Job growth surges past estimates; unemployment dips to 6.2%

U.S. employers added more jobs than forecast in February and the unemployment rate declined, suggesting the labor market is clawing its way forward again following several disappointing months.

Payrolls increased 379,000 after an upwardly revised 166,000 January increase, according to a Labor Department report Friday. Economists in a Bloomberg survey projected a 200,000 February gain. The unemployment rate dropped to 6.2%.

A decline in Covid-19 cases, along with an easing of business restrictions in some states, is starting to result in more hiring even as millions of Americans remain unemployed. February job growth was propelled by a 355,000 surge in leisure and hospitality employment, an industry hardest-hit by the pandemic and key to a broader recovery in the labor market.

“The core story here is that the re-opening of services will be the dominant factor in the payroll numbers over the next few months,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. In March, job growth “could easily see a 1 million” gain in employment, unless there’s a renewed surge in infections, he said.

The report adds to recent evidence, including data on manufacturing and retail sales, that the economy is gaining momentum. High-frequency data have also shown additional improvement, including an uptick in restaurant bookings.

The yield on the 10-year Treasury note advanced to the highest in more than a year following the report, while U.S. stocks advanced in early trading and the dollar rose. Many economists expect to see job prospects, and economic growth, improve in the coming months as vaccinations pick up and virus concerns ease further.

Policy makers are closely monitoring the labor market as they consider a another economic stimulus bill. President Joe Biden’s $1.9 trillion relief package -- which includes an extension of federal unemployment benefits -- passed the House of Representatives on Saturday and the Senate’s final vote is expected as soon as this weekend.

Federal Reserve Chair Jerome Powell said in a webinar on Thursday that the labor market is still a long way from maximum employment but that “there’s good reason to expect job creation to pick up in the coming months.”

“We want to see that the gains in employment are broad-based,” Powell said. “We have a high standard for defining what maximum employment is and we think it will take some time to get there.”

Powell has pointed to the fact that there’s still a big gap from where the labor market was before the virus hit. The report showed that the jobless rate rose for Black Americans and the number of long-term unemployed is still very elevated.

Overall, there were nearly 10 million unemployed Americans in February, almost double the pre-pandemic level, underscoring a lengthy road to recovery for the labor market. Other areas of the economy, including housing and manufacturing, have recovered much more quickly.

“We are always happy to see more people get more jobs. But let’s take a breath here and look at the bigger picture,” Jared Bernstein of the White House Council of Economic Advisers, said in an interview with Bloomberg TV. “There is a lot of economic pain out there, and that hasn’t changed because of this one print.”

Private payrolls rose by 465,000 last month, which included job gains in food services, retail, health care and manufacturing, after rising 90,000 in January. The 286,000 increase in employment at restaurants was the largest since July. Government jobs, meanwhile, declined by 86,000 in February, largely reflecting cutbacks in state and local education.

While the report also showed a decline in hours worked, inclement winter weather likely played a role.