Well that was disappointing. After days of speculation, the monthly jobs report landed with a resounding thud having missed everyone’s expectations. (BLS)
- Total nonfarm payroll employment rose by 266,000 in April and the unemployment rate ticked up for the first time in a year to 6.1%
- Expectations had been for at least one million added to the work force with some projections as high as 2.1 million.
So what happened? Neil Irwin noted on Twitter that “the labor shortage narrative just got a lot stronger.” So why is there a shortage of labor? There appear to be three schools of thought on this…
- Unemployment Benefits: Employers and Republicans have argued that expanded unemployment benefits have been too generous and people are making more money at home than going to work.
- Wages/Safety: Employees and democrats have argued that wages are too low and people aren’t going to risk their lives for minimum wage.
- School Closures: With a lot of schools still closed a lot of working parents can’t work.
So who is right? Probably everyone. The country has 8.4 million fewer jobs in March 2021 than in March 2020. The latest NFIB Jobs Report says a record 44% of all small business owners have job openings they could not fill in April.
- The good news. We are seeing some wage growth. Retail wages were 2.1% for the month and leisure and hospitality wages were up almost 3%. There are also reports that camps will be open this summer meaning parents who were forced to stay at home for their children remote learning can re-enter the workforce.
- The bad news: Enhanced unemployment insurance doesn’t end till the fall. Unless the Biden administration is convinced that UI is artificially constraining labor supply (which based on his recent comments he is not) it could be a slow recovery this summer.