U.S. Economy’s Revival Pivots on People Returning to Yoga, Bars
Wall Street’s most bullish economic forecasts hang on a simple prediction: everybody will flood back soon to their local gyms, bars and yoga studios as if the pandemic was in the past.
A jobs boom in the vast U.S. service sector – the nation’s largest employer ranging from software developers to the local Chipotle – is a central part of bold calls on growth this year.
The thinking is that vaccines and mounting immunity unleash pent-up demand, which stirs a hiring wave that drives unemployment sharply lower. The Federal Reserve sees the jobless rate dropping to 5% by the end of 2021 and some in the private sector including Goldman Sachs Group Inc. and Deutsche Bank AG have projections in the 4% range.
The Labor Department provides a fresh look on the service sector with the February employment report on Friday. The unemployment rate is expected to tick up to 6.4% from 6.3%, according to a Bloomberg survey.
Weak readings in December and January, which coincided with an escalation of U.S. virus cases, were concentrated in sectors such as leisure, hospitality and retail. The service sector, which currently employs 122 million people, has almost nine million less workers than when the pandemic struck early last year.
Fed Chair Jerome Powell said last week he was worried about permanent disruptions in service sector employment in comments to the House Financial Services Committee.
“What we’re going to find based on some of the surveys we’ve heard about is that not all of those jobs are going to come back because people have started to implement automation,” Powell said. “Many of those people may find it hard to get back to work, and I think they’re going to need further support.”