April 2, 2021
Payroll employment rose 916 thousand in March after having risen 468 thousand in February ( previously 379 thousand) and 233 thousand in February (previously 166 thousand). The February increase was undoubtedly held in check by the extreme bad weather in that month, and the March gain was bolstered by a rebound from the bad weather in the prior month. Thus, the average of the two months of 692 thousand is probably a reasonable approximation for average monthly growth in the two months.
In addition to hiring people, businesses can also lengthen the hours of existing employees. The nonfarm workweek rebounded by 0.3 hour to 34.9 in March after a decline of 0.4 hour in February. The March level of 34.9 is only fractionally below the record long 35.0 hour workweek reported for January..
The changes in employment and hours worked are reflected in the aggregate hours index which rose 1.5% in March to 107.3 after having declined 0.8% in February as a result of the bad weather. This means that this index rose 3.0% in the first quarter which seems consistent with our projected GDP increase of 6.0% in that quarter.
The economy seems to be gathering the momentum which is widely expected as the virus is showing clear signs of slowing its pace of spread. Three vaccines are now being distributed and some epidemiologists expect herd immunity to occur by the end of April. In addition, the impact on the economy from the $900 billion fiscal stimulus package will continue to work its way through the economy in the first quarter, and the $1.9 trillion fiscal stimulus package will boost growth in the second quarter.
The jump in employment in March was primarily in the leisure and hospitality industries where employment increased 280 thousand, most of which was in the food services and drinking places. Jobs in the retail sector climbed by 23 thousand . Manufacturing employment increased 53 thousand. Local government education jobs rose by 76 thousand, state government education jobs rose by 50 thousand, and private education jobs rose by 64 thousand as teachers returned to the classroom. The total number of teaching jobs is still down 1.2 million jobs from its peak in February 2020 prior to the pandemic.
Given these employment gains we continue to expect GDP growth in the first quarter to be 6.0% followed by 9.0% growth in Q2. For the year as a whole we expect GDP to climb by 7.1%.
Given the sharp drop in employment beginning in March 2020 and continuing into April, the National Bureau of Economic Research has concluded that the expansion ended in February 2020 and the recession began in March 2020. Given that employment rose sharply in both May and June, the NBER will likely mark the end date of the recession in April If that happens the recession will have lasted just two months, far shorter than the average length of 8 months.
Stephen Slifer
NumberNomics
Charleston, S.C.
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