March 2021 National Economic Outlook

Biden Signs American Rescue Plan; Welcome Pickup in Job Growth in February

Executive Summary

On March 11 President Biden signed the American Rescue Plan, which will provide about $1.9 trillion in near-term support for the U.S. economy. In addition to direct aid to households, the package includes aid to businesses, an increase in healthcare spending, and support for state and local governments. 

PNC had previously included the likely impact of the American Rescue Plan it its February forecast. In total, the stimulus bills passed in 2020 and 2021 have totaled about $5 trillion, or one-quarter of annual U.S. GDP. Supported by aggressive stimulus from the federal government, PNC expects real U.S. GDP to surpass its pre-pandemic level in the third quarter of 2021.

Nonfarm employment increased by 379,000 in February, according to the Bureau of Labor Statistics, based on a survey of employers. This was the strongest month of job growth since October, and was well above the monthly average of 41,000 from November to January. 

The U.S. economy has added almost 13 million jobs since April 2020, but employment is still down by 9.5 million from its peak in February 2020. 

  • The private sector added 465,000 jobs in February, while government employment fell by 89,000.
  • The unemployment rate fell to 6.2% in February, from 6.3% in January. 
  • The unemployment rate peaked at 14.8% in April, its highest level since the Great Depression, and has fallen steadily since then. However, it remains far above the pre-recession rate of 3.5% in early 2020. 
  • Average hourly earnings rose 0.2% over the month, while the average workweek fell by 0.3 hours to 36.6. The big decline in the workweek came from job gains concentrated in leisure/hospitality services employment, which is more part-time.

Many measures of economic activity weakened in February from January, in part because of winter storms, in part because household income fell over the month after stimulus payments were distributed at the beginning of the year. 

  • Retail sales fell 3.0% in February from a month earlier, and retail sales excluding autos and gasoline were down 3.3%. 
  • Industrial production fell 2.2%, including a 3.1% drop in manufacturing output; according to the Federal Reserve most of the monthly decline was due to the weather. 
  • Housing starts fell 10.3% in February, including an 8.5% decline for single-family starts. 
  • And sales of existing homes dropped 6.6% over the month, while sales of new homes dropped a huge 18.2%. But activity should pick back up again with better weather and stimulus payments distributed in March.

Our economics team is consistently analyzing and forecasting national, regional and global economic trends.

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