2 April 2021
Cogito Ergo Non Serviam
The Bureau of Labor Statistics announced a few moments ago that the US economy added 916,000 jobs in March. The unemployment rate fell from 6.2% to 6.0%. The labor force participation rate held steady at 61.5%. Hourly earnings fell 4 cents an hour, suggesting the jobs that came back were lower paid positions. At the same time, hours worked per week rose 0.3 hours to 34.9. January and February's figures were revised upward to add an additional 156,000 jobs to the previously reported figures. In short, the American economy appears to be storming back.
The recovery is widespread. No major sector surveyed by the BLS reported a decrease in employment. This is as expected. The decline in employment that began a year ago was the direct result of the pandemic. With the arrival of vaccines, people are beginning to return to something approximating normal.
Nevertheless, there is still a long way to travel before the country returns to the employment levels of February 2020 before Covid-19 shut things down. The BLS reported, "The unemployment rate edged down to 6.0 percent in March. The rate is down considerably from its recent high in April 2020 but is 2.5 percentage points higher than its pre-pandemic level in February 2020. The number of unemployed persons, at 9.7 million, continued to trend down in March but is 4.0 million higher than in February 2020."
So even if the economy maintains this rate of recovery, it will be the end of summer before the pre-pandemic levels are attained. Meanwhile, analysts are expecting a labor shortage to arise as the jobs spring back. This would cause wages to rise, which many believe would start a virtuous cycle of earning and spending that would drive the economy, which is 70% or so based on consumer spending.
Reuters reports, "Economists expect job growth will average at least 700,000 per month in the second and third quarters. That, combined with the fiscal stimulus and about $19 trillion in excess savings accumulated by households during the pandemic, is expected to unleash a powerful wave of pent-up demand.
"First-quarter gross domestic product estimates are as high as a 10.0% annualized rate. The economy grew at a 4.3% pace in the fourth quarter. Growth this year could top 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, the worst performance in 74 years."
Sustainability is always a concern, and those figures are not sustainable month in and month out. Enter the Biden Covid plan that will inject $1.9 trillion into the economy over a much longer time-frame, and the economy will get $2.3 trillion in infrastructure spending over the next decade. It will be the most effective kind of spending as it is pushing on an open door.
Naturally, the Republican Party will whine that this all has to be paid for and that the economy doesn't need a push from the government. The data show them to be wrong on the latter. As for the former, the Biden plan calls for tax increases, so it is paid for. The GOP just hates having to pay bills (so when they are in power, they don't).
The virus is still a significant problem, and the recovery is a function of vaccination. Delays in shots will result in delays in job creation. For now, though, things are looking up.
© Copyright 2021 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.