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US jobs recovery picks up steam

In March nonfarm employment rose by 916,000 jobs—the strongest gain in seven months and nearly double the February level—according to the Bureau of Labour Statistics. The unemployment rate fell to 6%, from 6.2% in February.

The latest jobs data confirm that US economic growth is accelerating, driven by a fresh round of fiscal stimulus, a relaxation of coronavirus restrictions in many states and mounting confidence around the vaccine rollout. Healthcare providers are administering about 3m vaccine doses per day, and the Centres for Disease Control estimates that almost one-third of all Americans had received at least one dose by early April. Joe Biden, the president, aims for the country to be “closer to normal” by July.

The economy has regained over half of the 22m jobs lost during the pandemic. Other recent data, such as a surge in the Institute for Supply Management’s manufacturing activity index, reflect the brightening mood among employers; the index jumped to 64.7 in March—a near 40-year high and well above the 60.8 recorded in February. (A reading above 50 indicates growth in activity.) IHS Markit’s purchasing managers’ index also rose in March, to 59.1, from 58.6 in February, the second-highest level on record. Consumer spending is picking up, especially for services such as restaurants and airlines, encouraging employers to rehire workers who were laid off early in the pandemic. Air transport alone gained 6,000 jobs in March. Construction was among the best performers, adding 110,000 jobs.

Beyond the strong headline numbers, however, the latest jobs report provides evidence of the damage wrought by the pandemic. The unemployment rate remains well above its February 2020 low of 3.5%. The labour force participation rate changed only a little in March, at 61.5%—nearly 2 percentage points lower than its pre-pandemic level. The number of those without work for more than six months remained unchanged, and up by 3.1m from February 2020. This group of long-term unemployed makes up 43.4% of the total jobless number. These shortfalls will give Mr Biden ammunition to press Congress to pass his ambitious infrastructure proposals, which his administration estimates will create up to 19m jobs.

The latest jobs data align with our plan to raise our real GDP growth forecast to 5.5% in 2021 (from 4.5%), with growth accelerating from the second quarter. Even so, we expect unemployment to remain above 5% this year as certain jobs fail to recover quickly or at all.

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