The U.S. jobs market erupted in March with 916,000 more jobs on the rosters. S&P Global Economics had been expecting to see a seismic shift in the U.S. economy as additional stimulus and faster vaccine rollout led to a quicker reopening and more optimism that the pandemic will soon be in our rearview mirror. There are still 8.4 million jobs lost since February 2020, before the pandemic took hold (see chart 1). We need an average of monthly 700,000 job gains over the next 12 months to regain those lost jobs. Fortunately, this jobs report is one big step in the right direction. The gains in payrolls were widespread. The biggest increase was 280,000 job gains in leisure and hospitality (two-thirds were in restaurants and bars) as restrictions eased across the country. On the half-empty side, employment in this sector is still down by 3.1 million (18.5%) since February 2020. Jobs in both public and private education were up by 126,000 and 64,000, respectively, though still down by 864,000 and 310,000 since pre-pandemic February 2020 levels.
Goods-producing sectors continue to add to the payrolls, with construction adding 110,000 jobs to the rosters while manufacturing employment rose by 53,000. Transportation and warehousing added 48,000 jobs in March. Not surprisingly given the boom in online shopping and eating, 17,000 couriers and messenger jobs were created--up by 206,000 (23.3%) over February 2020. March also saw an increase of 6,000 and 13,000 for air and transit and ground passenger transportation, respectively, as people came out of hibernation and ventured onto some form of public transport. While good news, employment is still down by 112,000 (22.8%) in transit and ground passenger transportation and by 104,000 (20.1%) in air transportation. So there is still a long ways to go.
The 0.2 percentage point drop in the unemployment rate to 6.0%--good news on its own--includes even more promising news that an astonishing 347,000 people entered the workforce in March and almost twice as many workers (609,000) got jobs. That's a good combination for both people's pocketbooks and productivity-driven growth. Average hourly earnings fell by 0.1% in March following an upwardly revised 0.3% (was 0.2%) jump in February. Moreover, the workweek (a leading indicator for future hires) jumped to 34.9 hours from 34.6 hours. The surge in the workweek means that hours have been earned by fewer employees working longer hours. This suggests the U.S. economy will see even more job gains over the next few months.
However, that headline drop in the unemployment rate doesn't capture COVID-19-related job market distortions, hiding the pain felt by many U.S. workers who may have dropped out since the pandemic reached U.S. shores. The 6.0% headline unemployment rate when adjusted for the Bureau of Labor Statistics (BLS) misclassification and holding the labor force participation rate at the pre-pandemic level suggests that the "adjusted" unemployment rate could be as high as 8.7%. Of the 9.7 million people unemployed in March, 43.4% are long-term unemployed (27 weeks and over). People who have been permanently displaced from their previous job (not on temporary layoff) held at 35% in March, for the third straight month. As more and more workers are permanently displaced from their previous job and more and more workers join the ranks of the long-term unemployed, signs of scarring are becoming apparent.
Furthermore, there is a large gap in job market conditions by race and ethnicity. The unemployment rate for Black and Hispanic workers dropped by a hefty 0.3 points and 0.6 points to 9.6% and 7.9%, respectively. Those unemployment rates are a far cry from the 6.0% and 5.4%, respectively, for white and Asian workers, suggesting the jobs market is still far from being fully healed. This will keep the Fed on easy street for some time. We don't expect the Fed to raise rate until third-quarter 2023.
If You're Happy And You Know It, Spend!
Consumer confidence maintains its momentum. The consumer confidence index hit its highest level in a year of 109.7 in March from 90.4 in February. Consumer sentiment also grew to 84.9 in March from 76.8 in February. Accompanying a recovery in consumer confidence, chain store sales increased to a 9.8% year-over-year growth rate for the week ended March 27 from 8.0% at the start of March. Meanwhile, February vehicle sales went down slightly to 16.1 million, from 17.1 million in January. We expect that households' confidence and spending will continue to improve as stimulus checks reach mailboxes and the vaccine rollout remains on track.
