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February 2021 Jobs Report: The Labor Market Needs to Speed Up

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The US economy gained 379,000 jobs last month, and the unemployment rate is at 6.2%, down from 6.3% in January.

The pace of job growth in February was a pleasant surprise, but it is still too early to get excited. Expectations were quite low given the current state of the labor market. Now in the second year of the pandemic, the labor market has 9.5 million fewer jobs than it did before the coronavirus arrived in the US. That gap rises to 11.5 million once you consider the jobs gains we would have seen absent the crisis. At this pace, it will take about four and a half years to get back to where the labor market would have been without the pandemic. Millions of Americans out of work do not have that time.

The labor market is still rebounding from the depths of last March and April, but there is still an enormous amount of damage to come back from. The current drop in employment is comparable to the worst months of the Great Recession. The prime-age employment-to-population ratio is the best way to see the damage. The share of the prime-age population with a job has fallen by 3.9 percentage points from a year ago.  Similarly, it will take years to get back to pre-pandemic levels on this front.

A bright spot is that the food services and drinking places industry was a leader on the job growth front. This industry has been especially impacted by the virus, so progress here is a good sign for the future. But while progress is being made, there’s still so much ground to be covered. The labor market is moving forward, it just needs to speed up.