Are COVID-related unemployment benefits preventing people from rejoining the workforce? This was an extremely hot topic when the April 2021 Jobs Report showed one of the biggest misses on record - what does that mean? It shows that the actual number of jobs the American economy was expected to add fell dramatically short of the expectation.
It’s all become politicized. The republican party has been claiming people have been de-incentivized to work because of COVID unemployment benefits. Joe Biden made a rare appearance to defend the unemployment benefits policy, citing “There’s been a lot of discussion since Friday’s report that people are being paid to stay home rather than go to work,” Biden said. “We don’t see much evidence of that.”
There are only a couple of data points that matter. Firstly, employers can’t find the people they need, and secondly, potential employees that remain among the unemployed aren’t taking jobs. Let’s take a look at the numbers from the April 2021 Jobs Report:
The stunningly disappointing April Jobs Report shouldn’t be taken as an indictment against the fast-moving economic recovery but shouldn’t be dismissed as merely a one-month blip either, according to Wall Street economists and market experts.
A variety of factors helped explain the weak Labor Department count that showed nonfarm payrolls grew by just 266,000 in a month that forecasters had expected to see 1 million. Among them: low labor supply caused by a lack of qualified workers, the reluctance of some to go back to work because of Covid-related fears and the continuation of enhanced unemployment benefits, and seasonal factors that skewed expectations for job creation.
Jim Caron, Head of Global Macro Strategies for the Global Fixed Income Team at Morgan Stanley Investment Management, had this to say, “The main thing we learned in this reopening trade was that we thought it was going to be this smooth trend of all this good stuff happening. What we’re starting to realize is it’s probably going to be a little bit bumpier.”
“The road is still pointed in the right direction. It’s just going to be a little less smooth than we had thought,” he added.
Let’s Focus on the Positives
It’s not all doom and gloom. Despite the downfalls, there were still things to like in the report that pointed to strong fundamental factors for the jobs market even if the headline number wasn’t the result we wanted.
Firstly, the unemployment rate rose 0.1 point to 6.1%, but that was primarily because more Americans returned to the labor force, a critical metric for policymakers. Secondly, the level of working remotely fell to 18.3% of those employed from 21% in March.
Also, those who said they weren’t working because their employer closed or lost business due to pandemic-related reasons declined from 11.4 million to 9.4 million. Those prevented from looking for work due to the pandemic fell to 2.8 million from 3.7 million the previous month. The average duration of unemployment declined to 28.8 weeks from 29.7 weeks.
There were also positives and hope for the future: Economic growth is expected to get even stronger through the second quarter. There were also other real-time indicators like restaurant reservations, foot traffic, and employment costs.
“This is just a blip. It’s one data point. I would not take a lot from it, said JJ Kinahan, Chief Market Strategist at TD Ameritrade. “This is one of those reports that is kind of interesting because something about this seems odd.”
Leisure and Hospitality Led April’s Job Growth
Employment in leisure and hospitality rose significantly last month, with employers in that sector adding 331,000 jobs. The BLS reports that the continued easing of pandemic-related restrictions in many parts of the country contributed to these gains.
The following industries also saw job growth in April, according to the BLS:
Government: 48,000 jobs added
Other Services: 44,000 jobs added
Financial Activities: 19,000 jobs added
Healthcare and Social Assistance: 18,500 jobs added
Wholesale Trade: 7,800 jobs added
At the same time, several industries saw notable payroll contraction last month, including professional and business services, transportation and warehousing, manufacturing, and retail trade.
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