Restaurant workers are quitting at record-high rates, and it could force their employers to raise wages, experts say

san francisco waiter
  • A record 5.6% of restaurant workers quit their jobs in April.
  • Analysts say this indicates that workers are confident they can find other jobs easily.
  • The restaurant industry has a record 1.34 million job openings.
  • See more stories on Insider’s business page.

Restaurant workers quit at record levels in April, and it’s another sign that employers are going to have to work harder to attract and retain workers.

The quit rate, which refers to the percentage of people who voluntarily leave their jobs over the period, reached 5.6% in April for the food service and accommodations sector. That number is an all-time high for the industry, according to Gordon Haskett Research Advisors, and it was more than twice the rate of the economy as a whole, not counting farming jobs.

The high quit rate is an “indication that restaurant sector employees are leaving their jobs to pursue higher wage rate opportunities – in both other sectors and other restaurant concepts,” the analysts said in a report.

The quit rate is “generally viewed as a measure of an employee’s confidence in finding a new job and perception of job availability,” Gordon Haskett analysts say, and workers have good reason to feel this confidence. The sector also saw a record high of 1.34 million job openings in April, an increase of 350,000 over March numbers. Total nonfarm openings abound, with a record 9.3 million openings in April, per the Bureau of Labor Statistics.

Restaurants and stores are looking to staff up and return to normal as COVID-19 restrictions lift and the country slowly reopens. Hiring has been difficult for many companies, which have reported a lack of candidates for open positions. Many businesses are offering perks, bonuses, and benefits to new employees just to get them in for interviews, while some like Chipotle are raising wages in the hopes of finding workers.

But retailers and restaurants are also struggling to retain workers who want to leave for new opportunities. That’s making the sector’s labor crunch even worse.

Read more: Newly revealed CloudKitchen documents show how Travis Kalanick’s company is pivoting as new rivals enter the crowded ghost kitchen space

Some workers are taking these conditions as an opportunity to leave retail and restaurant jobs to get away from low pay and difficult customers, and a growing number of openings in the labor market is making it easier to transition to new careers.

One Starbucks worker in Atlanta told Insider that she left for a job with better pay and benefits. The final straw for leaving her job of two years, she said, was realizing how her pay compared to the increasingly pricey drinks Starbucks sells.

“It took me a literal day to find a better job,” she said.

Some workers who were furloughed or laid off early in the pandemic may never return to fast food and customer service work. The past year has exposed the massive demands put on retail workers, often for relatively low pay and few benefits, even as they were called heroes and essential workers. Tasked with enforcing mask mandates and interacting with customers during the height of a pandemic, abuse, harassment, and assault were not uncommon. A Service Employees International Union survey of 4,187 McDonald’s workers in the summer of 2020 found that nearly half of respondents said that they had been physically or verbally assaulted.

In place of customer-facing retail jobs, some workers are turning to warehouse employment with companies like Amazon, even as those jobs make headlines for poor conditions. The e-commerce giant has hired about 2,800 people a day since July, mostly in warehouse roles. Others are “rage quitting” without another job lined up at all, fed up with low pay and poor treatment from customers.

Do you have a story to share about a retail or restaurant chain? Email this reporter at mmeisenzahl@businessinsider.com.

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One stunning chart shows just how much faster the US labor market is recovering now compared to the financial crisis

Now Hiring man with mask
  • A full labor-market recovery is more than a year away, but the rebound is still fast by historical standards.
  • The pandemic saw unprecedented job loss, but payrolls are bouncing back faster than in past downturns.
  • The US is on track to recoup all lost jobs in two years. The same feat took more than six years after the Great Recession.
  • See more stories on Insider’s business page.

The US labor market is far from a full rebound. Compared to the last recession, however, the recovery is moving at a breakneck pace.

The economy added 559,000 nonfarm payrolls in May, data out Friday showed. The reading marked a fifth consecutive month of job additions and a strong uptick from the disappointing gains seen in April. The US unemployment rate also hit a pandemic low of 5.8% and major stock indices neared record highs on the encouraging news.

Still, payroll growth hasn’t enjoyed the kind of V-shaped bounce-back staged elsewhere in the economy. At May’s pace of job creation, it would still take until July 2022 for the economy to recoup every job lost during the pandemic. It would take about another year from then to recapture jobs that would’ve been made had the pandemic not occurred. The projections also don’t take the nationwide labor shortage into account, which could further drag on job additions.