Manufacturing Celebrations Continue
Increased demand for goods keeps stimulating the manufacturing sector, pushing the Institute of Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) to its highest level since December 1983. March's manufacturing PMI rose to 64.7% from 60.8% in February, surpassing its precrisis level of 49.1% (March 2020) for a consecutive 10 months.
Gains were broad-based. The employment component increased by 5.2 points to 59.6, suggesting continued job gains are in store for the sector. New orders climbed by 3.2 to 68.0, while imports edged up 0.6 points to 56.7. Inventories rose 1.1 points to 50.8 as businesses stocked their shelves for a reopening buying splurge--hopefully at lower prices, as the prices paid index edged down by 0.4 points to 85.6.
February construction spending declined by a weather-led 0.8% to $1.51 trillion in February. This comes after upward revisions to major components, with the exception of public construction. Private residential construction edged down by 0.2% in March, and private nonresidential construction fell by 1.0% for the month. Public construction was down the most, by 1.7% in March, and has been down five of the last six months.
|Review Of U.S. Economic Indicators|
|Release date||Measurements||Jan-21||Feb-21||Mar-21||Level year ago||Year over year|
|Four-week moving average of initial claims||4/1/2021||in 000s||865.8||804.5||214.0|
|All employees, total nonfarm||4/2/2021||change in 000s||233.0||468.0||916.0||(1,683.0)|
|All employees, total private||4/2/2021||change in 000s||122.0||558.0||780.0||(1,622.0)|
|Average hourly earnings of all employees, total private||4/2/2021||m/m, %||0.0||0.3||(0.1)||4.2|
|Average weekly hours of all employees, total private||4/2/2021||Hours of work||35.0||34.6||34.9||34.1|
|Total nonfarm private payroll employment||3/31/2021||change in 000s||196.3||176.4||516.8||(203.7)|
|Labor force participation rate||4/2/2021||%||61.4||61.4||61.5||62.6|
|Job openings: total nonfarm||3/11/2021||Mil.||6.9||7.2|
|Consumer spending and confidence|
|Personal income||3/26/2021||m/m, %||10.1||(7.1)||4.3|
|Real disposable personal income||3/26/2021||m/m, %||11.1||(8.2)||3.4|
|Personal consumption expenditures||3/26/2021||m/m, %||3.4||(1.0)||(0.6)|
|Personal saving rate||3/26/2021||%||19.8||13.6||8.3|
|Total vehicle sales||3/26/2021||Mill.||17.1||16.1||17.2|
|University of Michigan: consumer sentiment||3/26/2021||Index||79.0||76.8||101.0|
|Industrial production: total index||3/16/2021||m/m, %||1.1||(2.2)||(4.2)|
|Industrial production: manufacturing (NAICS)||3/16/2021||m/m, %||1.3||(3.1)||(3.8)|
|Advance retail sales: retail and food services, total||3/16/2021||m/m, %||7.6||(3.0)||6.3|
|Advance retail sales: retail (excluding food services)||3/16/2021||m/m, %||7.4||(3.1)||9.5|
|Total business inventories||3/16/2021||m/m, %||0.5||(2.0)|
|Capacity utilization: total index||3/16/2021||Index||75.5||73.8||76.9|
|Current general business conditions; diffusion index for New York||3/15/2021||Index||3.5||12.1||17.4||(21.5)|
|Chicago Fed National Activity Index||3/22/2021||Index||0.8||(1.1)||0.0|
|Current general activity; diffusion index for Federal Reserve District 3: Philadelphia||3/18/2021||Index||26.5||23.1||51.8||(6.0)|
|Housing starts: total: new privately owned housing units started||3/17/2021||Mil.||1.6||1.4||1.6|
|New private housing units authorized by building permits||3/23/2021||Mil.||1.9||1.7||1.4|
