Week in Review: March 5, 2021

February’s employment report provided hope that the labor market might be on the upswing again following several months of tepid gains. Nonfarm payrolls added 379k, just over double the consensus estimate. Leisure and hospitality was the big winner, gaining 355k jobs, following over half a million job losses in December and January. However, the sector is still down 3.5M jobs (20%) from pre-pandemic levels. The headline unemployment rate ticked down 0.1% to 6.2%, while the labor force participation rate remained unchanged at 61.4%, well below its pre-pandemic level of 63.4%. One concerning trend is the number of individuals classified as long-term unemployed, which now stands at 41.5% of the total unemployment figure. Studies have shown that extended periods of unemployment can impact an individual’s ability to find new work, as well as long-term earnings, family relations, and mental health.

Manufacturing activity as measured by industry group ISM rose to its highest level since February 2018, thanks to gains in new orders, production, and employment. The headline improvement came despite a global shortage of semiconductors which has hampered auto production of late.

Similar to manufacturing, the service sector continued to grow in February, albeit at a slower rate than in January. Unlike the manufacturing sector, services saw slower growth in production, new orders, and employment.

Weekly jobless claims rose slightly to 745k, a sober reminder that despite February’s relatively positive employment report, labor markets continue to face significant pressure.