Calculated Risk recession chart
Source: Calculated Risk

Comparing the pandemic recovery to the Great Recession and other downturns tells an entirely different story. In a Friday post, economics blogger Bill McBride of Calculated Risk contrasted job creation from recent months to that seen during post-World War II recessions.

The trend is clear: despite seeing far more severe job losses at the start of the recession, the labor market’s recovery is the most V-shaped in modern history.

A few factors explain the pronounced rebound. The government’s response throughout the pandemic was unprecedented. Congress approved roughly $5 trillion in fiscal stimulus, and the Federal Reserve eased monetary conditions through historically low rates, massive asset-purchase programs, and extraordinary lending programs. Combined, the efforts helped economic activity bounce back relatively soon after the pandemic first hit.

The nature of the recession also played a role. The economic crisis was simply a symptom of a once-in-a-century pandemic. Lockdown measures used to curb the virus’s spread were a top reason for weaker activity. Once those restrictions were lifted, Americans with pent-up demand and bolstered savings got out and revived the economy.

The current downturn also doesn’t possess the same structural problems faced in the late 2000s. The Great Recession was fueled by a collapse of integral financial systems. Long-trusted institutions were suddenly behind an economic collapse, and the government was forced to step in with then-unheard-of support. Distrust in said institutions and severe damage throughout the housing market led to a painful and plodding recovery.

The COVID-19 crisis, by comparison, was simple. A deadly virus was spreading throughout the country, so authorities forced lockdowns that caused great harm to the economy.

The US has also learned from the Great Recession and the recovery that followed. An early push for fiscal austerity and inadequate aid for state and local governments hindered the labor market’s healing for years after the financial crisis. Payrolls didn’t return to their pre-recession highs until more than six years after the initial drop, longer than any previous postwar recession.

Policymakers are trying something else this time around. The $1.9 trillion stimulus measure approved in March included $350 billion for state, city, and local governments to offset budget shortfalls. On the monetary front, the Fed’s newly updated goals signal it will maintain ultra-easy monetary conditions well after the pandemic threat fades.

“Now is not the time to be talking about an exit,” Fed Chair Jerome Powell said in January. “I think that is another lesson of the global financial crisis, ‘be careful not to exit too early.'”

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Restaurants and hotels continued their streak of adding the most jobs out of any industry in May

A waiter pours champagne for customers in New York City.
A waiter without a mask pours champagne for customers during the “Eggs and Leggs Drag Brunch” at Da Capo on the Upper West Side on May 22, 2021 in New York City.

  • The US added 559,000 jobs in May, a bounce back from the disappointing 278,000 added in April.
  • As in April, leisure and hospitality had the largest number of jobs added among industry sectors.
  • On the other end, construction employment dropped by 20,000.
  • See more stories on Insider’s business page.

More US jobs were added in May than in April, and most of the gains once again fell in the leisure and hospitality industry.

The US added 559,000 nonfarm payroll jobs in May, according to the latest jobs report from the Bureau of Labor Statistics, below economists’ median estimate of 674,000, per Insider’s Ben Winck.

Leisure and hospitality saw another strong month of job gains. The Bureau of Labor Statistics notes that most of these gains were from food services and drinking places. That includes places like restaurants and bars.

Most industries saw some increase in their employment over the month, but some industries saw larger gains than others. The following chart shows where the job gains, and losses, were from April 2021 to May 2021:

Employment in leisure and hospitality increased by 292,000 in May after increasing by 328,000 in April, totaling four consecutive months of six-figure job gains.

“The leisure and hospitality sector added another healthy amount of jobs, but it was roughly the same number as were added the month before,” Nick Bunker, economic research director at Indeed, wrote in a statement. “Any future pickup in job growth for the overall labor market is dependent on this industry seeing more of a bounceback.”

Elise Gould, senior economist at the Economic Policy Institute, wrote on Twitter that the industry is still below pre-pandemic employment by about 2.5 million. She added she’s “optimistic that we will continue to see solid growth in coming months as vaccine distribution continues and businesses find it safe to reopen.”

The second-largest gain was in the education and health services sector at 87,000, which was higher than the 25,000 job gains this industry had in April. Most of the government jobs added in May were from local and state education jobs. State government education added 50,000 jobs and local government education added 53,000 jobs.

“Growth in ambulatory health care services accounted for essentially all of the employment change in health care,” BLS wrote in an analysis.