|New privately owned housing units completed: total||3/17/2021||Mil.||1.3||1.4||1.3|
|Monthly supply of houses in the U.S.||3/23/2021||Months||4.0||5.0||6.0|
|Total construction spending||4/1/2021||m/m, %||1.2||(0.8)||5.3|
|Trade balance: Goods and services, balance of payments basis||3/5/2021||Bil.||(68.2)||(44.4)|
|Exports of goods and services, balance of payments basis||3/5/2021||Bil.||191.9||207.7|
|Imports of goods and services: balance of payments basis||3/5/2021||Bil.||260.2||252.0|
|Import Price Index (end use): all commodities||3/16/2021||m/m, %||1.4||1.3||3.0|
|Export Price Index (end use): all commodities||3/16/2021||m/m, %||2.5||1.6||5.2|
|Producer Price Index by commodity: final demand||3/12/2021||m/m, %||1.3||0.5||2.8|
|Producer Price Index by commodity: final demand: finished goods less foods and energy||3/12/2021||m/m, %||0.3||0.2||1.6|
|Consumer Price Index for all urban consumers: all items in U.S. city average||3/10/2021||m/m, %||0.3||0.4||1.7|
|Consumer Price Index for all urban consumers: all items less food and energy in U.S. city average||3/10/2021||m/m, %||0.0||0.1||1.3|
|Personal consumption expenditures: chain-type price index||3/26/2021||m/m, %||0.3||0.2||1.6|
|Personal consumption expenditures excluding food and energy (chain-type price index)||3/26/2021||m/m, %||0.2||0.1||1.4|
|Note: Data retrieved from Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/. m/m--Month over month. Last three months selected. Yearly data is either year on year change (%) or level value year ago. Total nonfarm private payroll employment is from ADP 1. Data retrieved April 2, 2021.|
|Economic Release Calendar|
|4/5/2021||Factory orders (%)||Feb||(0.7)||(0.5)||2.7|
|ISM nonmanufacturing index||Mar||59||58.5||55.3|
|4/7/2021||Trade balance (bil. $)||Feb||(70)||(70.5)||(68.2)|
|Goods and services exports (bil. $)||Feb||191||187.6||191.9|
|Goods and services imports (bil. $)||Feb||261||257.2||260.2|
|Consumer credit (bil. $)||Feb||5||5||(1.3)|
|4/8/2021||Initial claims (000s)||Week of 4/3/21||680||690||719|
|PPI (excluding food and energy) (%)||Mar||0.2||0.2||0.2|
|Wholesale sales (%)||Feb||(2)||(2.2)||4.9|
|4/12/2021||Treasury budget (bil. $)||Mar||(780)||(775)||(310.9)|
|CPI (excluding food and energy) (%)||Mar||0.2||0.1||0.1|
|4/14/2021||Export Price Index (%)||Mar||0.9||0.9||1.6|
|Import Price Index (%)||Mar||1.2||0.9||1.3|
|4/15/2021||Retail sales (%)||Mar||4||3.3||(3)|
|Retail sales (excluding auto) (%)||Mar||3||2.9||(2.7)|
|Philadelphia Fed Index||Apr||42||44||51.8|
|Empire State Index||Apr||16||16||17.4|
|Industrial production (%)||Mar||2.5||2.5||-2.2|
|Capacity utilization (%)||Mar||75.5||75.4||73.8|
|Business inventories (%)||Feb||0.5||0.4||0.4|
|4/16/2021||Housing starts (mil.)||Mar||1.58||1.585||1.421|
The views expressed here are the independent opinions of S&P Global Ratings' economics group, which is separate from but provides forecasts and other input to S&P Global Ratings' analysts. S&P Global Ratings' analysts use these views in determining and assigning credit ratings in ratings committees, which exercise analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.
This report does not constitute a rating action.
|U.S. Chief Economist:||Beth Ann Bovino, New York (1) 212-438-1652;|
|U.S. Senior Economist:||Satyam Panday, New York + 1 (212) 438 6009;|
|Contributor:||Shuyang Wu, Beijing|
|Research Contributor:||Arun Sudi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai|
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