Five takeaways on a surprisingly poor jobs report

Economists and politicians alike were shocked by the unexpectedly tepid April jobs report released Friday, which showed that the economy only added about a quarter the number of jobs most were expecting.

The report found U.S. businesses added just 266,000 new jobs in April instead of the roughly 1 million that economists had projected.

The figure would be solid in the midst of a strong economy, but was tremendously disappointing for a nation emerging from a pandemic in which 9.8 million people remain unemployed.

Here are five takeaways to make some sense of the report.

It’s going to be bumpy ride

Any recovery from the depths of the coronavirus recessions is unlikely to be a straight ride.

“I think this signals that we’re in for a rockier road that we thought,” said Robert Frick, corporate economist at Navy Federal Credit Union.

Frick predicted there will be a recovery and better reports in the future, but said the expectations of a booming report were too optimistic.

“Given the fundamentals, with so much money that’s been banked and all the good things that have come so far — strength in hiring, manufacturing, and so on — I think things are generally headed in a good direction, but there’s going to be friction coming,” he said.

But he acknowledged the bad report in April was still a surprise.

“Nobody expected it would be this early,” he said.

Child care is an issue

The jobs report shed light on some of the current trouble spots, though economists say more data is needed to know exactly what’s going on.

For example, even as overall employment rose, female employment dropped by 8,000, while female labor force participation dropped by 64,000.

An obvious explanation, says Frick, is child care, which disproportionately falls on the shoulders of women.

“There are preschools and kindergartens and child care and schools that are fractured and not open, so there are a lot of women who are forced to stay home,” he said.

While local government education jobs increased 31,000, they were still 611,000 lower than pre-pandemic levels.

Another problem is that despite the significant uptick in vaccinations, a large proportion of the population is still unvaccinated, and the pandemic, though greatly reduced from its winter surge, is far from over.

“There are a lot of people that don’t want to go back to work in closed quarters because of COVID, and 5,000 Americans died of COVID in the last week, so we can’t dismiss that,” Frick said.

An analysis from survey company Morning Consult noted data showing that losses in pay remained elevated, and that a growing share of workers thought they would lose pay in the coming month.

Kate Bahn, director of labor market policy at the left-leaning Washington Center for Equitable Growth, says the problems in the labor market reflect long-standing inequalities and divisions that will persist.

“Broadly speaking we went into the crisis with a really uneven and fragile economy,” she said. “Without having policies that are really intentionally targeting inequality, the recovery will be slower.”

But, she added, the April data was more confounding than previous swings in employment during the pandemic, which could often be tied to a specific event such as severe weather or a spike in COVID-19 cases.

“When we’ve seen fluctuations, there’s usually a reason we’ve seen to understand the fluctuation,” she said.“This month did not have any of those obvious reasons, and it will take a couple of months of data to get the full picture.”

The fight over extra unemployment is on

Republicans and conservative groups have zeroed in on generous unemployment benefits as the culprit behind the slowdown.

“Government paying people more to stay home than to work has crushed the ability of businesses to get workers back, and this jobs report is evidence of that,” said Adam Brandon, president of the conservative FreedomWorks advocacy group. 

The U.S. Chamber of Commerce called for repealing the additional $300 weekly unemployment benefit that is in place until September.

Republican governors of Montana and South Carolina both said they would withdraw the federal benefit to boost employment.

But debate remains fierce among economists as to whether or how much additional unemployment is holding back the labor force.

“What is causing these supply constraints in the job market? Is it unemployment benefits that are too high? Schools that are still closed for full-time in-person instruction? A skills mismatch between available jobs and available workers? A lack of business startups?” Nationwide Chief Economist David Berson asked in response to the report.

“All of these probably are playing a role,” he concluded.

Frick said there’s little evidence to back up the idea that expanded benefits are keeping people from working.

“You can look at states with higher and lower unemployment benefits and there’s no correlation with their unemployment rates,” said Frick, who suggested a lack of child care, transportation issues are among the reasons why low-income workers might face greater challenges in getting back to work.

Democrats are doubling down on spending

Democrats said the report showed the schisms in the economy that they aimed to address through the infrastructure and family support plans proposed by President Biden.

“The disappointing April jobs report highlights the urgent need to pass President Biden’s American Jobs and Families Plans,” House Speaker Nancy Pelosi (D-Calif.) said in response to the report. 

She said the evidence shows that women and working families need the enhancements to child care, education and other issues provided by Biden’s proposals, and that this would in turn create jobs and help the economy.

Vice President Harris echoed the call for furthering such investments. “There are still two million fewer women in the workforce today,” she said. “More action is needed.”

President Biden said the report proved critics of the $1.9 trillion coronavirus relief bill wrong for suggesting that the economy didn’t need that level of stimulus.

“Today’s report just underscores, in my view, how vital the actions we’re taking are,” he said.

It’s just one report

While the April jobs report was universally seen as a disappointment, economists by and large agree that one month does not a trend make.

“It may be bumpy from month to month for a variety of factors,” Treasury Secretary Janet Yellen said Friday. “One should never take one month’s data as an underlying trend.”

As more data becomes available, analysts will be able to sharpen their views as to what is causing the labor market to hold back.

Updated data on job openings and labor turnover is expected next week, which could shed light on the question of labor shortages.

And monthly jobs reports are often the subjects of revision, with even hundreds of thousands of jobs sometimes added or subtracted from reports.

Beth Ann Bovino, chief U.S. economist of S&P Global Ratings, noted that there was also plenty of good news hiding underneath the somber headline numbers in the jobs report.

It showed that 430,000 people rejoined the labor force, average weekly hours climbed, and average hourly earnings spiked to 0.7 percent month-over-month.