Four sectors saw job losses in May, including retail trade which lost 5,800 jobs and construction which lost 20,000 jobs in a single month. At almost 15.2 million jobs, retail trade is still 2.6% below pre-pandemic employment, while at about 7.4 million jobs, construction is still 2.9% below February 2020 employment. Additionally, employment in mining and logging did not change from April.

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US stocks rise after jobs data shows labor market strengthening after disappointing April report

Stock trader
Peter Tuchman, right, works among fellow traders at a post on the floor of the New York Stock Exchange, Wednesday, March 4, 2020.

  • US stocks rose Friday on the latest jobs data that indicate a strengthening labor market, though at a slower pace than analysts were predicting.
  • “The economy is still far from showing substantial progress with the labor market recovery,” an analyst said.
  • The 10-year US Treasury yields slightly fell to 1.604% compared with Thursday’s 1.624%.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

US stocks rose Friday as investors cheered May jobs data that indicated a strengthening labor market after a disappointing April reading.

Non-farm payrolls showed the US economy added 559,000 jobs in May, the Bureau of Labor Statistics said Friday. However, that was slightly lower than the 674,000 median estimate economists surveyed by Bloomberg were predicting.

“The May nonfarm payroll report showed that the economy is still far from showing substantial progress with the labor market recovery,” Ed Moya, senior market analyst at Oanda, said in a note.

He continued: “Labor market hiring remains modest at best and this should support a complete labor market recovery for the Fed at some point between the end of 2022 and early 2023.”

The reading shows a sharp acceleration from April’s dismal report, which saw job growth land well below economist forecasts. The May increase marks a fifth straight month of job additions.

In the bond market, the 10-year US Treasury yields slightly fell to 1.604% compared with Thursday’s 1.624%.

US stocks closed mostly lower Thursday as investors mulled over a new report that President Joe Biden may be open to a lower tax hike for corporations. Mega-cap tech stocks led losses, with Apple, Google, Facebook, and Amazon all down at least 1% Thursday. Tesla fell as much as 5%.

Here’s where US indexes stood at the 9:30 a.m. ET open on Friday:

AMC Entertainment has asked shareholders to let it issue another 25 million shares in the wake of the stock’s 2,300% rally, saying it will fortify the movie-theater chain with the means to chase acquisitions “hard” and turn itself around. The company CEO Adam Aron revealed this in a YouTube interview with Trey’s Trades Thursday night.

Meanwhile, billionaire investor Bill Ackman confirmed that his blank check company, Pershing Square Tontine Holdings, is in talks to spend about $4 billion for a 10% stake in Universal Music Group. He also unveiled plans to launch a new investment vehicle and deploy up to $14 billion on future transactions.

In cryptocurrencies, bitcoin slipped as much as 8% after Elon Musk signaled a potential breakup with the digital asset by posting a broken-heart emoji and a reference to a popular Linkin Park song. Bitcoin has fallen more than 40% since its April record high of near $65,000.

West Texas Intermediate crude was up 0.60%, to $69.22 per barrel. Brent crude, oil’s international benchmark, was also up 0.52%, to $71.68 per barrel,

Gold was down 1.9% to $1873.70 an ounce.

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Friday’s jobs report will show hiring rebounded last month after a shockingly grim April, economists say

Fair Wage Demonstration Hiring Washington DC
  • Friday’s jobs report will show whether hiring rebounded in May or slowed further from April’s weaker-than-expected pace.
  • Economists are forecasting a gain of 674,000 payrolls and for the unemployment rate to hit a new pandemic low.
  • Whether the report misses or exceeds expectations could shift Fed policy, Bank of America said.
  • See more stories on Insider’s business page.

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.

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Businesses are struggling to find workers and experts are raising the alarm over a ‘labor shortage.’ But there are clear reasons to think the job crunch is only a short-term problem.

mcdonald's advertising help wanted labor shortage $15 an hour
The sign at the McDonald’s restaurant on Penn Ave in Sinking Spring, PA April 8, 2021 with a message on a board below it that reads “Work Here $15 And Free Meals”.

  • The US economy appears to have a labor shortage on its hands as businesses are having trouble attracting workers.
  • But there are reasons – improving vaccination rates, childcare reopenings, the end of boosted unemployment – to believe the job market imbalance won’t last long.
  • Given the temporary nature of the issue, the Federal Reserve shouldn’t overreact.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

Until recently, enthusiasm was building in the economic recovery. But a series of dark clouds have come together all at once to darken the outlook for the US economy and they all point to one thing: inflation.

