February Job Gains Smash Expectations with 678,000 Jobs Added to the Economy

March 4, 2022
|
Author: Mallory Vachon, Ph.D., Sr. Economist

The economy added a whopping 678,000 jobs in February continuing a remarkable stretch of growth, as omicron subsided. The strong February jobs report caps off 14 months of impressive growth – the economy has added an average of 562,000 jobs each month since January 2021.

National Labor Market Performance in February 2022

In February, the U.S. economy added 678,000 jobs, smashing economists’ expectations. And numbers for December and January were revised upward by a total of 92,000.

Last month the economy added a surprising 481,000 jobs – the omicron surge reduced labor hours but didn’t result in the job losses many expected. As COVID-19 cases level off, many areas have reduced restrictions in a sign that things are stabilizing to reach a new normal. Additional pandemic waves may come, but the labor market and economy both proved resilient during delta and omicron.

Despite the positive trends, the U.S. labor market remains tight – businesses are struggling to find and retain talent. There are around 590,000 fewer workers in the labor force now, compared to February 2020. The unemployment rate dipped to 3.8% – near pre-pandemic levels – meaning that the talent pool of workers who are unemployed and looking for work is shrinking.

And workers are quitting their jobs in record numbers – the voluntary quits rate topped 32% in 2021 compared to an average of around 25% from 2015-2019. In 2021, small businesses faced the biggest challenges due to employee turnover from voluntary quits, totaling 29–39% for businesses with fewer than 5,000 employees and around 13% for businesses with over 5,000 employees.

Workers are not heading for the sidelines but leaving for new roles at higher pay with better benefits or more flexibility. The typical 2–3% wage increases will not be enough to retain talent in today’s competitive environment. And even as businesses increase wages, pay may not be rising to keep up with inflation.

Based on analysis from LaborIQ, many jobs – including data analyst, human resources manager and software engineer – show 10–15% gaps when comparing in-place salaries versus compensation the market is commanding today.

A Look Ahead: 2022 Still Promises Strong Recovery

The economy lost 22 million jobs in the early months of the pandemic, and around 2.1 million jobs remain unfilled. While 2022 begins with more challenges than anticipated, the outlook for this year remains strong. At a pace of roughly 210,000 jobs added per month – less than the average monthly gains of over 500,000 per month since January 2021 – all jobs lost to the pandemic would be recovered by the end of 2022.

The outlook for 2022 remains strong but the big variable at play is the Russia-Ukraine war. Rising energy prices could increase the pace of inflation; global trade could be interrupted resulting in further supply chain challenges and broader conflict or economic recession in Europe all have the potential to impact the U.S. economy.

LaborIQ® Market Index: Top 10 Markets in January 2021

Thanks to steady job growth, the U.S. economy is around 98.6% of pre-pandemic employment levels. However, several strong markets have already recovered, and other markets that experienced big losses early in the pandemic are making big gains.

The national employment numbers are released weeks prior to the metro-level data. Because of this timing, the January market index reflects the most current metro data.

LaborIQ Market Index: Top 10 Markets in January 2021

The top 10 markets for January 2021 reflect strong growth in Texas, the South, Mountain West and Pacific Northwest.

  1. Dallas-Fort Worth-Arlington, TX
  2. Austin-Round Rock, TX
  3. Phoenix-Mesa-Scottsdale, AZ
  4. Tampa-St. Petersburg-Clearwater, FL
  5. Denver-Aurora-Lakewood, CO
  6. Seattle-Tacoma-Bellevue, WA
  7. Jacksonville, FL
  8. Atlanta-Sandy Springs-Roswell, GA
  9. Houston-The Woodlands-Sugar Land, TX
  10. North Port-Sarasota-Bradenton, FL

The LaborIQ® Market Index measures key economic performance indicators – job gains and growth, net-migration and population growth, wage growth, education – to measure the health of local job markets and economies.