What We Learned Today About the U.S. Economic Recovery
(Bloomberg Opinion) -- The April jobs report was expected to show more than 1,000,000 new jobs. Instead, it announced one of the largest downside misses in history. What happened? What did we learn about the U.S. economic recovery? We asked Bloomberg columnists for their first impressions.
It’s Time for a Job-Finding Bonus
Usually, it's best not to pay too much attention to the monthly payroll numbers, since there's so much volatility and noise. But when the economy generates only 266,000 jobs instead of an expected 1 million, it's time to be concerned. With more than half the adult population vaccinated and infections trending down, the pandemic itself -- which was by far the biggest barrier to employment in earlier periods -- is waning. Employers might be hesitating out of uncertainty about Covid and about government policy, waiting to see if they can get by without raising wages. But it's also possible that the special $300 per month unemployment benefit (sometimes called Pandemic UI) is making workers hesitant about taking jobs. The best move now would be to wind up the Pandemic UI program and convert it to a job-finding bonus: a lump-sum payment to people who have been unemployed but who now get a job. This would help Americans financially while also providing an incentive for things to get back to normal. — Noah Smith
Labor Shortages Are Now Confirmed
The one thing we should all be able to agree on after today's jobs report is that there are some short-term frictions restraining employment growth. Whether those frictions are due to supply chain issues, childcare/closed school issues for parents, lingering fears related to the virus, unemployment benefits or something else is up for debate. Historically-fast wage growth in the retail and leisure and hospitality sectors — more than 2% in April, or 25%+ annualized — should give pause to those who don’t think we’re dealing with labor shortages in some parts of the economy. — Conor Sen
The Noisiest Jobs Data Left a Big Mark
Here is the thing: This is well within a range of non-farm payroll report “misses” – it’s a noisy series that encompasses a broad statistical range of potential outcomes, with lots of room for modeling error. Add to that the difficulties associated with assembling data during a dynamic period of change, in the early stage of an economic recovery from a pandemic-driven, work for home but now re-opening circumstances.
The result is a recipe for a non-farm payroll wildly off from estimates; or more accurately, an especially challenging month to for those whose jobs requires them to make wild estimates of government data reports. — Barry Ritholtz
Too Much Stimulus or Too Little? Nobody Knows
Today’s jobs report reignited the debate between those who say the labor market still needs government support and those who say government support is precisely what's holding back the labor market. The data gave little comfort to either side. Take a look at food-service and hospitality sector. It is generally viewed as the sector most affected by enhanced unemployment benefits, which are said to make it harder for businesses to lure back their workers. Yet it accounted for almost the entire increase in jobs. At the same time, wages in food service and hospitality are growing at a double-digit pace, suggesting a shortage of workers.
One possibility is that demand in the sector is so high that it is sucking workers from the rest of the economy. More generally, it’s probably true that there are millions of Americans on the sidelines and ready to go — but a combination of Covid fears, enhanced unemployment benefits and a lack of in-person schooling are keeping them on the out of the work force. Come the fall, it may be an entirely different story. Only time will tell. — Karl Smith
‘We Are in Uncharted Waters’
At its most basic, the big miss in the April jobs report underscores that we are in uncharted waters economically and analysts are having a hard time adapting old models to the new order. It's almost impossible to predict how consumers would respond to trillions of dollars of fiscal stimulus to go along with the trillions of dollars pumped into the financial system at the same time. What we are beginning to see is that when given the choice, many consumers would rather collecting generous unemployment benefits than seek employment paying around the same as what they are getting by not working. There are surely many others not wanting to seek work until more progress is made on vaccinations as well as getting child-care facilities and schools back up and running.
It's not as if the jobs aren't there. The Labor Department said on April 6 that job openings rose to a two-year high of 7.37 million in February but continuing weekly unemployment claims stand at 3.73 million, more than double their pre-pandemic levels. Another thing to consider is early retirements. Bloomberg News reports that government data show 2.7 million Americans age 55 or older are contemplating dropping out of the workforce years earlier than they’d imagined because of the pandemic. — Robert Burgess
The Chip Shortage Is Having an Impact
The manufacturing sector lost 18,000 jobs in April, a setback after a 54,000 gain in March and a 35,000 gain in February. The bulk of the decline last month, however, came from the motor vehicle sector. High-profile shortages of semiconductors have caused rolling, periodic halts to production and it’s unclear the extent to which those supply-chain headaches were a factor in the jobs numbers. Anecdotally, executives at companies including Caterpillar Inc. and Parker-Hannifin Corp. have commented on tight conditions in certain pockets of the labor market for some suppliers and customers. Companies that didn’t cut their workforce as deeply during the pandemic, have strong cultures and are willing to offer attractive wages — including Rockwell Automation Inc., Trane Technologies Plc and Illinois Tool Works Inc. — aren’t having issues getting the people they need. — Brooke Sutherland
Echoes of the Great Recession, Only Louder
For a few years after the Great Recession, the economy did this weird thing where it posted surprisingly good numbers early in the year and surprisingly bad ones later. It was a big mystery. Eventually, it dawned on us that seasonal adjustments were the problem. Could they be messing up jobs numbers again?
Seasonal adjustments are the tweaks economists make to raw economic data to adjust for the fact that a lot of landscapers get hired in April, say, or ice-cream scoopers get hired in June. After the recession, seasonal adjustments started basically assuming the half-disastrous 2009 was a normal year, with awful numbers early and a rebound later.
The pandemic recession was orders of magnitude more awful than the Great Recession. Just check out the unadjusted April jobs data. Most years, employers hire about 1 million people in April. They did the same thing this April. But in 2020, they laid off nearly 20 million. That’s right: 20 million. Roughly a decade’s worth of job growth gone in a month. Imagine what such a hole in the fabric of space-time-economics might do to seasonal adjustments.
Fortunately, the Bureau of Labor Statistics is run by very smart people who have been thinking about that already. They’ve been diving into the numbers every month and “manually” trying to tweak the seasonals to account for last year’s freakish numbers.
So you can’t say seasonal adjustments are having exactly the same effect as after the Great Recession. If that were the case, then you might expect April jobs numbers to look far better than forecasts. Instead, they did the opposite: A 1 million-job unadjusted gain, roughly matching Wall Street hopes, got about 800,000 jobs smaller.
The BLS data-massagers are not superheroes, and these are extraordinarily weird times. Could they have overdone their “manual” seasonal adjustments?
These numbers will be revised for months and maybe years to come. Until we get much more clarity on how all these working parts interact, the very boring short answer seems to be: “Shrug, pandemic.” Hopefully it at least won’t take us years to sort it all out this time. — Mark Gongloff
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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