The most hotly debated topic is the question of the labor market. The weak April jobs report and reports from firms citing difficulties finding workers and mounting wage pressure have people worried about labor supply shortages. In turn, some economists are swinging from the optimism of accelerating demand to the pessimism of binding supply. As I will argue, first, the fretting over the job market and labor shortage will prove to be short-lived and second, the Federal Reserve should not change course to address the concerns – interest rates are too blunt a tool.

Yes, there is a labor shortage but it will pass

I believe there is enough evidence to conclude that there is indeed a shortage of workers for companies to hire. Since last summer, the percentage of prime-age workers – people aged 25 to 54 – in the labor force (employed or actively looking for employment) has not budged and is still stuck 1.7 percentage points below its pre-pandemic peak. At the same time, total job openings have surged by just over two million, indicating strong demand from businesses for labor. There is plenty of anecdotal evidence of firms boosting pay: McDonald’s, Chipotle and Amazon among them.

These are 2019 like headlines in 2021. The only difference is that the unemployment rate was below 4% then and it is above 6% now. This would indicate a temporary increase in NAIRU, which is not surprising in the early stages of recovery. There was a similar phenomenon following the financial crisis. The initial recovery always involves a “clearing out of the brush” so to speak – the reallocation of resources often results in short-run labor market frictions.

But these frictions will be just that, short. In the coming quarters, there are good reasons to expect labor supply constraints to ease:

  1. There is less fear of COVID in the general population. Believe it or not, we saw more people with a job, but not at work due to illness in April than we did on average last summer. As cases continue to decline, the spread of COVID is less likely to be a reason keeping people from attaching to jobs in the future. As Fed Governor Lael Brainard recently noted, the vaccinated share of the population increased notably from the survey week of the April payroll figures.
  2. Schools are likely to return to full in-person instruction in the fall. Now, just half of school districts are fully in-person. This might be impacting the attachment of parents to the workforce, especially mothers. The participation rates for women aged 25 to 44 has dropped a bit more than men. There’s some debate about how much of an impact school closures are having but I’d be surprised if the return of a normal routine did not bring with it some recovery in labor supply.
  3. The jobless benefits are coming to an end. This is the most contentious point, but there is some reason to believe these payments, critical safety nets during the worst of the pandemic, have now kept workers from attaching to jobs. After all, one reason for these programs was to bridge people over the pandemic by staying away from working. At any rate, there area slew of states endingthe boosted unemployment benefits early (covering about one-third of the labor force) and the program itself is over the summer. So, to the extent this is a big constraint, it will be fading in the months ahead.

What to do about it? Stand pat.

I think this easing of labor supply constraints has a few important implications, particularly for the Fed.

Many investors and economists are anxiously awaiting speeches from Fed officials, especially Chairman Jerome Powell, about whether these constraints and wage increases could lead to a hike in interest rates. These breathless observers should exhale. While there is some evidence that a tapering of asset purchases is coming into focus (“thinking about thinking”), rate hikes remain in the distance.

More importantly, what exactly is the Fed supposed to do about labor constraints? Lift rates and cool demand for labor? In the same way that much of the rise in consumer prices has been concentrated in items related to supply chain disruptions or the economic reopening, the Fed will likely view the recent supply side pressures in the labor market as temporary. Thus, the Fed’s best strategy is to do nothing.

In short, I think the months ahead will alleviate some of the supply pressures in the labor market. While the increased unemployment benefits are the most contentious, the fact that COVID is going away should bring many people back into the workforce. This positive labor market supply shock will give the Fed some breathing room to bide their time.

Of course, no outlook is without risks. In this case, there is some chance that the pandemic has accelerated the retirements for many. The participation rate for those aged 55 and over has declined 2 percentage points against pre-pandemic levels, a bit more than prime-age workers. If we assume that the participation rate for those aged 55 and over stays flat, the participation rate for those aged 16 to 24 would need to rise by roughly 7 points from its current level to push the total participation rate back to its pre-pandemic level – in other words, by quite a lot.

But, for now, I see more evidence that the labor supply problem is temporary than permanent. The next couple of quarters should be better.

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Biden said he’d cut down on unemployment benefits, but he really might reinstate a pre-pandemic job-seeking policy

Biden
President Joe Biden.

