Democrats seized on the February jobs report as proof that, in the words of President Biden, “the American Rescue Plan is urgently needed.” The American Rescue Plan is the $1.9 trillion so-called COVID-relief bill that passed the Senate on Saturday and is expected to pass the House of Representatives on Tuesday or Wednesday. “The economy is down 9.5 million jobs from February 2020,” tweeted the White House Council of Economic Advisers, “and will need more than two years of job growth at February’s pace just to get back to pre-pandemic levels.”
That’s true. It’s also true that our economy added 379,000 nonfarm payroll jobs last month, easily beating expectations, and the headline unemployment rate declined from 6.3 percent to 6.2 percent. Economists surveyed by Dow Jones had expected an increase of 210,000 jobs, while those surveyed by Reuters had expected an increase of only 182,000. Most of the February job gains came from the leisure and hospitality sectors—in particular, from restaurants and bars, which are gradually emerging from lockdown restrictions.
And while the economy lost 79,000 more jobs than previously reported in December, it also gained 117,000 more jobs than previously reported in January. In other words, total employment for those two months combined was revised upward by 38,000.
As Federal Reserve economist Ryan Decker has noted, Census Bureau surveys show that both “permanent closure expectations” and “expected financing needs” among small businesses “have improved dramatically” since mid January.
“[The] most recent permanent closure expectations are below actual average six-month exit rates for small businesses during 2015-2018,” writes Decker. “That is, small businesses expect the next 6 months to be better, in terms of survival chances, than past (pre-pandemic) years.”
Still, the February jobs report contains plenty of sobering reminders about the impact of the pandemic and lockdowns. Our overall labor-force-participation rate did not budge at 61.4 percent; pre-COVID, it had not been that low since 1976. The participation rate among prime-age men actually ticked down slightly, to 87.6 percent—lower than at any point in recorded history before the pandemic. Remember, discouraged workers who have stopped looking for a job—and thus have dropped out of the labor force—are not included in the official unemployment rate.
For that matter, more than 41 percent of the “officially” unemployed have now been out of work for 27 weeks or more—the highest level since 2012. These people face a stigma that only gets worse the longer they’re jobless.
“It’s not just employers,” UMass-Amherst sociologist Ofer Sharone recently told Marketplace. “That stigma is also often held by colleagues, former colleagues, friends. Even a spouse. Even people close to you can start to view the long-term unemployed with some suspicion.”
None of this means the American Rescue Plan is good policy. Most of the bill would go toward non-COVID spending, and certain provisions could entrench welfare dependency. Writing in the Wall Street Journal last week, Robert Doar and Matt Weidinger of the American Enterprise Institute argued that it would effectively create a universal basic income by stealth.
Even though the $1.9 trillion bill is fatally flawed, the case for some type of fiscal stimulus remains sound. Yes, the economy is improving on its own as COVID vaccination rates increase and lockdown restrictions loosen. But we’re still a long way from restoring our pre-pandemic labor market.