However, due to a greater number of job gains versus losses in the second month of the year, economists responded positively despite an estimated 10 million people still reported as unemployed.
“Non-farm payrolls beat expectations, rising by 379,000 in February. We’re not out of the woods yet – the U.S. remains 9.5 million jobs short of its pre-pandemic employment level, but this is positive news,” said Odeta Kushi, First American‘s Deputy Chief Economist.
Last month’s employment gains were led by an increase in private sector jobs while overall employment is still down 6.2% compared to February 2020. Offsetting these gains were losses in government education jobs – though this number can be hard to track given the seasonality of education employment.
Employment improvement was also concentrated in the leisure and hospitality sector, in particular, the bar and restaurant sub-sector, a strong signal of the service industry reopening. As this sector is heavily dependent on people gathering in close proximity, Fannie Mae’s chief economist, Doug Duncan, said the GSE strongly believes efficient distribution of effective COVID-19 vaccines will be crucial to support the ongoing recovery.
“On the downside, the construction sector lost 61,000 jobs in February, likely impacted by recent severe winter weather, which would hamper hiring,” Duncan said.
While the housing industry battles ongoing supply constraints, declines in non-residential specialty trade contractors and heavy and civil engineering construction also fell.
Though with January’s growth revised up by 117,000, the jobs picture is brighter than expected, said Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association.
“All in, this report is strongly positive for the broader economy’s growth prospects over the next several months,” Fratantoni said. “We have been expecting a burst of activity from pent-up demand as the vaccine rollout continues. This may be the first sign of that increase. Higher employment will support a very strong spring housing market, while somewhat higher mortgage rates will continue to slow refinance activity.”
Throughout the pandemic-induced recession, now a year old, the Federal Reserve has stated that the housing market has been among the only persistent bright spots. However, much of that strength has piggybacked on the industry’s historically low interest rates, and left some economists worried that the rapid rise in Treasury yields in the last several weeks risk choking off that activity.
On Thursday, Fed Chairman Jerome Powell said the outlook for the economy has improved after three months of weak job growth. But he cautioned that the economy and the job market are still far from fully recovered and that full employment would not be achieved this year.
Powell did not comment whether the Fed will respond to rising interest rates on Treasury securities by altering its bond-buying policies.
“We think our current policy stance is appropriate,” Powell said.
On Friday, Senate Democrats struck a deal on President Biden’s $1.9 trillion coronavirus aid package to extend the current $300 weekly federal unemployment benefits through the end of September, adding an extra month of coverage for those who have lost jobs during the pandemic.
Overall, the economy has only regained approximately 58% of the jobs lost at the start of the pandemic, but according to Kushi, “the recovery has momentum now.”
However, as of February 2021, 4.1 million people were considered long-term unemployed (jobless for 27 weeks or more) and this long-term unemployed statistic accounted for 41.5% of the total unemployed last month.
“The potential implication of long-term joblessness? A prolonged recovery,” said Kushi.