Employment rose in February as US economic activity grew amid a gradual decline in Covid-19 cases, and vaccines offered hope for future growth.
The Department of Labor reported on Friday that non-farm payrolls rose 379,000 for the month and the unemployment rate fell to 6.2%. This is compared to the expectations of 210,000 new jobs and the unemployment rate will remain constant compared to the rate of 6.3% in January.
An alternative measure of unemployment, which includes discouraged workers and those holding part-time jobs for economic reasons, was unchanged at 11.1%.
“Today’s job report sets an extremely positive tone as we move into the warmer months and the pace of COVID-19 vaccinations is accelerating,” said Tony Bedikian, head of global markets at Citizens Bank. “While the labor market still has a lot of ground to work on, we are in a different place than a year ago and the economy seems ready for a strong recovery.”
Almost all job gains came from the leisure and hospitality sector, which grew by 355,000 amid easing dining restrictions in some areas. Bars and restaurants gained 286,000 jobs, while hotel-related jobs totaled 36,000, and entertainment, gambling and recreation companies added 33,000.
Despite the gain, the industry is still 3.5 million lower than its employment level a year ago, just before the worst pandemic. The increase in employment led to a reduction in the unemployment rate in the sector to 13.5% compared to 15.9% a month ago; the accommodation and food subsector recorded an unemployment rate falling to 12.7% from 15.3%.
“We see great opportunities in the service sectors,” said Amy Glaser, senior vice president at national personnel firm Adecco. “We anticipate that the weather will continue to heat up [hospitality] the sector will start to explode in the next eight to 12 weeks. “
Stock futures rose sharply following the report, with the Dow industry indicating a gain of 235 points at the opening. Government bond yields were also higher.
Friday’s report showed that employment was also stronger in January than originally indicated, with that month’s accounting number revised up to 166,000 from 49,000. However, the December issue was revised lower from a loss of 227,000 to a decrease of 306,000.
Health jobs rose by 46,000 in February, while retail added 41,000. Production also increased by 21,000.
Several sectors recorded losses.
Jobs in local and state government education fell by 69,000, while construction fell by 61,000 and mining lost by 8,000.
In total, there were 8.5 million fewer Americans in employment in February than a year ago, a total that fell only slightly from January. The size of the labor force increased by 50,000, but the labor force participation rate remained at 61.4%, down 1.9 percentage points from a year ago.
The average working week also decreased during the month, decreasing by 0.3 hours to 34.6 hours.
Employment growth slowed at the end of 2020, amid an increase in cases and the renewal of government-imposed shutdowns during the winter. However, most economic indicators continued to rise, and GDP growth in the first quarter is expected to defy previous expectations for a flat or only slightly better environment.
Federal Reserve officials have been closely monitoring the number of jobs not only for the general increase in wages and the decrease in the unemployment rate, but also for the extent of the job recovery. The central bank has pledged not to raise interest rates until it sees earnings spread across income, gender and racial lines, even if that means the risk of higher inflation.
There was bad news on this front in February: the unemployment rate for blacks rose to 9.9% from 9.2% a month ago. The rate for Hispanics fell to 8.5% from 8.6%, while the rate for Asians fell to 5.1% from 6.6%.
Fed Chairman Jerome Powell reiterated that position on Thursday, saying he does not expect the U.S. economy to meet central bank targets anytime this year.
Despite the February gain, the job market still has a long way to go, with millions of workers displaced by the pandemic still looking for a job. Recent indicators show that job offers continue to rise, but still at a rate well below that required for a full recovery.