Why April's disappointing jobs report may not be so bad for Biden

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A man walks into a restaurant displaying a "Now Hiring" sign, Thursday, March 4, 2021, in Salem, N.H. U.S. employers added a robust 379,000 jobs last month, the most since October and a sign that the economy is strengthening as confirmed viral cases drop, consumers spend more and states and cities ease business restrictions. (AP Photo/Elise Amendola)
Many restaurant owners say they can't find enough workers. (Elise Amendola / Associated Press)

In a stunning surprise for forecasters, U.S. employers added only 266,000 jobs in April, far below what most experts had predicted and a reminder that the future course of an economy badly shaken by COVID-19 remains uncertain.

If the jobs numbers were disappointing to economists, in political terms they may strengthen President Biden’s hand in rebuffing Republican attacks on his multitrillion-dollar spending plans for economic stimulus and other domestic purposes. The GOP has attacked Biden’s plans as unnecessary in a fast-recovering economy and liable to trigger inflation.

The unemployment rate stood at a relatively high 6.1% in April, up a notch from March. That compared with 3.5% in February 2020 before the pandemic struck.

Speaking in the East Room on Friday, Biden pushed back against those who called April's numbers disappointing.

"We knew this wouldn't be a sprint. It would be a marathon. Quite frankly, we're moving a lot more rapidly than I thought we would," he said, noting that the 1.5 million jobs added since he took office are the most for any administration in its first three months.

Nevertheless, he said the figures highlighted the need for his $2.25-trillion American Jobs Plan and argued that working people remain in dire need of additional help.

"This report reinforces the real truth: For years, working-class and middle-class people, the people who built this country, have been left out in the cold," Biden said. "We're still digging out of an economic collapse that cost us 22 million jobs."

Given the historic economic damage inflicted by the pandemic on both workers and employers, the recovery is starting from a very low base, with lots of room for improvement.

With millions of workers still unemployed and many businesses struggling to get back on their feet, considerable slack remains in the overall economy. The Federal Reserve has emphasized its readiness to impose cooling increases in interest rates if the economy shows signs of overheating.

At the same time, claims of labor shortages and the inability to fill new job openings are increasing, and may help explain some of the weakness in hiring. Employers in the manufacturing, food service, construction and transportation industries have complained about the difficulty of finding available and skilled workers.

Adding to the problem are shortages of key materials including semiconductors and lumber, which have held back employment in car factories, trucking firms and other businesses.

Economists remained optimistic about the economy and the labor market’s growth prospects, especially in states such as California where infection cases and government restrictions have eased dramatically.

But they also point out that the pandemic has reshaped the economy in ways that no one completely understands. That makes long-term predictions — and political claims on both sides — exceptionally fraught.

Even as the president continues to make his case for trillions more in federal spending for infrastructure and various social and health programs — to be largely paid for by tax hikes on corporations and wealthy individuals — some of his senior officials have begun to worry.

The heightened sensitivity was reflected this week when Biden’s Treasury secretary and the former Federal Reserve chairwoman, Janet L. Yellen, said higher interest rates might be necessary to keep the economy from running too fast and stoking inflation. Yellen later clarified that she doesn’t see an inflation problem now and was not recommending the Fed raise rates.

Reports of her earlier comments nonetheless spooked investors and fanned fears of an overheating in the economy, which Biden’s Republican critics see as a potentially powerful talking point as they prepare for the 2022 congressional election.

After Friday’s report, Democratic leaders and progressive groups said now was not the time to back away from plans for further help to American workers and families.

"The disappointing April jobs report highlights the urgent need to pass President Biden’s American Jobs and Families Plans,” House Speaker Nancy Pelosi said. “We need to take bold action to Build Back Better from this crisis by investing in our nation, our workers and our families.”

Conservatives and some business groups blamed the weak hiring on Democrats for enhancing unemployment benefits, with some lawmakers saying they would seek to repeal the $300 extra weekly amount.

"The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market," said Neil Bradley, executive vice president of the U.S. Chamber of Commerce.

The labor market shed an unprecedented 22.4 million jobs in March and April last year as COVID ravaged economies across the country. With April’s gain, the nation has recovered about 14.2 million jobs, or about 63% of what was lost.

