March Employment: Exceptional Results on (Almost) All Fronts

posted by Michael Lewis on April 2, 2021 - 12:00am

In like a lion, and out like an even bigger lion. March jobs and vehicle sales surprised to the upsides, even for those (such as FMI) who were expecting well-above-consensus gains. FMI is still expecting +6% real GDP growth for 21Q1 and +10% for 21Q2.

Employment (March)

All observers were braced for a strong report. Instead, it was exceptional, hitting all the “upside risk” that FMI had cited. The private sector added +780K jobs in March, a stunning +905K including upward revisions to January and February. The workweek snapped back up, retracing almost all of February’s storm-driven losses. Thus, aggregate hours worked rose an incredible +1.5% in March; for 21Q1, hours worked were up more than +3% annualized. With higher productivity, that is consistent with FMI’s +6% real GDP forecast for 21Q1. We are still looking for +10% for 21Q2.

The jobless rate (U-3) fell from 6.2% in February to 6.0% now. The labor force did expand, up +0.2%, but FMI was looking for a bigger gain -- that was the only disappointment today. Fed chairman Powell, in particular, has fretted that the labor force will recover slowly from pandemic losses. However, with vaccinations surging, all states continuing to “re-open,” and public schools starting to resume in-person instruction, FMI is confident that we will see a mass return of workers in coming months. The unemployment rate will continue to trend down, but at a more moderate rate ahead.

Key Payroll Details

With all states easing virus restrictions, hospitality added +280K jobs (+303K with revisions). A lot more will be back this spring.

Other private categories were respectable: business services +66K and retail +23K. Factories added a hefty +54K workers. Construction surged +110K jobs as it recovered all weather losses in Feb. and then some.

State & local government added +129 jobs ( +150K with revisions). Nearly all were in education; many more are coming this spring as more schools re-open.

Vehicle Sales (March)

Vehicle sales accelerated to 17.7 mm units in March (seasonally-adjusted at annual rate), as they recovered from storm driven losses in February (a modest 15.8 mm units sold) and then some. This according to BEA’s comprehensive totals released this morning. With COVID-19 vaccinations accelerating and the economy responding, consumer prospects are brightening further.

The March totals were even more remarkable given very lean inventories (read: poor selection at dealerships). Automakers plan to boost output in 21Q2 which, in turn, will spur sales. However, ongoing supply problems, especially in computer chips, may well slow these gains.

The $1,400 stimulus checks, which mostly arrived last month, may have helped spur some of the March (and upcoming April) sales. In most cases, though, the windfall likely just encouraged people to move up their existing plans to buy a vehicle. In other words, the stimulus “borrowed” from future sales -- very few people need two new vehicles, after all. 

For March, domestic light truck sales set a new record at 10.7 mm units (excluding the rebate-a-palooza in mid-2005). Domestic car sales rose to 2.8 mm units.