The jobs report: The boom that wasn’t

Diners in Detroit on May 5, 2021. The largest job gains were in leisure and hospitality, two industries that had been particularly hard hit during the pandemic. The New York Times
It’s a little secret of the news business that for some anticipated events, like a Supreme Court decision or the death of a prominent figure, we pre-write much of an article or different versions of them so that we can publish quickly once news occurs.

Which is why there is now a trashed draft of this article explaining how the April jobs numbers show what a hyper-speed economic recovery looks like. It was completely wrong.

Employers added only 266,000 jobs last month, the government reported Friday morning, not the million or so that forecasters expected. The unemployment rate actually edged up to 6.1%.

The details of the new numbers are messy. Temporary employment fell sharply (down 111,000 jobs), while hiring in the leisure and hospitality sector was robust (up 331,000 jobs). It will take time to figure out why so many mainstream forecasts were so wrong — the modest job creation is out of whack with what other indicators have suggested — and whether some part of the weak results is more statistical aberration than reality.

But if robust job growth does not return quickly, it will be very concerning. The economy is still short 8.2 million jobs from its February 2020 level. The great hope has been that employers would fill that gap rapidly, bringing the United States back to its full potential in short order.

Even if you view April as an outlier, job growth has averaged only 524,000 a month for the past three months, a pace that if continued would imply a long slog back to full health. It certainly does not signal the kind of rapid boom that many forecasters have started to expect, and that the Biden administration and the Federal Reserve are hoping for.

These numbers are consistent with the story many business leaders are telling, of severe labour shortages — that demand has surged back but employers cannot find enough workers to fulfill it, at least not at the wages they are accustomed to paying. Many employers and conservatives argue that the expanded federal unemployment benefits have been too generous (they were extended as part of the recent pandemic rescue aid package and are scheduled to expire in September).

Citing the jobs report, the US Chamber of Commerce on Friday urged an immediate end to the $300 weekly unemployment benefit supplement.

April's slow job growth was accompanied by significant pay increases. Average hourly earnings rose by 0.7%, not too shabby on its own. And in certain sectors the pay raises were blockbusters, including a 4.8% rise in leisure and hospitality average hourly earnings — in a single month.

It is worth noting that the labour force is growing — an additional 430,000 Americans were either working or looking for work in April — so it is pretty much the opposite of the situation after the 2008 recession, when wages were growing slowly and millions were leaving the labour force.

Still, it remains possible that many people remain reluctant to jump back into work for a variety of other reasons: having to care for children whose classes are remote, fearing the coronavirus, reconsidering their careers.

Back in 2010, the Obama administration introduced one of the more unfortunate economic messaging concepts of recent decades, announcing that a “Recovery Summer” was underway. It became a punchline, because while the economy was expanding, Americans were still far worse off than they had been before the 2008 recession, and improvement was coming very slowly.

That’s one outcome the Biden administration desperately wants to avoid.

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