The labor market is on the launch pad.
Signs of ignition emerged Thursday asjobless claims fell to the lowestthey’ve been since the pandemic started. Unemployment claims for the week ending March 13 were 684,000, vs. 730,000 expected.
In a note this week, Renaissance Macro Research's Neil Dutta outlined five bullish indicators that indicate the labor market “really is picking up steam right now,” as vaccinations ramp up and temperatures warm up — along with the economy.
“I would guess that we see jobs growth at least over one million in March,” Dutta wrote. “The current consensus is around 550,000 though only 11 folks have their estimates into Bloomberg. I would take the over.”
In a recent note, JPMorgan’s job tracker based on alternative data sources showed a clear acceleration in total employment.
Dutta’s five signs and JPMorgan’s “alternative data,” paint a picture of future numbers that look bullish.
The Census Bureau’s Small Business Pulse Survey showed a 7.1% increase in paid employment in mid-March, as well as a similar increase in hours worked.
“I haven’t seen numbers like this since last summer,” Dutta wrote. “Recall that average jobs growth in Q3 2020 was 1.174 million per month.”
Two other bullish surveys tell a similar story. The Dallas Fed’s Real Time Population Survey showed employment rates for working-age adults spiked from mid-February to mid-March, from 68.6% to 70.9% and a similar drop in the unemployment rate also occurred. The Household Pulse Survey told a similar story of a spike in job growth, with double the increase of a “normal March,” Dutta noted.
The American Staffing Association’s Staffing Index was also up 11.2%. “Taking the index at face value implies that temp-help employment has reversed all of its pandemic-related job losses,” Dutta wrote.
Lastly, people are driving a lot more. Google’s mobility data shows a spike in movement in the leisure and hospitality sector – hit especially hard during the pandemic – now at last July’s volume.
“We have not seen improvement this rapid since the initial reopening in the economy last spring,” Dutta wrote. “So, the decline in COVID cases is likely pushing up employment as businesses restart.”
Some analysts are drawing larger conclusions based on this data – and the predictions are rosy.
Bank of America, which revised its GDP growth to 7% in 2021 and 5.5% in 2022, up 0.5 percentage points each, wrote that the growth in GDP would also mean a “faster healing in the labor market,” almost a million new jobs a month.
“Based on our projections, the unemployment rate will reach 4.5% by year-end and slip [under 4%] next summer,” according to a note from Bank of America. “Our forecasts imply a return to the pre-COVID level of jobs by 1Q 2022 and pre-COVID participation rate by the end of next year. This means the employment-to-population will have fully healed by the end of next year.”