April job growth was far short of expectations. Here’s why hiring slowed

Thomas Catenacci, DCNF

  • Experts gave varying explanations after the Department of Labor reported a meager April jobs report that fell far short of predictions.
  • “The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” U.S. Chamber of Commerce chief policy officer Neil Bradley said in a statement Friday morning.
  • The Biden administration said the virus may still scare unemployed workers out of looking for work and continued school closures may explain why the female unemployment rate has stayed high.

Experts gave varying explanations after the Department of Labor reported a meager April jobs report that fell far short of predictions.

While conservatives blamed continued generous pandemic-induced unemployment benefits for the lackluster job growth, progressives argued that the prevalence of coronavirus was to blame. The White House cautioned that month-to-month job reports may be volatile.

“We should be clear about the policy failure at work here: There are 7,400,000 jobs open in the US — but fewer than 300,000 people found new work last month,” Republican Sen. Ben Sasse, who serves on the Senate budget and finance committees, said in a statement Friday. “Why? This tragedy is what happens when Washington know-it-all’s decide to pretend they’re generous by paying more for unemployment than for work.”

Democrats’ $1.9 trillion coronavirus relief package passed in March extended unemployment benefit payments of $300 through September.

The U.S. economy added just 266,000 jobs in April after economists predicted it would add a million, according to a Department of Labor report released Friday morning. The U.S. remains nearly eight million jobs short of the 2020 peak that the economy reached prior to the pandemic, the report showed.

‘Unnecessary additional unemployment benefits’

“The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” U.S. Chamber of Commerce chief policy officer Neil Bradley said in a statement Friday morning.

Nearly 60% of small business owners reported that they were trying to hire while 44% said they were struggling to fill job openings, according to the National Federation of Independent Business’ (NFIB) April jobs report released Thursday. Ninety-two percent of those looking for workers said there were few of no qualified applicants.

“The tight labor market is the biggest concern for small businesses who are competing with various factors such as supplemental unemployment benefits, childcare and in-person school restrictions, and the virus,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Many small business owners who are trying to hire are finding themselves unsuccessful and are having to delay the hiring or offer higher wages.

Twenty-two percent of small owners generally report that they are struggling to find workers, according to the NFIB’s 48-year historical average.

“The huge miss in expectations is because the unnecessary additional unemployment benefits are incentivizing people to stay home,” Alfredo Ortiz, president of the Job Creators Network, and Steve Moore, co-founder of the Committee to Unleash Prosperity, said in a joint statement on Friday. “As we’ve been saying all along, the extension of unemployment benefits would hurt our recovery, and now we are seeing that in real time.”

“Additionally, President Biden’s relinquishing leadership to the teachers union on reopening schools has prevented people from getting back to work,” the statement continued.

‘Lingering concerns about contracting the coronavirus’

Despite previous signs of economic recovery and states announcing plans to allow businesses to reopen, the Biden administration said the virus may still scare unemployed workers out of looking for work. In addition, continued school closures may explain why the female unemployment rate has stayed high.

“Lingering concerns about contracting the coronavirus, and child care and school disruptions have prevented many from participating in the labor market,” Council of Economic Advisors Chair Cecilia Rouse said.

Rouse further suggested month-to-month figures are often volatile and that the pandemic labor market has shown signs of particular volatility.

Progressive economists have also pushed back on the argument that unemployment insurance is causing a labor shortage.

“I’m sure that labor supply is lower than it would be if we didn’t have COVID, but that doesn’t mean there’s a labor shortage,” Heidi Shierholz, a senior economist at the progressive Economic Policy Institute, told HuffPost Tuesday.

Wages would be rising to lure unemployed individuals out of unemployment if there was in fact a labor shortage, Shierholz, who worked in the Obama administration, argued in a recent blog post. She also referenced a study conducted by Yale University researchers that found $600 unemployment benefits introduced at the beginning of the pandemic hadn’t led to a labor shortage.

But, average hourly earnings did tick up slightly by 21 cents, according to the report. Shierholz explained Friday morning that wages wouldn’t just grow higher, but would grow to rates higher than what were reported before the pandemic.

“Ordinarily, if labor supply were the big issue, we’d expect to see unemployment coming down quickly but the labor force stagnating, as employers hired up available workers but couldn’t attract more,” business reporter Ben Casselman tweeted after Friday’s report.

Both the unemployment and labor force participation rates increased in April, which isn’t a combination that suggests a labor shortage, Casselman said.

Labor Secretary Marty Walsh noted that the black unemployment rate increased to 9.7% and the Hispanic unemployment rate stayed elevated at 7.9%. Asian and white unemployment fell to 5.7% and 5.3% respectively.

“These figures underscore how the American Rescue Plan puts us on the path to recovery,” Walsh said in a statement. “It’s increased the speed and access of vaccinations, it’s bringing needed relief to families, it’s enabling daycare centers and schools to reopen, and it’s supporting small businesses. It’s going to take time and effort to heal this economy.”

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