for a job. People aren’t captured by the official unemployment rate if they have dropped out of the labor force. “There’s a lower participation rate because people have left. That’s the disconnect,” North said.
Federal Reserve Chair Jerome Powell said last month that the nation’s real unemployment rate is closer to 10 percent, and the flagging labor force participation rate — which was 63.4 percent in February 2020, when unemployment was at just 3.5 percent — reflects that. “My guess is we won’t see that again until late 2022,” said Bob Phillips, co-founder of Spectrum Management Group.
Mark Hamrick, senior economic analyst at Bankrate, said those hard-won gains in labor force participation prior to the pandemic were a function of a long-running stretch of job growth. “The low unemployment rate was essentially leading to more improvement in the fortunes of individuals in sectors and communities that previously had not taken part” in the early years of the economic recovery, Hamrick said.
Now, many of these individuals face an existential threat to their employment prospects. Covid-19 dealt an especially hard blow to service industries that depend on person-to-person contact, such as travel, dining, entertainment and in-person retail. The people who hold these jobs — many of which are low-skill and low-paying — are already at a higher risk of falling behind economically, and they now risk falling behind in employment recovery, as well.
While college-educated people lost proportionately fewer jobs and have regained more of them, people who graduated high school but never obtained a college degree have not been so lucky. “Lower-paid workers, lower-educated workers … they’ve been left behind. They've got skills that haven’t been developed, and we’re all less wealthy because of that,” Phillips said.
Women, and particularly young women, have lost ground — an observation noted by the Fed’s Powell as well as other officials as a stumbling block that could impede a broader economic rebound. “Women are staying at home because of the school situation, so that is a really significant change that Covid has brought about and will probably stick with us for a while, I think — schools are only slowly opening up,” North said.
They will never make up for this time out of the labor force, because they will never make up for the skill sets they would have acquired by working.
“One of the key determinants of whether someone’s in the labor force right now is whether children are in school. As that would seem to be resolved, that could lead to more individuals in the labor force,” Hamrick said. “And one would hope a good number of those people would be able to be reemployed.”
The clock is ticking, though, for those workers still waiting for the opportunity to renter the workforce. Another metric that alarms labor economists is the percentage of people classified as long-term unemployed — that is, people out of work for 27 weeks or longer. These workers, who number about 4 million, now make up roughly 2 in 5 of America’s jobless.
The longer unemployment lasts, the more that duration becomes a hurdle in its own right, as employers may perceive that people’s skills have atrophied. In a job market with elevated unemployment, hiring managers may then elect to choose an applicant with a shorter stint out of the workforce, reinforcing the challenges facing the long-term unemployed.
“When people are out of the labor market, they just don't keep up in terms of changes in work patterns and skill sets, and that becomes a bigger barrier to get back in,” Phillips said.
“The longer it takes somebody to get active in the labor market … history shows they’ll never make up for this time, because they’ll never make up for the lost skill sets they haven't acquired by working.”