The US economy created 266,000 jobs in April, a big miss from expectations that the rapid rollout of vaccination in the United States and fiscal stimulus would generate job gains of nearly 1 million.
The implication for the recovery is that the American boom in the wake of the winter spike in coronavirus cases is not as strong as one might think. The official data released Friday validate the Federal Reserve’s long-held view that the US recovery is far from over, and can only allay some soaring inflation and overheating fears.
But it also calls into question the Biden administration’s hopes for a rapidly improving economy and the prediction by Treasury Secretary Janet Yellen that the United States may be back to full force. employment by next year.
So what’s to blame for the disappointing data? Here are some plausible explanations.
Volatile numbers
Economic data at a time of great changes in the labor market, such as the one underway with the reopening of many activities, can be volatile, erratic and non-linear, leading to large forecasting errors.
During the initial pandemic rebound last spring, economists vastly underestimated the strength of the recovery, while last month they clearly overestimated it. Federal Reserve officials have often said they don’t judge the economy based on a single month of data, and this is even more so during the pandemic. Most economists have responded to the numbers by treating them as a bit of a fluke – a temporary slowdown in the recovery – as opposed to a sign that it is already dying out.
The coronavirus has not disappeared
Economists may have been blown away by the rapid pace of vaccinations in America and the benefits it would bring to the job market. Although the Biden administration has achieved its goal of administer 200m vaccinations against the coronavirus last month, and 100 million Americans are now fully vaccinated, the employment report was compiled the week of April 12, when eligibility for injections had not been extended to all Americans . This meant that some unvaccinated workers were still not ready to return to the workforce, and companies were not hiring as quickly as expected, purely for health reasons.
Some labor shortages may appear
With 8.2 million Americans working less than in February 2020, it’s hard to imagine a situation where employers are struggling to find workers to fill positions.
But the mismatch of labor supply and demand may be starting to hold back the recovery. After more than a year of the coronavirus crisis, some workers may have severed ties with their former employers, relocated or find themselves struggling with a reconfigured family situation that hinders their ability to return to work. Meanwhile, some public transport the systems operate on limited hours, which limits the mobility of some workers.
Government support may be too comprehensive
Republican lawmakers and some business groups quickly identified their favorite culprit for slow job creation: overly generous government benefits. Not only has the US Treasury sent stimulus checks of $ 1,400 to most American families to ease the strain on household finances, but an additional $ 300 per week in federal unemployment benefits is in place until early September.
The criticism is that these payments reduce the incentive for Americans to look for work. But other labor market data does not support this thesis. For example, the last weekly count of first unemployment claims showed that unemployment benefit claims were declining below 500,000 for the first time since the first lockdowns in 2020.
Many parents are still stuck
The employment data revealed, as has become common throughout the pandemic, a widening gender gap in the nature of the recovery. While men have continued to re-enter the workforce over the past month, women have withdrawn, which means less women were employed or looking for work compared to March.
Perhaps the most likely cause is the fact that many schools have only partially reopened and still lack services such as after-school child care. Since women disproportionately bear the brunt of caring for children, they are reluctant to return to full-time employment. They may postpone any move until September, given the uncertainty over summer camp availability and conditions.
