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New data from the Bureau of Labor Statistics (BLS) show that the unemployment rate declined to 6.0 percent in March from its February level of 6.2 percent. While the current unemployment rate remains quite high compared to its pre-pandemic level of 3.5 percent, the widespread job gains in March provide reason for optimism for the labor market.
In March, the economy added 916,000 jobs. The industry sector with the largest number of gains was leisure and hospitality, and BLS notes that the gains in that sector were primarily driven by new jobs in food services and drinking places as pandemic-related restrictions eased in various parts of the country. Nine of the other ten industry sectors each experienced job gains of 16,000 or more. The only sector that didn’t experience job gains — information — lost just 2,000 jobs in March.
While the job gains in March were considerable, a large number of workers continue to file for unemployment compensation. In the week that ended on March 27, there were 719,000 new claims (such data are released on a weekly basis). That continues the trend of the past 34 weeks, during which claims have hovered between 650,000 and 1,000,000 per week.
In addition, labor market conditions remain more difficult for non-white workers. In March, the unemployment rate for white workers was 2.4 percentage points higher than it was before the onset of the pandemic. Black, Hispanic, and Asian workers have each faced a larger increase in their respective unemployment rates over the same period.
Standard unemployment rates do not capture all of the negative effects that the coronavirus pandemic is having on the labor market. For example, the overall unemployment rate would be 7.1 percent if it included people who have stopped looking for work during the past four weeks. (The headline unemployment rate does not count those people as unemployed because they are considered outside of the labor force.) Including the 5.8 million people that are working part time despite desiring full-time work would bring the rate to 10.7 percent. In other words, one in ten American workers are currently affected by the ongoing downturn in the labor market, and not all of those individuals are included in the headline unemployment rate of 6.0 percent.
The labor market recovery still has a ways to go, and until then, the federal budget will continue to be affected in a number of ways. Income and payroll tax receipts will be lower than would otherwise occur because fewer people are working. Also, payments for unemployment compensation and other safety net programs will remain relatively high, in part as a result of recent legislation to continue certain unemployment benefits. Enacted legislation to provide relief to individuals and businesses from the pandemic is projected to add about $5.3 trillion to the cumulative deficit from 2020 to 2030. However, there is no reasonable alternative — providing assistance to individuals who lose their jobs, especially during a global health crisis, can save the economy from suffering even further damage.
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