US economy adds more jobs than expected as restrictions ease

US non-farm payrolls rose a lot more than expected in February as Covid cases fell and some restrictions were lifted, while the unemployment rate ticked lower, according to data released by the Labor Department on Friday.

Total non-farm payrolls employment was up 379,000 following a 166,000 jump in January, beating expectations for a 182,000 increase and marking the biggest rise since November.

Meanwhile, the unemployment rate nudged down to 6.2% from 6.3% in January, versus expectations for it to remain unchanged. Average hourly earnings were steady at 5.3%, in line with expectations.

The Labor Department said most of the job gains occurred in leisure and hospitality, which saw 355,000 jobs added as Covid-related restrictions eased in some parts of the country. About four-fifths of the increase was in food services and drinking places, which saw a 286,000 gains.

There were also smaller gains in temporary help services, health care and social assistance, retail trade, and manufacturing. Employment declined in state and local government education, construction, and mining.

Pantheon Macroeconomics said the core story is that the re-opening of services will be the dominant factor in the payroll numbers over the next few months.

"The monthly gains are likely to rise sharply unless a renewed surge in Covid cases, due to the B117 variant, forces states to delay their re-openings until vaccination finally squashes it. Our base case, though, is that March could easily see a 1M payroll gain.

"We’re surprised to see unemployment dipping again after the unexpectedly big drop in January, but the 208K increase in household employment comfortable offset the 50K increase in the size of the labour force, though all these numbers are wildly erratic. Still, the trend in unemployment is falling, and the employment-to-population ratio is rising, with further gains coming.

"Employment remains more than 10M below the level we would have expected absent Covid, but the gap is now narrowing again, with a great deal more progress to come over the next few months."