A Big Miss
U.S. Labor Market Added Disappointing 266,000 Jobs in April
The U.S. labor market added a modest 266,000 jobs in April, with the unemployment rate increasing to 6.1%. The job growth was much lower than consensus expectations that nearly 1 million jobs had been added last month. This report is another sign that the labor market recovery remains tenuous. The constrained growth numbers also point to an emerging struggle between a high demand for workers but a low supply of available labor.
Top Takeaways from the Report
An Unexpected Slowdown
The anticipated surge in employment growth lost steam in April, with only 266,000 jobs added to the U.S. economy. Analysts had expected close to 1 million jobs to be added in the month. This is the largest labor report expectation miss in more than 20 years and is another sign that the ongoing economic recovery remains uncertain.
Unemployment also surprisingly disappointed expectations in April, increasing to 6.1% from a previous pandemic era low of 6.0% in March. The consensus forecast was for the jobless rate to drop to 5.8%. However, the labor force participation rate came in stronger than expected, increasing from 61.5% in March to 61.7% in April.
Employers Struggling to Find Workers
The unexpectedly weak report is especially surprising since many businesses can’t find workers to fill job vacancies. There are many reasons for optimism that job growth should accelerate. COVID infection rates have dropped, vaccinations are spreading rapidly, government restrictions are dropping and businesses continue to reopen and expand operations.
However, the labor market still remains a little over 8 million jobs below its pre-pandemic level and the unemployment rate is still much higher than a year ago. A strengthening economy and increasing job openings should entice more people to return to work, but a variety of factors are causing workers to remain on the sidelines. Some remain fearful of the COVID virus, with surges in other parts of the world and the possibility of variants emerging in America. Others continue to struggle with the lack of childcare, making a return to the office more difficult.
And there is increasing concern that continued robust unemployment benefits, which provided critical support during the worst of the economic contraction last year, are now constraining potential job growth. More than 16.1 million people received unemployment benefits during April. Those receiving benefits get an additional $300 a week, on top of regular state benefits, which average $318 a week. This means the average unemployment recipient is receiving a benefit equal to working full time earning $15 an hour.
Inflation Risk Rising
With companies struggling to meet employment needs, coupled with strong consumer confidence and consumer spending in the economic recovery, the potential for continued strong inflation is becoming more likely.
Numerous products, ranging from semiconductors to chicken have seen prices soar as supply chains struggle to catch up with soaring demand. The influx of federal stimulus payments to consumers has likely exacerbated the problem by devaluing the dollar and allowing consumers to increase spending before supply chains have fully recovered.
Growth by Industry
April saw mostly weak growth and job losses across industries with only leisure and hospitality gaining a significant number of jobs.
Leisure and hospitality once again led all growth sectors last month, adding 331,000 jobs. Accommodation and food services (+241,400) led growth in the sector thanks to particularly strong growth among food services and drinking places (+175,800). The arts, entertainment, and recreation subsector (+89,600) also saw significant growth month to month. Although leisure and hospitality has added 5.4 million jobs in the last year, the industry is still down by 2.8 million jobs since before the pandemic.
The government (+48,000) and other services sectors (+44,000) were the only other sectors to see significant job growth in April.
Employment in the trade, transportation and utilities (-81,000) and professional and business services (-79,000) sectors saw significant declines in April, especially in subsectors that saw growth during the pandemic. Temporary help services (-111,400) led the decline in professional and business services while couriers (-77,400), a bright spot during the pandemic, led to the decline in the trade, transportation and utilities sector.
Declines in manufacturing (-18,000) were due in large part to losses coming from motor vehicles and parts manufacturing (-27,000). Many employers had to cut back hours and jobs in the sector due to a lack of semiconductors that are vital to the modern car manufacturing process.
The Bottom Line
As with any economic report, it is important to remember not to take any single report too seriously. The April jobs report was much weaker than expected but it’s still too early to tell whether this report is an anomaly or a sign of future trends. However, it illustrates that the U.S. economic recovery remains somewhat uncertain. The next few months will be critical to determine how the economy emerges from the pandemic.
The division of Economics and Public Policy at Zions Bank informs and educates employees, clients, and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.
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