  • Biden is pushing states to reinstate job-seeking requirements for people to stay on unemployment.
  • “Anyone collecting unemployment who is offered a suitable job must take the job,” he said.
  • It comes as the GOP ramps up criticism that unemployment aid is dissuading people from seeking jobs.
  • See more stories on Insider’s business page.

President Joe Biden said in a speech on Monday that Americans receiving unemployment benefits must either take a job that is “suitable” or lose their benefits, as he encouraged states to reinstate a pre-pandemic policy of requiring people to search for work.

“We’re going to make it clear that anyone collecting unemployment who is offered a suitable job must take the job or lose their unemployment benefits,” Biden said at the White House.

According to a White House fact sheet released after the speech, the Department of Labor will “reaffirm longstanding” unemployment-insurance requirements to ensure that states, workers, and employers understand the rules regarding the benefits.

The Department of Labor will also issue a letter to states reaffirming that people receiving benefits cannot turn down a suitable job to continue receiving their benefits.

Experts said these job-seeking guidelines were in place before the pandemic, and states scrapped them last year as the economy crashed, which caused a surge in unemployment. While the economic situation is improving, those experts said factors like a lack of childcare and school closures were keeping some people out of the workforce.

“On the whole, the Biden Administration is moving to return UI slowly like the rest of the economy to its” pre-pandemic rules, Andrew Stettner, an unemployment expert at the Century Foundation, said in emailed comments to Insider.

“Advocates are concerned that policy makers ensure that no workers are cut of off benefits because they cannot find affordable child care, and the reinstatement of work search requirements raises the stakes for this type of protections,” he added.

This announcement came after a jobs report last week that fell significantly short of expectations, with Republican lawmakers casting the blame on too-generous unemployment benefits disincentivizing Americans from returning to work.

While Biden said in his speech that “we don’t see much evidence” of benefits hurting job growth, his remarks suggested he was listening to GOP criticism on the issue.

Since the start of the pandemic, Republicans and businesspeople have criticized expanded unemployment insurance – inserted into March 2020’s CARES Act by Democrats in the House – as too generous. While the $600 federal unemployment addition to weekly benefits expired last year, Congress reinstated it in December at $300 a week, which Biden extended through September 6 as part of the stimulus law in March.

The US Chamber of Commerce called for an end to the benefits in the wake of the April jobs numbers, but Democrats like Sen. Bernie Sanders of Vermont said on Twitter that “workers desperately need” the benefits.

While states waived their unemployment-benefits work requirements at the start of the pandemic, 39 of them have already started, or are planning to, reimpose them.

Biden said: “We’ll insist that the law is followed with respect to benefits, but we’re not going to turn our backs on our fellow Americans.”

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The US labor market is stuck in a ‘deep hole’ and needs more support, Minneapolis Fed president says

neel kashkari fed
Minneapolis Federal Reserve President Neel Kashkari participates in the Yahoo Finance All Markets Summit at Union West on Thursday, Oct. 10, 2019, in New York.

  • April jobs data proves officials should keep supporting the recovery, Minneapolis Fed Pres. Neel Kashkari said.
  • Unemployment benefits likely contributed to the weak hiring along with virus fears and childcare needs, he added.
  • Kashkari praised Congress and the Fed for their “aggressive” policy support over the past year.
  • See more stories on Insider’s business page.

The dismal April jobs report underscores just how far the US has to go in reviving its labor market, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday.

What was expected to be another month of stellar job growth instead shocked economists and showed the fragility of the US economic recovery. The US added just 266,000 nonfarm payrolls in April, according to data published by the Bureau of Labor Statistics on Friday. That compares to a median estimate of 1 million payrolls and the downwardly revised March sum of 770,000.

Americans “shouldn’t overreact to any one report,” but the data proves the country is far from a full recovery, Kashkari said on CBS’ “Face the Nation.” A strong pickup in consumer spending suggests pockets of the economy are roaring back. Still, policymakers shouldn’t retreat from providing support until millions more Americans find their way back into the workforce, the Fed president said.

“Roughly eight to 10 million Americans ought to be working right now if the COVID crisis had not happened,” Kashkari said. “We still are in a deep hole and we still need to do everything we can to put those folks back to work more quickly.”

Pegging the weak April figures to any single factor is misguided, he added. The shortfall led many Republicans to immediately blame expanded unemployment benefits for diminishing the incentive to work.

