Hiring Surges in March

Roy Maurer By Roy Maurer April 2, 2021
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Hiring activity in the U.S. exploded in March, as employers added 916,000 new jobs, mostly in leisure and hospitality, according to the latest employment report from the Bureau of Labor Statistics. Economists expected the spike, as the economy has begun to reopen more broadly and the rate of vaccinations has increased. The unemployment rate ticked down to 6 percent from 6.2 percent in February and is expected to continue falling in the coming months as more service-sector jobs return.

The report shows the biggest hiring spree since last summer, with broad gains across industries, but there are still 8.4 million fewer people working today than there were in February 2020. Nevertheless, economic projections indicate that it's far less likely that the job creation trend will reverse now that accelerating vaccinations have limited the prospect of repeated business shutdowns.

"This is the most encouraging jobs report since last summer," said Kevin Harrington, CEO of job search site Joblist. "There is still a long way to go to a full recovery, but we are beginning to see a light at the end of the tunnel. Increased vaccination rates and an improving economic environment should give employers, and especially small and midsize businesses, more confidence to ramp up hiring in the months ahead. This sets up well for an even stronger recovery this spring and summer."

Julia Pollak, a labor economist at ZipRecruiter, added that the economy could return to pre-pandemic employment levels if the labor market sustained this pace of job growth for about nine months.

"There was a huge pickup in the pace of job gains, with bounce-back in some of the most strongly affected sectors," said Nick Bunker, an economist at the Indeed Hiring Lab. "Leisure and hospitality is leading the way, contributing almost a third of the total job gains. It is also great to see the public sector adding jobs, since during the last recovery, the sector slowed overall growth."

Leisure and hospitality showed the strongest gains for the month, with 280,000 new jobs. Bars and restaurants added 176,000, while arts, entertainment and recreation contributed 64,000 to the total. Even with the gains, however, the sector remains 3.1 million below its pre-pandemic total in February 2020.

"Service-providing industries rebounded in March as the reopening reached restaurants and schools alike," said Daniel Zhao, Glassdoor senior economist. "Goods-producing industries like construction (+110,000 jobs) also saw strong growth, rebounding from the effects of winter weather in February."

Construction employment is still 182,000 below its February 2020 level.

"The economy saw both rapid recovery in out-and-about industries as well as continued strength in the stay-at-home industries that have been boosted by the pandemic," Pollak said.

Employment in professional and business services rose by 66,000 over the month, with administrative and support services jobs trending up (+37,000). Manufacturing employment rose by 53,000 in March, and transportation and warehousing added 48,000 jobs last month.

Education employment showed encouraging signs of recovery, Pollak said. Employment increased in both public and private education, reflecting the resumption of in-person learning in many parts of the country. Employment rose by 76,000 in local government education, by 50,000 in state government education and by 64,000 in private education.

"Educational services are still down by hundreds of thousands of jobs, however, but could soon get back on track if we maintain this rate of recovery," Pollak said. "That could unleash a surge in labor force participation, particularly among women, many of whom have been forced out of the labor force due to pandemic-related child care challenges."

Job growth in March was also strong among small businesses, according to the latest monthly employment report from the National Federation of Independent Businesses (NFIB). Employer demand is strong across the board, but particularly for skilled workers, said NFIB Chief Economist William Dunkelberg. "Owners are frustrated with mounting unfilled job openings, as qualified candidates are scarce," he said.

Unemployment Falls

The jobless rate is down considerably from its recent high in April 2020 but is 2.5 percentage points higher than its pre-pandemic level in February 2020. The number of unemployed people, at 9.7 million, continued to trend down in March but is 4 million higher than in February 2020.

"We also saw job gains translate into reduced unemployment for some of the workers most affected by the crisis," Bunker said. The unemployment rate for Black workers "dropped by 0.3 percentage point, and the rate for Hispanic workers fell by 0.6 point. Unemployment also dropped most for less-educated workers, with unemployment falling most for those with a high school diploma or less."

Among the unemployed, the number of persons on temporary layoff declined by 203,000 in March to 2 million, down considerably from 18 million in April 2020. "That indicates job gains are largely coming from pulling furloughed workers back into employment," Zhao said. "An open question remains on how quickly workers who have been laid off or who have fallen out of the labor force can be pulled off the sidelines."

Labor Force Dropouts

One key factor to watch for is whether the millions of workers out of the labor force come off the sidelines. Labor force participation improved only marginally, rising to 61.5 percent, 1.8 percentage points lower than in February 2020. Roughly 347,000 workers came back last month, but there are still 3.8 million fewer people in the labor force compared to the beginning of last year.

"Despite the surge in job gains, relatively few of the people who have left the labor force since the pandemic have returned," Pollak said. "Despite rising vaccination rates, school reopenings and a surge in job postings, labor force participation remained tepid. One reason is that job seekers have become discouraged over the past year, and don't seem to have realized yet that their labor market prospects have improved. Even though online job postings surged in February and March, the number of discouraged workers who believed there were no jobs available to them was essentially unchanged. The number of marginally attached workers who say they want a job but didn't search for one in the past four weeks was also essentially unchanged."

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