Chef Alessandro Pirozzi, of Alessa by Chef Pirozzi, brings a takeout order to an outdoor table at the Promenade on Forest in Laguna Beach, Calif. On Wednesday, Jan. 13, 2021.
Paul Bersebach | Orange County Register via Getty Images
The surprisingly strong job growth in February indicates that the economy may be at a tipping point and is about to enter a hiring boom.
The economy has created 379,000 jobs, well above the 210,000 forecast, most in leisure and hospitality, the sector hardest hit by the brutal shutdown of the economy a year ago.
Economists say it would not be surprising to see several months now of job growth of at least 500,000 jobs.
Stock futures surged on the report and bond yields surged. The 10-year Treasury yield, which moves opposite to price, returned to a recent high of 1.61%, before falling back to around 1.57%. The 10-year started the year just above 0.9%.
“It’s very consistent with other economic data that we’re starting to see,” said Michael Arone, chief investment strategist at State Street Global Advisors.
“The job market was lagging behind, and it’s now starting to catch up,” he said. “It was great to see all the gains in leisure and hospitality as the pandemic has started to subside a bit and the restrictions are lifted.”
“The numbers are moving in the right direction,” added Arone. “The job market was the only one to resist … Spring is upon us. You have that and you have the vaccine rollout.”
Green shoots in spring
Strategists expect the economy to grow by around 6% this year, aided by vaccine rollouts, reopenings and fiscal stimulus.
“I think we’re going to see more jobs as spring and summer approach,” said Diane Swonk, chief economist at Grant Thornton. She expects greater gains as the weather improves and people regain the ability to congregate more safely.
“It’s still a long way to go, considering what we’ve lost, but the good news is we should see some solid job gains,” Swonk said.
Economists are optimistic about the recovery, but remain concerned that variants of the virus could slow it down.
The jobs force is also feeding fodder to both sides of the debate over the need for the $ 1.9 trillion stimulus package passed by the House and currently being considered by the Senate.
Effects of the Stimulus package
For Swonk, data for February shows that the stimulus package approved in December was necessary to lift the economy out of a low.
Job losses in December were revised down to 306,000 from 227,000. January’s gains were revised up to 166,000 from 49,000. Individuals received stimulus checks of $ 600 each. first days of January.
Swonk said the economy is still down by 9.5 million jobs.
Leisure and hospitality jobs increased by 355,000 in February, 80% of which were in restaurants and drinking places. However, employment in this field is still down by 3.5 million over the year.
The health care industry created 46,000 jobs, but health care and social assistance declined by 909,000 jobs during the year.
“December was really a train wreck,” Swonk said, noting that not only were there huge job losses, but also consumer spending fell sharply.
The February report, however, indicates a shift.
“This is good news,” Swonk said. “This underscores the key role the stimulus played in derailing what could have been a larger downward spiral, which we have seen overseas in other countries.”
“We avoided what could have been a double dip,” she said.
But Arone of State Street said the market was concerned about the next stimulus package, much bigger than December’s $ 900 billion, overheating the economy and creating inflation.
“The economic numbers for the week or two have been really strong,” he said.
“I think that sounds like a ‘do you really need another $ 1.9 trillion?’ “We’re going to put more gas on the fire and with that $ 1.9 trillion that’s what’s worrying the market.”
He predicts that the economy will continue to heal and that job growth will increase.
“I think there is a huge pent-up demand,” Arone said. “I think that’s what people have been describing all year, with very easy monetary policy, very easy fiscal policy.”
“With the reopening of the economy, the progression of vaccine distributions and the epidemic put behind us, I think you could have a real explosion in terms of the economy, the labor market and [corporate] income over the next nine months or so, ”he added.