President Joe Biden rebuked such claims on Monday, saying the benefit helped keep millions of Americans afloat. He added that jobless Americans who refuse work shouldn’t be able to stay on unemployment insurance, although his administration clarified he was not announcing a new policy, rather a reinstatement of prior requirements that would be up to states to implement.

There is “some truth” in the disincentive argument, but other dynamics are playing major roles in slowing the hiring boom, Kashkari said. Childcare shortages are forcing many parents to miss out on work, at least until school is back in session. For countless others, the risk of contracting COVID-19 still outweighs the job search. These factors should fade over the next three to four months, and its likely hiring accelerates into the fall, the Fed president said.

“As the vaccine continues to penetrate, as the virus continues to slow down, schools reopen and people regain their confidence,” Kashkari said. “Those things should get better, which should lead to strong growth in the second half of the year and strong labor market recovery, I hope.”

Keeping the Fed’s foot on the gas

The Fed has already indicated it will maintain its ultra-accommodative policy stance into 2023 to ensure the recovery progresses. The central bank’s benchmark interest rate sits near zero, and it’s still buying at least $120 billion worth of Treasurys and mortgage-backed securities every month. Keeping rates at historically low levels encourages borrowing and, in theory, should promote hiring in the years after the pandemic.

Since the Fed introduced its emergency support measures in March 2020, chair Jerome Powell and the regional presidents have repeatedly backed plans to keep the help around well into the recovery. Fed officials have been less vocal in regard to fiscal stimulus. The central bank’s independence has long led its policymakers to refrain from endorsing or criticizing measures actively being debated in Congress.

Still, Kashkari noted that lawmakers’ actions so far have helped a great deal in lifting economic activity.

“The hope is that Congress has been so aggressive in the past year and the Federal Reserve has been so aggressive in the past year that we have positioned the economy for a fast recovery, not a 10 year recovery,” he said, adding there’s “still a great deal of uncertainty” around the virus.

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The US ‘real’ unemployment rate fell slightly in April amid an otherwise dismal jobs report

unemployment jobless claims
People who lost their jobs wait in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fayetteville, Arkansas, on April 6, 2020.

  • April’s job report came as a surprise, with gains far lower than expected and unemployment up.
  • But “real” unemployment did tick down, showing at least one sign of economic improvement.
  • The jobs report contained a lot of other surprises, including increased temporary layoffs.
  • See more stories on Insider’s business page.

The April payrolls data was largely a massive disappointment, but not entirely.

The US economy added only 266,000 jobs last month, according to the Bureau of Labor Statistics, far undershooting estimates calling for an increase of 1 million payrolls. The unemployment rate rose to 6.1% from 6%, and a handful of industries shed jobs despite the easing of economic restrictions.

While nearly all gauges pointed to a slowing recovery, an alternative measure of nationwide unemployment improved slightly from its March level. The “real” unemployment rate previously mentioned by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen fell to 8.3% in April from 8.7%, by Insider’s calculations. The rate includes workers who have been misclassified as having a job while on furlough and Americans who’ve dropped out of the labor force since February 2020.

The decline suggests about 13.6 million Americans are still jobless despite the economy steadily recovering through the spring. The number of Americans misclassified as holding a job while actually furloughed dropped, dipping from 636,000 to 558,000.

The U-6 rate, which includes those employed part-time for economic reasons, and those marginally attached to the labor, dropped again in April. It went from 10.9% in March to 9.9% in April; while that’s yet another dip, the rate is still nearly in the double digits.

Surprising and confusing data on April jobs

All of those numbers evoke a jobs report that is, in a word, confusing. Industries such as leisure and hospitality – the seeming epicenters of concerns over a labor shortage – saw the strongest job growth, while temporary layoffs also grew in April, which seems to contradict narratives of booming businesses looking to hire. Around 10 million people continue to be unemployed.

An analysis from Morning Consult found that, as of April 1, more workers expected to lose income over the next four weeks. By the end of April, adults across the income spectrum were still experiencing income loss at an “elevated” level. And the number of high-earners – those making over $100,000 – experiencing pay loss the week before actually went up.

It’s hard to say what, exactly, caused the jobs report to look the way that it did; possible reasons include unemployment benefits, temporary layoffs, and a dispiriting dip in female employment. All in all, the jobs report showed a potential turning point in recovery, marking a significant departure from the perhaps easy gains of March.

