Nonfarm employment increased by 379,000 in February, after an upwardly revised increase of 166,000 in January. The published unemployment rate dropped from 6.3 to 6.2 percent, and the true rate, after adjusting for the misclassification error, decreased from 6.9 percent to 6.7 percent in February. The labor force participation rate remained unchanged at 61.4 percent.
Most job gains were in the services sector, primarily driven by an increase of 355,000 jobs in leisure and hospitality of which 286,000 came from the food services industry as restrictions were eased somewhat in some parts of the country. The number of jobs in the goods producing sector decreased because of job losses in construction related to inclement weather in February.
Looking ahead, The Conference Board expects gradual improvement in the labor market over the coming months. The number of infections has significantly decreased since early January, more people are being vaccinated, and states have lowered or are expected to lower restrictions on consumer and business activity. Fewer restrictions may boost employment growth, especially in in-person services. By late spring, job growth is expected to accelerate, partly driven by anticipated further government stimulus that will boost consumption spending and could help create or preserve jobs through the PPP program and aid to state and local government. Between now and the end of the year, around 4.5 million jobs could be added to the economy.
The prospect of stronger employment growth and the unemployment rate, which could drop below 5 percent in the second half of 2021, provide an upbeat outlook for the labor market in 2021. However, on the downside, the number of jobs is 9.5 million below a year ago, with the small majority being women, and it is still a long way to make up for that loss. Especially those working in in-person services–primarily people without a college degree as well as Hispanic and Black workers–have had more difficulty returning to work. In addition, the labor force participation rate of 61.4 percent in February remains below its rate of 63.3 percent from a year ago and has not shown any sign of improvement just yet. A return to normalcy and strong economic growth could pull people back into the labor market over the coming months, but it is not yet clear if this will lead to a full recovery in participation.
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