Shockingly Weak Jobs Report Spurs Partisan Clash

By Yuval Rosenberg

Surprisingly Weak Jobs Report Spurs Clash Over Unemployment
Benefits

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 a while 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.”

U.S. Postal Service Narrows Quarterly Loss, Presses Ahead With
Overhaul

The U.S. Postal Service on Friday reported a second-quarter loss
of $1.7 billion, compared to loss of $1.9 billion in the same
period a year earlier. The results, adjusted to exclude non-cash
workers’ compensation, reflect a pandemic-driven surge in package
deliveries that was still not enough to offset higher operating
costs and a continuing decline in revenue from mail services, the
Postal Service said.

Revenues rose to about $18.9 billion, up 6% from the same
quarter last year, driven by a year-over-year increase of $2
billion, or 33.6%, for package deliveries as volumes jumped by more
than 25%.

“While the Postal Service believes that consumer behavior has
evolved during the pandemic as the nation has increasingly relied
on the safety and convenience of e-commerce, the Postal Service
still expects this surge to partially abate as the economy
continues to open,” USPS said in announcing its results.

Postal Service officials said the results — and the continuing
trends of declining mail volume and increasing package shipments —
reinforced the need to implement the
10-year overhaul rolled out by Postmaster General
Louis DeJoy in March. That plan seeks to put the agency on a path
to profitability by investing in package delivery operations has
drawn sharp criticism because it calls for higher prices, service
cuts, slower delivery standards and significant structural changes,
including consolidation of mail-processing facilities and the
closure of some post offices.

The Postal Service projects that it will lose $160 billion over
the next decade without the changes but could break even over the
10-year period and become profitable by 2023 or 2024 if the plan is
implemented in its entirety.

DeJoy on Friday told a meeting of the USPS Board of Governors
that, despite the criticism, he remains convinced his plan is
necessary. “Yes, I do hear the criticism, and we will consider
them,” he
said. “But what I don’t hear is any viable
comprehensive alternative.”

Read more about the U.S. Postal Service’s challenges at

The Washington Post.

A very happy Mother's Day to all the
moms out there. Have a great weekend! Send your feedback to
yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis