Job listings climbed for five straight months as vaccination began and reopening led businesses to hire. The May increase in openings also came as hiring rebounded after dismal growth in April. Taken together, the data suggests the nationwide labor shortage grew somewhat less intense as the US entered summer.
June’s payrolls data further supports the outlook. Job creation improved again, with the US adding the most payrolls since August. Still, the unemployment rate ticked slightly higher and labor force participation held steady, implying continued slack in the job market.
Experts largely expect the labor market’s recovery to accelerate further through the summer as various factors keeping Americans from work fade. The start of the school year should ease childcare pressures and the ending of enhanced unemployment benefits should also boost participation, Federal Reserve Chair Jerome Powell told lawmakers in June. There also “may be a bit of a speed limit” on matching people with openings, but that process should play out into the fall, he added.
“I think it’s clear, and I am confident, that we are on a path to a very strong labor market,” he said in June 16 press conference. “I would expect that we would see strong job creation building up over the summer and going into the fall.”
Hiring, layoffs, and job availability
The monthly JOLTS data – which lags the corresponding jobs report by one month – provides even more detail around pandemic-driven dislocations in the labor market. The survey took on even more relevance as the labor shortage emerged, giving economists insight into which pockets of the economy are struggling the most to rehire.
Broadly, there was an opening for every available worker in May, compared to 1.1 in April. The ratio shows the US boasting as many openings as workers for the first time since the COVID-19 recession began. By comparison, it took roughly 8 years after the financial crisis for openings to match workers.
The state and local government education and educational services sectors added the most openings, with gains of 46,000 and 35,000, respectively. The arts, entertainment, and recreation sector lost the most openings with a decline of 80,000.
Quits, which soared to all-time highs in April, fell slightly to 3.57 million from 3.99 million. Quits were most common in the professional and business services sector. While down from the April reading, the elevated quits count signals Americans are confident in their abilities to find better jobs as the economy recovers.
Layoffs also fell slightly to 1.37 million from 1.45 million. The layoffs rate dipped to a record-low 0.9%.
Hiring accelerated again in June as Americans returned to the workforce and reopening further juiced demand.
The US economy added 850,000 nonfarm payrolls last month, the Bureau of Labor Statistics announced Friday. The median estimate from economists surveyed by Bloomberg was for an increase of 720,000 jobs. The data suggests the labor shortage waned as businesses raised pay to attract workers.
The June print marks the strongest month of job growth since August and the sixth consecutive month of payroll additions. May payroll additions were revised to 583,000 from 559,000.
The unemployment rate rose to 5.9% from 5.8%. Economists expected the headline rate to hit 5.6%.
The labor-force participation rate was unchanged at 61.6%. The metric has become the go-to gauge for tracking the nationwide labor shortage. Hiring unexpectedly slowed through the spring as virus fears, childcare costs, and enhanced unemployment insurance kept Americans from seeking work. Firms have since raised wages to pull in job applications.
Average hourly earnings rose again, by 10 cents, to $30.40. The gain signals firms still lifted wages into the summer to speed up their hiring efforts.
“This pace of progress is solid and it looks like things can get even better,” Nick Bunker, an economic research director at the hiring website Indeed, said. “There’s still quite a bit of damage left to repair, but today’s report suggests that we may rebuild sooner rather than later.”
Snapshot of recovery
The monthly BLS report is among the most detailed snapshots of the labor market’s performance and gives new insights as to how the broader economy is recovering.
Even after the month’s stronger hiring, about 9.5 million Americans remain unemployed. Total payrolls are still about 6.8 million shy of their pre-pandemic peak.
The U-6 unemployment rate – which counts Americans working part time for economic reasons and those marginally attached to the workforce – rose to 10.1% on an unadjusted basis from 9.7%.
Gains were largest in the leisure-and-hospitality and accommodation sectors, where businesses added 343,000 and 75,000 payrolls, respectively. In leisure and hospitality, restaurants and bars counted for more than half of the gain.
The construction industry lost the most jobs, with a decline of 7,000 payrolls.
Roughly 6.2 million Americans named the pandemic as the primary reason their employer ended operations, down from 7.9 million. About 1.6 million cited the pandemic as the main reason they didn’t seek work, down from 2.5 million in May.
The share of Americans telecommuting fell to 14.4% through the month. That compares with the May share of 16.6%.
Experts see encouraging growth through the 2nd half
June stands to represent a turning point for the labor market’s recovery. The month saw the first few states end the federal boost to unemployment insurance ahead of its September expiration. Twenty-six states – all but one governed by Republicans – have announced plans to prematurely cancel the benefit, saying the move should encourage Americans to return to the workforce.
While the set of cancellations aren’t reflected in the June jobs report, jobless claims data out Thursday suggests the plan is working. Filings for unemployment benefits fell to 364,000 last week, beating economist estimates and marking a new pandemic-era low. Continuing claims still rose, suggesting Americans on unemployment insurance weren’t yet rushing to find jobs.
Survey data backs that up. Just 10% of surveyed job seekers urgently sought work in late May and early June, Indeed said. The most cited reasons for the slow return to work were virus fears, employed spouses, and financial cushions.
Those factors keeping Americans from taking jobs should fade as schools reopen and vaccination continues, Federal Reserve Chair Jerome Powell said. Americans can look forward to “strong job creation building up over the summer and going into the fall,” he told reporters during a June 16 press conference.
He added that while hiring stumbled in April, some of the slowdown was most likely caused by a skills mismatch between workers and open jobs. There “may be something of a speed limit” on the recovery as people look for work in new areas, Powell said.
Spending at US retailers slumped for the first time since February last month as more economic restrictions were reversed and Americans settled into a new sense of normal.
US retail sales fell 1.3% in May, the Census Bureau said Tuesday. Economists surveyed by Bloomberg held a median estimate for a 0.7% decline. The decline places monthly sales at $620 billion and just below the record-high seen in April.
The April sales data was revised higher to a 0.9% jump from an initially unchanged reading.
While sales sit lower than the previous total, they’re still up 28% year-over-year and 18% from pre-pandemic highs. The May 2020 sales report showed spending surge as stimulus included in the $2.2 trillion CARES Act revived economic activity. It also marked the largest one-month sales jump in data going back to 1992.
Spending in the clothing and accessories industry was up 200% year-over-year, while sales at food services and bars sat 71% higher from the year-ago period.
Sliding sales and rising inflation
The May dip in retail spending suggests that, after reopening unleashed pent-up demand, consumers are pulling back. Retail sales were among the few indicators to stage a V-shaped rebound early in the pandemic and quickly exceed pre-crisis levels. Now, as stimulus dries up and the final lockdown measures are unwound, spending is set to moderate.
Such a trend would be good news for those fearing runaway inflation. The wave of consumer demand and various bottlenecks throughout the economy led price growth to accelerate sharply through the spring. The Consumer Price Index rose 0.6% in May, beating the median estimate for a 0.4% jump.
The gauge also rose 5% year-over-year, marking the fastest one-year inflation rate since 2008. Though the reading is somewhat skewed by falling prices in May 2020, it still signals inflation firmed up as massive demand ran up against widespread supply shortages. A steady dip in retail sales could hint at softer demand through the summer.
But whereas fiscal stimulus like direct payments and enhanced unemployment insurance will soon lapse, monetary policy remains highly accommodative. The Federal Reserve has indicated it is willing to run the economy hot to foster a faster and more inclusive recovery for the labor market. The central bank continues to hold interest rates near zero and buy at least $120 billion in assets each month to maintain its policy stance.
The Federal Open Market Committee will give the next hint at when the Fed will retract its support on Wednesday, following its two-day meeting. Policymakers are expected to hold interest rates and purchase pace steady but note the committee has begun talks on when to taper its asset-buying. Fed Chair Jerome Powell will likely acknowledge that, while inflation has exceeded estimates, the elevated rate will prove temporary as supply-chain strains are solved.
Demand for workers in the US intensified in April as nationwide reopening squared off with an unprecedented labor shortage.
Job openings rose to a record-high 9.3 million from 8.3 million in April, according to Job Openings and Labor Turnover Survey, or JOLTS, data released Tuesday. Economists surveyed by Bloomberg held a median estimate of 8.2 million openings.
The reading marks a fourth consecutive jump in openings. The report also sheds more light on how the labor market performed through April. The month’s nonfarm payrolls report, released in early May, showed hiring drastically slowing as businesses reported difficulties finding workers.
The April payroll gains have since been revised slightly higher, and data published last week showed hiring rebound in May. Yet job growth is still down from the pace seen in March despite openings climbing further. Democrats have attributed the slowdown to a push for higher wages, while Republicans largely blame enhanced unemployment insurance.
The Tuesday JOLTS report showed fewer Americans competing for each opening. About 1.1 available workers existed for each open job, down from 1.2 in March. The reading compares to a pre-pandemic average of 0.8 and a crisis peak of 5.
A detailed look at April hiring and firing
Like the jobs report published on Friday, the JOLTS release includes more a granular look at which sectors thrived and which lagged, albeit one month behind the Bureau of Labor Statistics’ report.
The accommodations and food services sector added the most job openings throughout April, with a gain of 349,000 positions. The educational services sector shed 23,000 openings, setting the month’s largest decline.
Separations, which include layoffs and quits, jumped by 324,000 to 5.8 million.
Quits rose to a record-high 4 million from 3.6 million. Layoffs and discharges fell by 81,000 to 1.4 million, mirroring the downward trend in weekly jobless claims.
The US hiring rate held steady at 4.2%. That’s just above the pre-pandemic trend and suggests the labor shortage intensified through April.
The latest labor-market diagnosis
While the JOLTS report lends more detail to how the economy fared in April, Friday’s jobs report gave the most up-to-date look at the labor market’s performance. The US added 559,000 nonfarm payrolls last month, missing the median estimate of 674,000 jobs but improving significantly from the April pace.
The unemployment rate fell to 5.8% from 6.1%. The decline, powered by strong hiring and a slight drop in labor-force participation, beat the median estimate of 5.9%.
Economists largely viewed the report as a lukewarm print. “With unemployment benefits set to fade in the fall, we may be waiting until the end of summer before we see clear evidence of a fundamentally healing labor market,” Seema Shah, chief strategist at Principal Global Investors, said.
The Friday report also showed wages surging for a second consecutive month. Economists have looked to average hourly earnings for signs of whether labor shortages are merely overblown anecdotes or signs of a more widespread shift. Combined with the marked climb in openings through the spring, the strong upward pressure on wages backs up reports that Americans are holding off on returning to work.
The Bureau of Labor Statistics’ monthly jobs report is among the most closely watched gauges of economic health, but Friday’s release is even more anticipated than usual.
It’s the first reading since April data showed a sharp slowdown in hiring and stupefied economists across the board. The Friday report will reveal whether the deceleration was a one-month fluke – or the start of a stagnating recovery.
Economists are largely optimistic. The median estimate for May payroll growth sees the US adding 674,000 jobs throughout the month. That would mark a sharp rebound from April’s 266,000-payroll bounce. Economists also expect the unemployment rate to dip to 5.9% from 6.1%. That level would represent a new-pandemic-era low.
Data published Thursday suggests the forecasts could ring true. ADP’s monthly employment report showed the US adding 978,000 private payrolls in May, blowing the 674,000-payroll estimate out of the water. The reading marked the strongest month of private-payroll growth since June 2020 and a fifth straight month of job additions.
Separately, weekly filings for unemployment benefits fell to a fifth consecutive pandemic-era low last week as layoffs slowed further. Jobless claims totaled an unadjusted 385,000 for the week that ended Saturday, narrowly beating the median estimate for 388,000 claims. Claims have steadily trended lower throughout May, signaling the labor market’s recovery picked up after April’s less-than-stellar data.
To be sure, weekly claims counts and ADP’s report are also volatile and only loosely tied to the government’s nonfarm payrolls data. As seen just one month ago, strong prints from both indicators can still precede an upsetting jobs report.
“It is hard to know what to make of the signal from the ADP report because it has not reliably predicted the BLS data in recent months,” Daniel Silver, an economist at JPMorgan, said in a Thursday note. “Declines in initial claims likely reflect improving conditions in the labor market, although other factors could also be at play.”
Hiring should improve, but don’t get too excited
Experts are finding reasons to temper their expectations for other labor-market signals. Data from the Ultimate Kronos Group and Homebase both show modest increases in hours worked in May, Bank of America economists said last week. The former’s shift-work measure rose by just 0.1% between the May and April payroll weeks, compared to the 0.3% decline from the prior period. The reading “could mean a slightly better jobs report but does not suggest a gangbusters print,” the team led by Michelle Meyer said.
The Homebase employee working index rose just 1.7% between the May and April survey weeks. That similarly hints at a “soft reading,” the bank added.
Other metrics, such as the Conference Board’s labor-market differential index and national purchasing managers’ indices, suggest hiring improved in May. Still, the BofA economists cautioned against “reading too much” into such information for the “magnitude of hiring,” and instead see them as pointing to a general improvement in hiring.
“All told, we see scope for decent gains in employment in May following a disappointing report in April,” the team said.
Taper time? Or delay further?
There’s a fair deal riding on the Friday report, the bank added. The Federal Reserve has indicated it won’t pull back on its ultra-accommodative monetary policy until it sees “substantial further progress” toward maximum employment and above-2% inflation.
The latter condition is already being met, with price growth trending above average as the US reopens. The Friday jobs report, then, is a “critical data point” for the Fed’s next steps toward policy normalization, the BofA economists said.
On one hand, a stronger-than-expected report could push the central bank further toward tapering its emergency asset purchases. The Fed has been buying at least $120 billion of Treasurys and mortgage-backed securities each month to support market functioning. Officials have been adamant they don’t expect to shrink the purchases in the near-term, yet minutes from the Federal Open Market Committee’s April meeting suggested they may soon discuss a plan for eventual tapering.
A strong rebound in employment “could give the Fed more confidence in the recovery and the ability to start guiding markets toward a taper,” BofA said.
Conversely, another disappointing report could push tapering further into the future, the economists said. The central bank has made clear that it’s willing to maintain its easy monetary policy for as long as needed to support the economic recovery. Any sign of the labor market recovery stagnating would likely entice the Fed to keep rates near zero for as long as needed to promote hiring.
Potential buyers will need to wait a little while longer for the housing market to cool off.
US housing starts slid 9.5% in April to an annualized rate of 1.57 million units, the Census Bureau said Tuesday. That’s well below the median estimate of a 1.7 million pace from economists surveyed by Bloomberg. March’s huge upswing was revised slightly lower to a rate of 1.73 million.
The reading erases much of the sharp improvement seen through March and suggests contractors’ efforts to shore up supply are hitting snags. Lumber prices skyrocketed through April as shortages slammed the construction sector. While the housing market remains robust, the Tuesday report signals inventory pressures won’t be alleviated so easily.
“Strong demand, a need for inventory, and homebuilder optimism will support housing starts over the rest of 2021, while record-high lumber prices and supply chain bottlenecks may act as headwinds,” Nancy Vanden Houten, lead US economist at Oxford Economics, said in a note. The firm expects starts to average 1.6 million through the year, which would mark the fastest pace of home construction since 2006.
In more encouraging data, building permits rose 0.3% through April. Permits are more forward-looking than starts, suggesting contractors expect to ramp up construction through the year. There’s also a growing backlog of permitted homes that haven’t been started yet. The recent decline in lumber prices and easing of some supply bottlenecks could pull forward that construction, Vanden Houten said.
Housing starts will be the indicator to watch as the red-hot market charges into the summer. Sales of existing and previously owned homes, while still elevated, have dropped off in recent months as massive demand runs up against a nationwide supply shortage.
That imbalance has driven prices higher throughout the year. Home-price inflation hit a record-high 12.2% in February, the Federal Housing Finance Agency said on April 27. The lingering shortage and lack of an immediate supply boost likely kept price growth strong in March and April.
The shortage and months-long price surge led some to worry that the market is repeating the boom-and-bust cycle of the late 2000s. Experts told Insider last month that, while prices will likely climb further, the current rally has more to do with a lack of inventory than the risky lending that fueled the 2008 crash.
The Federal Reserve backed the outlook following its April policy meeting. The central bank is “carefully” monitoring the housing market but doesn’t see the “kind of financial stability concerns” that emerged in the late 2000s, Fed Chair Jerome Powell said in an April 28 press conference.
“My hope would be that over time, housing builders can react to this demand and come up with more supply, and workers will come back to work in that industry,” he added.
Job openings grew to record highs in the US in March amid continued vaccination and fresh stimulus.
The data shows businesses reopening along with the country, yet last Friday’s jobs report for April indicated employers have since had trouble filling those jobs.
Openings rose to 8.1 million from 7.5 million, according to Job Openings and Labor Turnover Survey, or JOLTS, data published Tuesday morning. The median estimate from economists surveyed by Bloomberg was for 7.5 million openings. The reading marks a third straight increase and places job openings at their highest level ever.
The food services, accommodations, and state and local government education sectors added the most openings throughout the month. The health care and social assistance sectors shed 218,000 jobs, marking the largest decline of the month.
Separations, which count layoffs and quits, dropped to 5.3 million from 5.4 million.
Quits climbed by 125,000 to 3.5 million. Layoffs and discharges sank by 243,000 to 1.5 million.
The country’s hiring rate rose to 4.2% from 4%, according to the report. That’s just above the pre-pandemic trend. Yet with roughly 10 million Americans unemployed, the pace signals the labor market recovery will take years if hiring doesn’t accelerate further.
Data published Friday suggests that such acceleration isn’t likely, at least not in April. The US added just 266,000 jobs last month, grossly missing the median estimate for 1 million payrolls. The reading also marked a sharp deceleration from the job growth seen in March. Unless the April figures prove to be noise or are revised higher, the report hints the labor market recovery hit major snags despite the broad easing of economic restrictions.
Some attributed the weak payroll growth to reports of labor shortages, but JOLTS data showed plenty of Americans searching for work. About 1.2 Americans competed for each job opening in March. That’s down from the February reading of 1.3 and the pre-pandemic level of about 0.8.
To be sure, a phenomenon known as reallocation friction can keep companies from hiring even in areas with an abundance of jobless Americans. Experts have warned that the post-pandemic economy will be drastically different from that seen in early 2020. The types of jobs available to workers could be very different, and jobless Americans might need time to decide which sector to work in if they have to make such a pivot.
The JOLTS report provides more detail around what was largely an encouraging month for the labor market. The country added 770,000 payrolls as Democrats’ $1.9 trillion stimulus supercharged spending. The unemployment rate fell to a pandemic-era low of 6%.
While the April jobs report showed the recovery stagnating last month, other indicators have shown more promising trends. Daily COVID-19 case counts fell to an 11-month low on Sunday and are swiftly trending lower as vaccination continues. Filings for unemployment benefits have similarly declined over the past four weeks and most recently slid below 500,000 for the first time since March 2020.
Various economic indicators are surpassing their pre-pandemic highs as stimulus and reopening drive the country toward a full recovery.
US wages are the latest to rebound.
Salaries and hourly wages finally leaped above their February 2020 peak in March 2021, according to the Bureau of Economic Analysis. Employee payment across the country rose to a seasonally adjusted annual rate of $9.78 trillion from $9.67 trillion, marking a new record high and an eleventh consecutive climb.
By comparison, it took more than twice as long for wages to fully rebound from their decline during the Great Recession.
The sharp increase seen two months ago was powered by stronger wage growth for workers in food preparation and serving, cleaning, and individual care, a group hit hard by lockdowns. Those Americans have enjoyed a massive jump in wages from January to March as vaccines started to be rolled out and service jobs bounced back. Wage growth for managers, professionals, technicians, and office and administration workers remain below their pre-pandemic rates, albeit only slightly so.
The bounceback in low-wage income growth marks a positive development amid the largely uneven recovery. The white unemployment rate still sits significantly lower than that for Black and Asian Americans. And while wages are rebounding across racial and gender lines, the pandemic only exacerbated long-lasting inequalities.
More broadly, the labor market seemed to turn a corner in March. Payroll growth shot higher as stimulus and the easing of lockdown measures juiced the economic recovery. Gains were also strongest among leisure and hospitality businesses, some of the firms hit hardest by the virus and its fallout.
The labor market’s rebound is expected to have accelerated last month. The Bureau of Labor Statistics is set to publish April payroll growth data on Friday and reveal how reopening and warmer weather benefitted hiring. The median estimate from economists surveyed by Bloomberg calls for nearly 1 million nonfarm payroll additions. They also expect the unemployment rate to drop to 5.8% from 6%.
Economists got their first preview of April job creation Wednesday morning. The country’s private sector added 742,000 payrolls in April, according to ADP’s monthly employment report. That missed the median estimate of 873,000 private payrolls but still marked a fourth straight monthly gain.
“Service providers have the most to gain as the economy reopens, recovers, and resumes normal activities and are leading job growth in April,” Nela Richardson, chief economist at ADP, said.
[Editor’s note: This article has been updated to remove the Federal Reserve phrase classifying workers in food preparation and serving, cleaning, and individual care as “low-skill workers,” a term increasingly seen as problematic.]
After April’s shockingly disappointing jobs report, it looks more like “it’s not the economy, stupid, it’s the virus.”
March’s strong jobs data – along with widespread projections of a coming economic boom – had raised optimism among economists for a continued recovery in the labor force. It prompted Federal Reserve Chair Jerome Powell to deem March an “inflection point” for the reopening of the economy, and experts saw it kicking off a season of outsize payroll increases. But the drop in April makes clear the virus continues to bite.
Economists had expected payroll gains to reach 1 million, but the country added just 266,000 jobs last month. It was the smallest monthly increase since January and the biggest miss of payroll forecasts in more than two decades. The unemployment rate rose to 6.1%, female employment declined, and, although hard-hit sectors like leisure and hospitality saw healthy gains, most others posted either meager growth or shed jobs entirely.
The Bureau of Labor Statistics’ Friday release underscores just how much the labor market still has to recover, and that the climb won’t be as easy as most economists anticipated. Even if April stands out as a gloomy outlier, the average pace of payroll growth suggests it could take years to fully recoup the millions of jobs lost to the pandemic.
What went wrong?
The jobs report was such a shock that it’s hard to find a single explanation at first glance. It also highlights just how inadequate forecasting tools are for measuring this unique economic moment.
Economists typically use a combination of quantitative and qualitative data to estimate future growth. Indicators like weekly jobless claims and hours worked join anecdotal evidence and broad surveys to create forecasting models. Economists’ calculations, when tallied together and averaged, usually come close to guessing monthly payroll additions.
The April data serves as a wake-up call for the many forecasters who didn’t even come close to guessing correctly. Whether models overlooked details like COVID-19 fears or bullish biases tarnished forecasts, economists need to reconcile how they were so wrong.
The disappointment was likely fueled by several factors instead of one solvable hurdle. Despite President Joe Biden’s overdelivering on vaccinations, the country is far from placing the coronavirus pandemic behind it. Daily case counts still averaged about 50,000 at the end of last month, and highly contagious strains continue to spread across the US.
The coronavirus pandemic has also been notable for the “she-cession,” hurting female employment much more than men. The absence of affordable childcare and lack of in-person schooling around the country likely kept some Americans home instead of working, as born out by the April report, which showed women – who disproportionately take on childcare responsibilities – losing jobs through the month.
How big is the labor shortage?
Last month also saw several businesses across the manufacturing and service sectors reporting difficulties in finding workers. The jury is still out on how widespread worker shortages might be, as about 10 million Americans remain unemployed. On one hand, some economists suggest boosted unemployment benefits cut into the incentive to find work. Strong wage growth in the leisure and hospitality sector also signals businesses may need to lift compensation to attract workers.
“The benefits are due to expire in September but perhaps people think jobs will be just as easy to find then as they are now, so why take a job today?,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said. “If people continue to resist taking the jobs on offer at the pay on offer, then wages will have to rise more quickly.”
The Chamber of Commerce called on lawmakers to withdraw the federal benefit to unemployment insurance following the April report. The supplement results in 25% of recipients earning more from unemployment benefits than by working, Neil Bradley, executive vice president and chief policy officer at the Chamber of Commerce, said in a statement.
“We need a comprehensive approach to dealing with our workforce issues and the very real threat unfilled positions pose to our economic recovery from the pandemic,” he added.
The April data does not quite agree with the chamber’s argument, showing labor demand overshadowing anecdotes of a supply shortage. April job gains were strongest in lower-wage industries and in sectors with in-person jobs. The composition of last month’s job additions “doesn’t scream supply constraints as the problem,” Nick Bunker, an economist at Indeed, wrote on Twitter.
Separately, the number of Americans temporarily laid off ticked slightly higher in April. That also signals labor demand wasn’t as robust as businesses’ anecdotes suggested.
Looking to other labor-market data, the steady decline in weekly jobless claims now looks much less encouraging for the recovery. The April uptick in unemployment comes as filings for unemployment benefits fell throughout the month to numerous pandemic-era lows. The drops initially seemed to signal that more Americans were returning to work, but BLS’ report suggests the downtrend has more to do with Americans dropping out of assistance programs than finding employment.
It could take months for the government to lend a hand
Much of the last few months’ promising job gains were linked to massive stimulus packages. The CARES Act helped a sharp hiring rebound after initial COVID-19 lockdowns in March 2020. And Biden’s $1.9 trillion plan in March 2021 spurred stronger economic activity last month.
The president has since rolled out two new spending proposals, the larger of which would spend $2.3 trillion on job creation. The American Jobs Plan would create millions of jobs by funding traditional infrastructure projects, clean energy initiatives, and nationwide broadband, Biden said in a Thursday speech. Biden’s administration has at other times cited a Moody’s Analytics projection of 2.7 million new jobs from the American Jobs Plan.
The smaller package, named the American Families Plan, could support hiring in its own right by overhauling the care economy, as it seeks to provide paid family and medical leave and childcare support.
Yet such support is likely months away. Republicans have balked at both plans, lambasting their hefty price tags and the tax hikes proposed to offset them. Democrats seem to face a challenge passing the package on a party-line vote via reconciliation, as some moderates in their party have yet to throw their full support behind the follow-up packages as they exist.
To be sure, the April report represents just one month of hiring. May numbers could show a healthy rebound and revive the positive trend. The economy is not even fully reopened from virus-safety considerations yet, so rebounds are likely.
But with additional fiscal support far on the horizon and economists highlighting a number of obstacles hindering job growth, the resurgent spring recovery for jobs that many economists were predicting is gone.
The Bureau of Labor Statistics’ upcoming jobs report is expected to show strong payroll growth through April as the US reopened. But where most economists see a moderate month-over-month improvement, Aneta Markowska of Jefferies stands out in her bullishness.
The median estimate from economists surveyed by Bloomberg for April payroll growth sits at 1 million payrolls. That would mark a pickup from the 916,000 jobs added in March and the strongest month of job growth since August.
Markowska, Jefferies’ chief economist, forecasts that the economy added 2.1 million jobs last month. Not only is that more than double the median forecast, but also 800,000 payrolls greater than the next highest projection from a top economist. The unemployment rate will fall to 5.2% from 6% and beat the forecast of 5.8%, according to the bank.
While Markowska’s estimates stand leagues away from the consensus, the chief economist told Insider she has a tougher time understanding the median forecast than supporting her own.
“To be honest, I’m sort of asking the same question in reverse. What is everybody else not seeing?” Markowska said. “I run a number of models and the lowest one gives me an estimate of 1.4 million.”
Looking to quantitative data, Markowska highlighted changes in jobless claims as supporting growth of more than 1 million payrolls. Kronos data tracking hours worked correlates well with nonfarm payrolls and signals an April gain of 1.6 million jobs, she added.
BLS’ survey timing also backs up Jefferies’ forecast. The March report had little to do with reopening, as the survey window closed on March 13, Markowska said. The April report, due for release Friday morning, should better capture how reopening and Democrats’ stimulus boosted job growth in the leisure, hospitality, and retail sectors, she added.
Still, the hard data only makes up part of Markowska’s projection. Reports like the Census Bureau’s Household Pulse Survey and The Conference Board’s own survey point to growth as high as 4 million payrolls, the economist said. Although survey responses are volatile and harder to tie to quantitative data, they support Markowska’s argument for a blowout month of job gains.
“Obviously [3 million] sounds excessive, and I wouldn’t rely on any of those individually. But they certainly give me more confidence that we could get something closer to 2 million,” she said.
Looking beyond April growth and into 2022
Robust hiring could last into the summer, and even though Markowska sees the pace tapering off later in the year, she still expects growth to trend above the pre-pandemic norm. Jefferies’ GDP forecast calls for a 7% expansion in 2021, slightly exceeding the Federal Reserve’s estimate for 6.5% growth. That rate implies average monthly payroll additions of about 500,000 payrolls in the final month of 2021, Markowska said.
The chief economist’s optimism isn’t relegated to 2021. Consensus forecasts see the rate of recovery dropping off in 2022 as stimulus expires and easy gains turn into more modest improvements. But where the Fed expects GDP growth to slow to 3.3% next year, Markowska cited a still-elevated savings rate and expectations for stronger production for her 5% growth forecast.
“There’s still a lot of upside for industrial production. I think, by the middle of the year, you’re going to be looking at capacity utilization rates that match the peaks from the last cycle, and they’re going to keep going,” she said.
“That’s where I really differ: the ability of this economy to sustain a lot of that momentum. Whereas a lot of people see a fiscal cliff happening next year, I think that’s more of a story for 2023.”