The jobs report came on the heels of recent data showing U.S. economic output in the first quarter has just about fully recovered. And with personal incomes, production and spending all having surged recently, thanks in good part to massive federal relief money, many analysts were expecting April job growth to hit a million or more and for unemployment to drop below 6%.

Moreover, government statisticians revised the job gain in March down to 770,000 from the 916,000 estimated last month, although some of that was made up by an upward adjustment to February data.

"This might be one of the most disappointing jobs reports of all time," said Nick Bunker, economic research director at the jobs site Indeed.

There were a few bright spots. With more vaccinations and COVID worries receding, more people rejoined the labor force, notably men.

U.S. Secretary of Labor Marty Walsh said labor force participation reached “its highest point since last August and the number of people expressing hesitancy about returning to work due to the coronavirus is at its lowest point in the pandemic.”

That didn’t extend to women, however.

“For those hoping that female labor force participation would recover as more children went back to school, the numbers were disappointing — female participation was flat overall and down a bit for adult females,” said Harry Holzer, public policy professor at Georgetown University. He added: “We should never place too much weight on data from any one month, but the April numbers suggest that the labor market is recovering, albeit a bit more slowly than we had hoped.”

Despite Friday's disappointing report, Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy, remained confident that the state's jobs recovery would accelerate in coming months.

Up till now California had lagged behind the nation in recovering from the pandemic, but it looks to catch up as Los Angeles County, the state’s largest, and San Francisco County this week both moved to the least restrictive “yellow tier,” which allows the reopening of indoor bars and expanded capacity at restaurants, gyms, theaters, amusement parks and other hard-hit venues and services.

California’s jobs report for April will be released in two weeks. Based on March data, California had about 1.5 million, or 8.5%, fewer jobs than before the pandemic, compared with a 5.5% shortfall for the nation as a whole.

By number of jobs, the pandemic has had the biggest toll on restaurants — payrolls sank by about 6 million last spring across the country. With April’s gain of 187,000 jobs nationwide, food and drinking establishments have recovered about 4.5 million of the jobs lost.

But the outlook for that sector is cloudy. For one thing, about 110,000 restaurants — or roughly 1 in 6 — have closed their doors since the pandemic began, said Sean Kennedy, senior vice president of the National Restaurant Assn. There’s new federal money for restaurants: The government launched a new grant program for restaurants this week, but Kennedy said the biggest problem is a shortage of workers.

“There are a lot of restaurants right now that aren’t going to be open for Mother’s Day, which is one of the biggest restaurant sales days,” he said. “And it’s because they can’t get enough staff to work all of the shifts, to keep the kitchen going.”

Manufacturing, construction, transportation and other businesses also are reporting increasing difficulty filling jobs and finding staff, according to the Fed’s anecdotal accounts of economic activity in April.

Some businesses and independent analysts blamed labor constraints on the government’s renewed enhancement of unemployment benefits, which adds $300 to regular weekly jobless amounts until early September. In California, most workers in jobs that pay less than $28,000-$30,000 per year are receiving more income on unemployment insurance, said Michael Bernick, former director of the state’s Employment Development Department.

For businesses such as restaurants, industry executives think some of the shortage will let up when schools reopen and more women can jump back into the labor force. And by fall, the expanded unemployment benefits will have expired.

Wage pressures do appear to be building at some types of businesses. In California, anecdotal reports suggest that pay and benefits are increasing relatively faster for lower-wage jobs such as security guards, janitors and hospitality workers. “Increasing wages suggest that the labor market has tightened in recent months, and some employers may really be finding it challenging to hire new workers,” Holzer said.

But employers elsewhere are taking a wait-and-see approach.

“Several workforce contacts suggested that employers might be delaying wage hikes in hopes of a surge of newly vaccinated job seekers,” the Minneapolis Fed reported. “Why start raising wages when a lot of labor might be coming back?”

Kennedy, from the restaurant trade group, said, “We’re trying to identify how much things will sort themselves out over the coming weeks and months. When our nation’s students are safely at a school during the day, is that going to be the final thing that allows people, particularly women, to say, ‘My family’s taken care of, they’re safe, I’m now going to go back into the workforce’? We don’t know things like that yet."

He added, “People are really trying to identify what is life going to look like, what is work going to look like, on the other side of this pandemic.”

This story originally appeared in Los Angeles Times.

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