The U.S. economy brought back far fewer jobs than estimated in April and the unemployment rate unexpectedly increased, underscoring the choppiness in the labor market’s recovery even as social distancing requirements were eased further in the spring.
The Labor Department released the April jobs report Friday morning at 8:30 a.m. ET. Here were the main results from the report, compared to consensus data compiled
- Non-farm payrolls, April: +266,000 vs. +1.000 million expected and a revised +770,000 in March
- Unemployment rate, April: 6.1%vs. 5.8% expected and 6.0% in March
- Average hourly earnings, month-over-month, April: 0.7%vs. 0.0% expected and -0.1% in March
- Average hourly earnings, year-over-year, April: 0.3%vs.-0.4% expected and 4.2% in March
Non-farm payrolls rose for a fourth straight month but at a markedly slower-than-expected clip, despite easing social distancing standards across the country that had been expected to support the recovery. Friday’s report came as a sharp disappointment for many economists, who had been expecting a blowout payrolls number with job gains north of 1 million, as more stay-in-place restrictions were eased and mobility picked up.
March’s non-farm payroll gain was also revised sharply lower, showing a rise of 770,000 versus the 916,000 previously reported. February’s payrolls were revised up by 68,000 to 536,000.
Altogether, the U.S. economy remained 8.2 million payrolls short of pre-pandemic levels from February 2020.
A handful of industries in the service sector generated outsized drags on the headline payrolls figure. Temporary help services lost 111,400 payrolls in April, with jobs in this industry dropping for a back-to-back month. Transportation and warehousing jobs fell by more than 74,000, and retail trade jobs declined by 15,300. In the goods-producing sector, manufacturing jobs unexpectedly dropped by 18,000 whereas a rise of 54,000 had been expected, marking the first net decline in these payrolls since January.
Other industries fared better. Leisure and hospitality jobs rose by 331,000, adding to a gain of 206,000 payrolls in March and 413,000 in February. This industry group, however, remains 3 million payrolls short of its pre-pandemic levels, and has been the hardest hit due to social distancing restrictions.
April’s rise in the unemployment rate also came alongside a larger than expected increase in the labor force participation rate, suggesting more individuals were back looking for work. The labor force participation rate increased to 61.7% from 61.5%, but still remains well below the 63.3% posted in February 2020. And at 6.1%, the unemployment rate has increased its distance to recover before returning to its pre-pandemic, 50-year-low of 3.5%.
And recently, companies and business surveys have suggested that the main economic concern now is around making sure businesses have enough workers to keep up with rising demand.
Friday’s jobs report “could indicate that labor shortages are becoming a significant drag,” Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note Friday.
“Overall, it is difficult to judge how much weight to put on this report at a time when most of the other evidence suggests economic activity is rebounding quickly, but it is a clear reminder that the recovery in the labour market is lagging the rebound in consumption,” he added. “For the Fed, we suspect that means it will be a many months before it judges the economy has made ‘substantial further progress’ towards its ‘broad based and inclusive’ full employment goal. That means any talk of tapering, let alone rate hikes, is still some way off.”
Still, many Americans remain on the sidelines of the labor market, and will likely continue to do so until concerns around the pandemic recede further. But with more than 40% of the population already injected with at least one dose of a COVID-19 vaccine, additional progress is unlikely to come quite as quickly, and many epidemiologists are now predicting the U.S. will never entirely reach “herd immunity.” The labor market’s ability to rebound further as businesses focus on risk mitigation rather than total elimination will be a key focus going forward.
“A big segment of the workers are still concerned about the pandemic. We estimate roughly 1.6 million workers want a job but didn’t look for a job recently because they were still concerned about contracting the virus, or other factors around the pandemic,” Joe Song, Bank of America U.S. economist, told Yahoo Finance on Wednesday. “On top of that, you had some workers citing that childcare was still a big factor for their decision not to participate in the labor market.”