Job Creation in April Disappoints

Roy Maurer By Roy Maurer May 7, 2021
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woman hanging reopening sign

U.S. employers added 266,000 jobs in April, falling well short of the 1 million jobs economists were expecting, and the unemployment rate ticked up to 6.1 percent, the first increase of that measure since early in the pandemic, according to the latest employment report from the Bureau of Labor Statistics.

The disparity between the data and the expectations for it make it the biggest miss in the report's history and a major setback for the hopes of a speedy labor-market recovery as the COVID-19 crisis subsides.

April's job gains are barely enough to keep up with population growth, let alone recover from the pandemic's economic devastation. Adding to the bad news is that the number of jobs added in March was also revised downward by 146,000.

"This might be one of the most disappointing jobs reports of all time," said Nick Bunker, an economist at the Indeed Hiring Lab. "The labor market needs to gain 8.2 million jobs to put us back where we were pre-pandemic, not accounting for the jobs that would have been created if the pandemic never happened. Every month job gains don't accelerate puts us further behind."

The deceleration is a surprising result given the increasing distribution of vaccines and continuing economic reopening, said Daniel Zhao, Glassdoor senior economist.

Kevin Harrington, the CEO of job search site Joblist, agreed, saying that "After a strong March, the expectation was that April would bring more good news as the public health situation continues to improve. With millions still out of work, we need this trend to reverse soon in order to get back to anywhere close to pre-pandemic employment levels this year. We can only hope that April's results prove to be a temporary slowdown before hiring heats up again this summer."

Leisure and Hospitality at the Forefront

The battered leisure and hospitality industry saw the biggest hiring gains, adding 331,000 workers last month even though the sector is still down nearly 2.9 million from where it was before the pandemic.

"It's encouraging to see that the category with the strongest jobs growth in April was leisure and hospitality," Harrington said. "Despite many reports of a labor shortage in this industry, a high number of workers are clearly flocking back to these jobs right now."

Zhao said that while shortages may make finding workers more difficult, they don't appear to be stopping jobs growth in the hard-hit sector. "It's unusual that leisure and hospitality, where reports of shortages were the most common, saw the strongest jobs growth even as other sectors like temporary help services (-111,400 jobs) and transportation and warehousing (-74,100) saw job losses," he said.

More than half of the increase in the sector (187,000 jobs) was in food services and drinking places. Jobs in accommodation increased by 54,000, but less than expected, said Diane Swonk, chief economist at Grant Thornton. "Many resorts have been reluctant to staff up ahead of summer despite strong demand. Too many vacation plans were cancelled a year ago, which forced them to scale back following lockdowns and they want to avoid a repeat of that this summer," she said.

Job gains were also reported in local government education (31,000 jobs) as children continue to return to in-person learning, social assistance (23,000 jobs) and financial activities (19,000 jobs).

Swonk added that hiring at childcare centers increased by 11,500 after rising modestly in March, and job losses were broad-based across sectors, ranging from manufacturing to professional services.

"Health care hiring also declined," she said. "Burnout and retirements are rising, while physicians' and dentists' offices are hiring to catch up on the backlog of routine exams since the pandemic began."

Manufacturing employment fell by 18,000 in April, following gains in the previous two months. Retailers lost 15,000 jobs and temporary service jobs declined by 111,000 last month.

"Members of the American Staffing Association are shaking their heads in disbelief over this morning's report," said Richard Wahlquist, president and CEO of the American Staffing Association. "Staffing and recruiting agencies across most sectors report that it is very difficult to find employees right now in almost every market. In fact, many report that their biggest challenge is the shortage of qualified workers."

Unemployment Goes the Wrong Way

The unemployment rate rose to 6.1 percent from 6 percent in March, driven by an uptick in the labor force participation rate.

"That's a sign that the reopening economy is pulling workers back into the labor force, even if they had trouble finding jobs in April," Zhao said. "Temporary layoffs rose to 2.1 million and permanent job losers rose to 3.5 million. The increase is less concerning if it's being driven by rising labor force participation, however, it is a surprise that rising participation is not driving more significant job gains."

The number of people considered long-term unemployed (jobless for more than 27 weeks) remained at 43 percent of the total unemployment figure, Swonk said. "That share is the same as last month, which was the highest since 2012 when the economy was still struggling to recover from the Great Recession."

Labor Shortages to Blame?

The disappointing employment numbers have led to various explanations for what's going on in the labor market. Many employers, particularly in restaurants, retail and hospitality, have reported little response to job ads. Some observers, including the U.S. Chamber of Commerce, have pointed out that the federal government's temporary emergency pandemic relief programs and augmented jobless benefits are keeping people in these hard-hit industries at home.

HR managers have told SHRM Online about their experiences with workers turning down jobs in order to collect the increased unemployment benefits. Rising wages in those industries also suggest a shortage of workers.

On the other hand, the labor force grew, which argues against the idea that unemployment checks are keeping people out of the workforce. Millions of workers still have health concerns and childcare responsibilities preventing them from returning to work. Many others still expect to be hired back by their previous employers once more businesses reopen fully. Another factor to consider is that most of the working-age population was still not vaccinated in mid-April during the survey reference period for the report.

"The data in today's report is not wholly consistent with the idea that labor shortages have crimped the recovery," Zhao said. "Labor shortages were most commonly reported in leisure and hospitality, but those employers also saw the strongest job growth. While it's possible that gains would've been even higher without these labor shortage challenges, it is unusual that they would show up in other industries more severely."

Swonk said several factors accounted for the disappointing numbers in April. "Resorts and retailers are reluctant to staff up ahead of reservations, given the repeated cancellations in the last year. What was once considered a sprint is now viewed as a marathon, with employers and workers both skittish on declaring victory before we cross the finish line of herd immunity," she said.

Regardless of what the cause of the slowdown is, it will be interpreted as being caused by worker shortages, Zhao said, "raising the temperature on the political debate surrounding extended unemployment benefits. As a result, we may see more states follow Montana and South Carolina in ending their participation in the federal unemployment benefit programs."

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