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How did Wall Street turn out to be so wrong about its forecast for 1 million new jobs in April? There’s plenty of suspects.
Read: U.S. gains just 266,000 new jobs in April ‘in a big disappointment’
Suspect No 1: Generous unemployment benefits.
Businesses complain some people won’t accept new jobs as the economy recovers from the pandemic because they earn more in government benefits than they would from working.
The Biden administration in March added $300 in federal aid each week for unemployed workers already collecting state jobless benefits. These extended benefits don’t expire until September.
“It turns out all those reports that firms were unable to find workers were more than just run-of-the-mill complaints,” said chief economist Stephen Stanley of Amherst Pierpont Securities.
Read: Unemployment claims drop below 500,000 for first time since pandemic
There’s indeed a lot of anecdotal evidence to suggest it’s true, but here’s something else to consider. The biggest increase in hiring (331,000) in April occurred precisely in lower-paid positions at restaurants, hotels, parks, theaters and the like.
Suspect No. 2: Closed schools and daycare centers.
Many schools and daycare centers still haven’t re-opened even though more than half of all adults have received at least one vaccination shot and the evidence clearly shows the coronavirus poses very little risk to teens and toddlers.
That’s left some families with few child-care options and posed an especially big burden for women. The number of women in the labor force actually fell in April.
Suspect No. 3: Funky government math.
The pandemic has played havoc with the government’s usual process for collecting information on the economy and adjusting its findings to account for seasonal swings in employment, consumer spending and the like.
“These are unusual times and there are so many weird things working on the numbers,” said chief economist Chris Low of FHN Financial.
If so, the April job numbers could turn out to be a one-off.
Suspect No. 4: All of the above.
Whatever the case, economists warn, as they always do, not to put too much stock in just one month of data.
The overwhelming evidence, they say, still points to faster economic growth and a rapid increase in new jobs in the months ahead as more people get vaccinated and the coronavirus fades. Most schools and daycare centers should be open by the fall and extra federal unemployment benefits will expire.
“This was a very weird report and we are highly skeptical that the trend in the labor market is stalling out,” said Neil Dutta, head of macroeconomics at Renaissance Macro Research.
