Economists warn positive jobs report obscures future challenges

A surprising job gain in February and a drop in the unemployment rate obscure the long road to a full recovery from the coronavirus recession, economists say.

The United States created 379,000 jobs last month, more than double what analysts expected, and saw the unemployment rate fall to 6.2%, the lowest level since March 2020.

While the February jobs report showed signs of an accelerating recovery, job gains were just a drop in the bucket compared to the deep damage accumulated in the labor market over the past decade. the last year. The deceptively low unemployment rate also ignores the millions of Americans who have been forced out of the workforce by COVID-19 and its disproportionate toll for women of color.

“The figures are not debatable, they are not doubtful, they are not confusing. It’s clear. Millions of Americans have left the workforce and it’s not good for our economy and certainly not good for the continued growth of the economy, ”said Michelle Holder, labor economist at John Jay College in New York .

Employment gains in February were a definite improvement from the meager increase of 49,000 in January and included signs of companies preparing for a post-pandemic economy. The hard-hit leisure and hospitality sector added 355,000 jobs, mostly in restaurants and bars long hampered by coronavirus restrictions.

Despite this, the remarkable gain in this sector covers just over a tenth of the 3.5 million jobs in this field claimed by COVID-19 that have yet to be replaced.

The United States is still down about 9.5 million jobs since the start of the pandemic, more than the total decline in employment during the Great Recession, a chasm that would take more than two years to fill. February rhythm.

Elise Gould, senior economist at the Economic Policy Institute, calculated that employers should add a 2.4 million jobs to cover those who would have been earned if COVID-19 had never derailed the economy.

“Returning to pre-recession levels would not come close to closing the total jobs deficit,” she wrote.

The unique toll of the pandemic has also made the unemployment rate – the number of people who cannot find work divided by the number of people who have jobs or are trying to find jobs – almost useless for assessing the health of the market. work.

More than 4 million Americans have stopped looking for work due to the pandemic, according to the February employment report, many leaving the workforce to care for school-aged children, care for children. sick family members or avoid contracting the virus. Since the unemployment rate does not include those who are not looking for work, many Americans who would otherwise like to work are not represented in this figure.

Federal Reserve Chairman Jerome Powell said in a speech last month – when the unemployment rate was 6.3% – that an unemployment rate including lost workers would be closer to 10%.

With the unemployment rate edging down in February, the participation rate stood at 61.4%, 1.9 percentage points lower than a year ago. The employment-to-population ratio – the proportion of working-age adults with a job – also remained unchanged at 57.3%, down 3.5 percentage points from February 2020.

“This is not to say that the overall unemployment rate is wrong, just that in the event of a pandemic, to get the full picture of the economy you have to look at the data in several ways,” wrote Cecilia rouseCecilia Rouse Economists warn positive jobs report obscures future challenges White House downplays surprising job gains in February, warns US away from recovery CBC ‘unequivocally endorses’ Shalanda Young for the post of Chief Budget Officer of the White House READ MORE, chairman of the White House Council of Economic Advisers, in a Friday analysis.

The unemployment rate is often deflated during prolonged downturns when eligible workers lose confidence in the labor market and stop looking for work. While the same dynamic suppressed the unemployment rate during the Great Recession, the pandemic threw it into overdrive with devastating consequences for women and people of color.

Rouse calculated that while black women made up just 14% of the female workforce in February 2020, they accounted for 26% of dropouts from the female workforce since then. Likewise, Hispanic women made up 17 percent of the female workforce a year ago, but are 27 percent of women who have left.

Overall, 2.3 million women and 1.8 million men have stopped looking for work, and economists say more help from the federal government will be needed to bring them back into the fold.

“Today’s jobs report, combined with revisions from previous months and the retail sales model, underscores how reliant the recovery is on federal aid,” wrote Diane Swonk, chief economist at Grant Thornton, highlighting the spike in consumer spending in January that followed the December relief package becomes law.

“Much of what was intended for low-wage households struggling with unemployment is set to expire again in mid-March,” she wrote. “We are still in a very deep hole.”

Biden and the Democrats in Congress are trying to pass a $ 1.9 trillion economic relief bill with an extension of expanded unemployment benefits before they expire on March 14. loss of income for families in difficulty.

“These gains are going too slowly,” Biden told the White House on Friday. “We cannot take one step forward and two steps back.”

Economists say the United States is still poised for a strong rebound once the country achieves collective immunity – potentially in the middle of summer – and can return to some semblance of normal life. And while economists recognize there is a light at the end of the tunnel, they say the tunnel may be much longer than it looks now.

“I expect to [the unemployment rate] to continue to decline, whether sharply or not, but I am concerned about the extent to which we are able to re-enter the US workforce that has disengaged, ”Holder said.