One mismatch: Childcare, and safely reopened full-time schools, are not necessarily caught up to the adults who want to rejoin the workforce, or have exited it.

“I think we’ve all been very hopeful that we’re turning the corner, and we’re moving forward, and that components of this pandemic – that the big principal issues of the pandemic are behind us – but I think that we need to rethink that,” Misty L. Heggeness, a principal economist and senior advisor at the US Census Bureau, told Insider. “That’s not true for a subset of our workforce. I think we’ve seen improvements until now because these have been the low hanging fruits.”

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How April’s dismal jobs report is setting the stage for Biden’s $4 trillion economic fight with the GOP

Joe Biden sad
President Joe Biden speaks about the April jobs report in the White House on Friday.

  • Republicans and Democrats drew sharply different conclusions about the April jobs report.
  • Democrats used it to bolster a case for massive infrastructure spending on issues like childcare.
  • The GOP wants to slam on the spending brakes, saying stimulus benefits are setting back job growth.
  • See more stories on Insider’s business page.

In some ways, the April jobs report resembled an optical illusion, with people making differing observations from a dataset that didn’t fit into a clean narrative.

In this case, Democrats and Republicans came to opposite conclusions about the report and what it means for the way forward in healing an economy battered by the pandemic.

The Friday report showed the economy recovered 266,000 jobs, a smaller amount defying expectations of a massive job surge on the back of government stimulus dollars, increased vaccinations, and easing restrictions. Economists had forecasted at least 1 million regained jobs.

In response, the GOP is demanding to end parts of President Joe Biden’s stimulus and calling for the government to slam the brakes on its spending. Democrats instead urged the passage of Biden’s $4 trillion infrastructure plans, viewing the lackluster report as another pillar in their argument that more spending, in part on childcare, would accelerate the recovery.

It sets the stage between the parties for a multitrillion-dollar fight on infrastructure, jobs, and families that will take up much of the White House’s time over the next few months.

The president argued for patience with his economic agenda on Friday. He said “more help is needed” and mounted a robust defense of his $1.9 trillion stimulus, which provided $1,400 direct payments and a $300-per-week federal unemployment benefit.

“When we passed the American Rescue Plan, I want to remind everybody, it was designed to help us over the course of a year – not 60 days – a year,” Biden said. “We never thought that after the first 50 or 60 days, everything would be fine.”

He flatly rejected the argument from Republicans and business groups that federal jobless aid has been sidelining people from the workforce, saying that was “nothing measurable.”

“We’re still digging out of an economic collapse that cost us 22 million jobs,” Biden said. “Let’s keep our eye on the ball.”

Kevin Brady
Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee.

Democrats double down, Republicans pounce

House Speaker Nancy Pelosi urged Congress to move immediately on Biden’s plans, and pointed to “women and working parents” being hit hardest in the pandemic. The number of women who held jobs fell in April, as reported by Insider’s Juliana Kaplan and Madison Hoff.

“The evidence is clear that the economy demands urgent action, and Congress will not be deterred or delayed from delivering transformational investments,” she said in a statement.

Republicans had already lined up against Biden’s plans, criticizing the proposed tax hikes on large firms and wealthy Americans as a future anchor on the economy. They pounced on the report in a fresh sign of their hardening resistance.

The GOP swung at Biden’s handling of the economy, arguing that the jobless aid was disincentivizing people from searching for a new job.

“This is a stunning economic setback, and unequivocal proof that President Biden is sabotaging our jobs recovery with promises of higher taxes and regulation on local businesses that discourage hiring and drive jobs overseas,” Rep. Kevin Brady, ranking Republican on the House Ways and Means Committee, said in a statement.

He also contended that jobless aid was disincentivizing people from returning to work. The argument mirrored one made by the Chamber of Commerce, an influential business group which on Friday called for an end to the $300 federal unemployment benefit.

Many economists have long disputed that federal jobless aid has kept people from returning to work. Unemployment claims has steadily fallen over the past month. They tend to cite other factors like the lack of available childcare and school closures.

Those burdens have fallen more on women, causing 2 million women to leave the workforce in the past year. Still, experts say the US will regain its economic footing eventually, though the nation faces a rocky path ahead.

“We’re gonna see pockets of strength, pockets of weakness, areas of overheating, areas where it is uncool – it’s going to be complicated and messy,” Jason Furman, a former top economist to President Barack Obama, told Insider in an interview. “But I think hopefully all moving in the right direction.”

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