The U.S. economy added 266,000 jobs in April, an impressive number in ordinary times but a huge disappointment for forecasters expecting to see about 1 million new jobs during the month as the recovery from the Covid-19 pandemic continued. The unemployment rate rose, too, increasing a tenth of a percentage point to 6.1%. And the previous month’s gains were revised downward by 146,000, from an increase of 916,000 to an increase of 770,000.
The rapidly reopening economy appears to be experiencing a labor shortage, with many business owners reporting that they are having trouble finding workers. “Demand is outpacing supply,” Daniel Zhao, an economist at Glassdoor, told the Associated Press. “That’s something that is occurring across the economy, in semiconductors to lumber, and we’re seeing a similar crunch in the labor market.”
While the shortage of workers seems fairly clear, the cause of the shortage is not, and the lackluster report added more fuel to the fire in the raging partisan debate over the effect of unemployment benefits on people’s willingness to work.
Stuck on the couch? Conservatives and business interests have been arguing that the federal government’s relatively generous unemployment payments, which add $300 per week to state-level benefits, are keeping workers on the sidelines, happy to earn as much or more through unemployment insurance than they can going back to work.
Following the release of the report Friday, the U.S. Chamber of Commerce — the largest lobbying group in the country — called on Congress to end the enhanced unemployment benefits, which were reauthorized in the $1.9 trillion American Rescue Plan in March and are scheduled to run until September 6.
“The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” said Neil Bradley, the group’s chief policy officer. Bradley added that according to an analysis by the Chamber, one in four workers earn more through the current unemployment system than they would by working.
Plenty of Republican lawmakers agree. “Turns out, paying millions of Americans to stay home leads to millions of Americans staying home,” Rep. Nancy Mace (R-SC) said. "We have to get Americans back to work and off of unemployment.”
Senate Majority Leader Mitch McConnell (R-KY) has also made it clear that he thinks elevated unemployment payments are keeping workers on the sidelines. “We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” he said earlier this week. “And what I hear from business people, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work. So we have a workforce shortage ...”
Some Republicans governors have been pressing to end the federal program in their states. Montana’s Republican Gov. Greg Gianforte announced on Wednesday that he would withdraw from the program by June 27, in response to a labor shortage in his state. And on Thursday, South Carolina’s Republican Gov. Henry McMaster said would do the same by the end of June.
Low pay, pandemic worries: Democrats and labor groups offer different explanations of the labor shortage. First and foremost, they argue, the country is still in the grips of a deadly pandemic, making the act of simply going to work far riskier than it would be otherwise; in surveys, nearly 3 million people have cited fear of catching the disease as a primary factor preventing them from looking for a job. On top of that, many schools and day care centers are closed, making it difficult for parents, especially mothers of young children, to return to work. Add in wages that have been stagnant for years, especially at the lower end, and you have a recipe for weaker labor force participation.
At a press briefing, Treasury Secretary Janet Yellen pushed back against the attack on enhanced jobless benefits. “I really don’t think the major factor is the extra unemployment,” Yellen said, adding that “if the unemployment bonus was slowing down hiring one would expect lower job growth in states and sectors where unemployment insurance is particularly high. In fact, what one sees is the exact opposite.” Instead, Yellen pointed to fears of catching Covid, problems with child care and supply-chain bottlenecks as key factors driving the disappointing results in April.
Economist Heather Boushey, who sits on the Council of Economic Advisers, told MSNBC that the evidence was weak for jobless benefits being the main cause of the labor shortage. “We are not seeing that there are a lot of folks who are not searching because of unemployment benefits,” she said. “Indeed as this report shows, there was an uptick in labor supply last month, and it still remains a difficult labor market for millions of workers.”
Support for more economic support: Speaking at the White House Friday, President Joe Biden cited the report as proof that the economy needs another boost and called on lawmakers to pass his multi-trillion-dollar American Jobs and American Families plans. “Today there is more evidence our economy is moving in the right direction, but it is clear we have a long way to go,” he said.
House Speaker Nancy Pelosi (D-CA) said the disappointing data highlight the “urgent need” to pass Biden’s plans.
The U.S. economy is still 8.2 million jobs short of its pre-pandemic level.
The place of work: Some analysts suggest that there may be deeper issues at play. There’s a “great re-assessment going on in the U.S. economy,” says Heather Long of The Washington Post. “It’s happening on a lot of different levels. At the most basic level, people are still hesitant to return to work until they are fully vaccinated and their children are back in school and daycare full-time. It’s telling that all the job gains in April went to men. The number of women employed or looking for work fell by 64,000, a reminder that childcare issues are still in play.”
At a deeper level, the pandemic is inspiring people to rethink the place of employment in their lives. “There is also growing evidence — both anecdotal and in surveys — that a lot of people want to do something different with their lives,” Long writes. “The pandemic has had a dramatic psychological effect, and people are re-assessing what they want to do and how they want to work, whether in an office, at home or some hybrid combination.”
There is evidence that wages are in fact rising, Long says, with the average hourly wage climbing by $1 in the hospitality sector and more than that in warehousing, a sector that now pays $26 on average. Still, the added pay may not be enough to lure back workers who are asking serious questions about the kinds of jobs they want to do.
“This big reassessment — for companies and workers — is going to take awhile to sort out and it could continue to pop up in surprising ways,” Long says.
The bottom line: It’s too soon to tell what’s really going on in the job market. The recovery from the pandemic will take some time to play out, with plenty of bumps along the way, and it will be many more weeks before a clear pattern emerges, though it is worth noting that disappointing as it may be, the April report shows the fourth straight month of job growth.
“There is nothing definitive here and we will know a lot more after the May numbers and we’ll find out whether something real is happening or this is just noise and problems with seasonal adjustments a year after Covid first hit,” economist Ian Shepherdson of Pantheon Macroeconomics said. “People with big mouths can bang the table and say they know exactly what happened, but they don’t and we won’t know for a while.”