For the Economy, the Present Doesn’t Matter. It’s All About the Near Future.

on Mar7
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It is generally considered bad journalistic practice to start an article this way, but it must be said: The new jobs numbers that the Labor Department released Friday morning don’t matter.

These numbers can sometimes be unimportant in the sense that any one economic report offers only a partial view of what is going on, and is subject to margins of error and future revisions.

But it’s more than that in this case. This jobs report is inconsequential because the economy is at a momentous inflection point — what matters is not what happened in the last few weeks, but where things end up several weeks from now.

The report that 379,000 jobs were added in February and that the unemployment rate edged down to 6.2 percent is good news. It is a better result than what was recorded in January, and better than forecasters expected.

But the economy is still in a deep hole, with nine million fewer jobs than a year ago, or around 12 million shy of where we would be if pre-pandemic job growth had continued over the last year.

For a simple model of today’s economy, think of it this way: A giant, complicated assembly line has been shut down for a year, and it is now being fired back up. Different stations on the assembly line are coming back at different speeds. The number of final products currently rolling off the assembly line is less important than the details of the progress all those different stations are making (or not) toward returning to full capacity.

In normal times, the total employment gains reported Friday would be a blockbuster number. But continuing to add jobs at that pace would still mean a two-year grind back to pre-pandemic employment levels. The question is whether job creation will accelerate in the months ahead as more Americans are vaccinated and begin to resume normal patterns of behavior, especially regarding travel and entertainment.

One worrisome sign in the new employment numbers: State and local governments appear to be cutting jobs en masse. They cut a total of 83,000 positions, about 69,000 in education.

Will many of these jobs come back, if schools are able to operate at full capacity by the fall? The Biden pandemic rescue plan before the Senate includes $130 billion to help schools reopen safely, and an additional $350 billion to support state and local government budgets more broadly. If that money proves adequate to the task, the February job cuts could turn out to be a temporary blip.

Huge job gains were reported in February in some of the sectors most directly affected by the pandemic, specifically an increase of 355,000 in leisure and hospitality jobs, most of it tied to restaurant employment.

That’s good news as far as it goes, but restaurant employment is still 16 percent below its levels of last February, a two-million-job hole. Widespread vaccination that enables people to return to restaurants safely is the only way those jobs will come back.

The news this week that Merck will help manufacture the Johnson & Johnson coronavirus vaccine is a bigger deal for out-of-work waiters and line cooks than the 286,000 bar and restaurant jobs added in February.

Things remain murky on the longer-term implications of the crisis. The surge in employment in February was entirely driven by people no longer being on temporary layoff — the number of these temporarily unemployed workers fell by 517,000 people. The number of permanent job losers remained steady at astronomical levels — 2.2 million higher than a year ago.

That raises questions about which jobs destroyed during the pandemic will come back. Are there certain patterns of behavior and business models that are gone forever? And what will the people who once worked in those businesses do now?

That’s the hardest question about the future. It is easy to describe the pathway back for jobs at schools and restaurants. But true economic health will mean that those 2.2 million people find their way back into the ranks of the employed as well, and that could take more than just a shot in the arm.

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