And Then There Were Few
There were many on Wall Street who thought April employment gains would come in north of a million. Nope. According to today’s initial estimate from BLS, America added just 266,000 jobs last month. We remain 8.2 million jobs short of the pre-pandemic level, and at April’s rate of job creation, we won’t reach full job market recovery until November 2023.
Who or what is the culprit? Like in any Agatha Christie novel (my personal favorite is They Do it with Mirrors, 1952), there are many suspects:
Excessively generous stimulus and unemployment insurance payments
Fear of infection
Geographic labor supply/demand mismatches
Suppressed small business confidence
Rising input prices
Did I mention Millennials?
Alexander Pope once said, “Blessed is he who expects nothing, for he shall never be disappointed.” This is of course the mantra of all Orioles fans, but it also reminds us that despite upbeat economic outlooks, uncertainties linger.
We all want the economy to zoom ahead like the Orient Express, but we’re just not quite there yet. While the aggregate U.S. household sector has amassed significant savings and wealth profiles have improved, the supply side of the economy remains in disarray. Auto manufacturing is suppressed by chip shortages, freight movement is hobbled by overwhelmed seaports, and many nations remain in the early stages of their vaccination programs (e.g., India).
Over the next several months, input shortages should abate, supply chains should become more efficient, and small business confidence should expand. Despite the challenges, restaurants added 187,000 jobs in April, hotels 54,000, and arts, entertainment, and recreation 90,000. Were the workforce more willing and able, these segments would be adding even more jobs.
Employers are trying to cope, including by raising wages and lengthening weekly hours for current staff. Average weekly hours for leisure and hospitality workers rose to their highest level on record in April and average hourly earnings rose 1.6% in just one month. (That’s inflationary, by the way).
Some April job losses are attributable to cyclical realignment as we move toward the post-pandemic world. Hiring at restaurants was partially offset by a decline in grocery store employment, which fell by 49,000 jobs in April. The messengers and couriers subsegment, which added more than 200,000 jobs since pandemic onset, lost 77,000 jobs for the month.
You can read more of my penetrating insights regarding the construction industry’s employment situation at Associated Builders and Contractors.
Three Key Takeaways
Temporary Help Services employment, often considered a leading indicator of labor market health, lost 111,000 jobs in April. This could be benign. It may be that temporary workers are transitioning into full-time employment as demand for labor heats up.
Nursing care facilities lost almost 19,000 jobs in April and home health care services lost almost 7,000 jobs. This may also be benign; the simple result of a healthier population.
The share of Americans who worked from home because of the pandemic fell to 18% in April, down from 21% in March and 35% during the second quarter of 2020. It’s possible that more people are taking the 4:50 from Paddington and going back to the office. Normalcy looms.
What to Watch
Will we be murdered by higher inflation and interest rates? Stay tuned.