Jobs Report Is Latest Sign of Growing Pains for U.S. Economy
The U.S. job market is suffering from growing pains as the economy rapidly reopens.
(Bloomberg) -- The U.S. job market is suffering from growing pains as the economy rapidly reopens.
While economists are optimistic about future growth, employers are facing hiring challenges as well as supply chain disruptions and higher costs. Friday’s jobs report from the Labor Department showed the U.S. added 266,000 jobs in April, far short of the 1 million gain economists had forecast.
The data suggest that the recovery from the pandemic will continue to be volatile in the coming months.
Despite surging job openings, companies say they’re having trouble recruiting workers because of ongoing fears of catching the virus, child care responsibilities, generous unemployment benefits and other factors. The global semiconductor shortage, record-high materials costs and shipping logjams are also a drag on the labor market.
“Ultimately the biggest obstruction to the recovery right now is the pandemic,” said Daniel Zhao, senior economist at Glassdoor Inc. “And today’s report is just a humbling reminder that the road to recovery is not a straightforward one.”
While coming in worse-than-expected, the April jobs numbers showed meaningful gains in leisure and hospitality -- primarily at restaurants, which were among the hardest-hit during the pandemic.
Labor force participation also improved, indicating that more Americans are looking for work. Another positive sign: average hourly earnings rose.
“You’ve had businesses reopen I think faster than a lot of workers have been able to come back and so we certainly see all indications point to demand for workers remaining strong,” said Sarah House, senior economist at Wells Fargo & Co. “Part of this was a supply-demand imbalance and just the frictions to reopening the economy.”
Ongoing supply chain disruptions held some businesses back in April and could continue to be a hindrance in coming months. Manufacturing employment edged down, primarily due to job losses in motor vehicles and parts production. That could be due to plant shutdowns and lower output at most carmakers, who’ve been hit hard by a global chip shortage.
Temporary-help agencies saw the largest industry decline, which could be a positive sign, if it means people are shifting to full-time work instead of short-time gigs.
Shifts in consumer behavior as the economy reopens and vaccinations are distributed more widely explain some of the job losses that hindered a more robust addition to payrolls.
Transportation and warehousing jobs fell, led by a more than 77,000 drop in couriers and messengers -- possibly reflecting a shift back to in-person shopping rather than online ordering. Food and beverage store employment declined by nearly 50,000, suggesting Americans are eating out instead of cooking at home.
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Friday’s report also underscored that the recovery continues to be uneven, particularly for women and minorities. The unemployment rate for Black workers rose slightly, to 9.7%, the highest among any race group tracked. Women also dropped out of the workforce last month amid ongoing challenges related to child care and patchy school reopenings.
Speaking about the report, President Joe Biden said it’s “clear the economy still has a long way to go” and that fiscal stimulus is still needed. He’s proposed $4 trillion worth of long-term infrastructure and social spending in addition to the $1.9 trillion rescue package signed in March.
Federal Reserve Chair Jerome Powell has previously said any changes to monetary policy will depend on months of strong employment. The April data could move the Fed’s timeline further into the future, according to some economists.
“The ‘string’ of payroll gains that Fed Chair Jerome Powell calls a pre-requirement of talking about tapering and policy normalization looks like it will take considerably longer to materialize,” Bloomberg economist Carl Riccadonna said in a note.
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