The good news: 266,666 people have jobs now, who did not in March. The bad news: It was far short of the one million jobs that economists expected, calling into question the strength of the recovery.

By Manuel Gutierrez, Consulting Economist to NKBA

The April jobs report was a surprise and a disappointment. Only 266,000 new jobs were added, far fewer than the million or so forecast by economists, and well below March’s encouraging increase of 770,000 that had suggested a continued strong recovery.

At April’s pace of job creation, it would take more than three years to return to the pre-pandemic level of 152 million jobs. With last month’s additions, there are currently 144 million jobs, resulting in a gap of 7.9 million positions in comparison with the number employed in January 2020.

April added just 266,000 jobs— far below the million expected — calling into question the strength of the economy’s recovery.

Along with the modest job gains, the unemployment rate actually edged up in April to 6.1%, from the 6% the previous month. This was the first uptick since the steady decline from the 14.8% peak in April 2020, but in reality, rates have continued to hover just around the 6% range since January, as seen in the left panel of Figure 2. This remains considerably above the 3.5% low seen in early 2020.

Overall, there has been significant improvement in unemployment among various age groups, shown by the numbers at the bottom of each bar in the right panel of Figure 2. Note that the largest gains have been among younger workers, even though they traditionally have the highest unemployment rates of all age groups.

By gender, a bit of a gap has developed as female unemployment improved to 5.8%, while it has worsened to 6.3% for males.

There is some speculation that the disappointing  employment picture — especially since many businesses claim they can’t fill jobs — is caused by generous government benefits that could be de-incentivizing workers. The thinking is that cash outlays given by the  government, the latest of which was a $1,400 payment per taxpayer plus an additional $300 a week offered to those who are unemployed, are holding some people back from pursuing jobs.

A second explanation is that many people have been hesitant to work or to seek a job out of fear of contracting COVID-19. Over time though, that concern should lessen as more people become vaccinated.

Whatever the reason, businesses have trouble finding workers to fill jobs. In February, there were 7.4 million job openings, the highest number in more than two years. This stands out, considering that 9.8 million people remain unemployed. Of course, a skills gap, with many being underqualified or overqualified for available openings, will always be a factor as well.

The negative news is offset by an increase in the labor participation rate, which has grown by 0.3 point since January to its current level of 61.7%. The higher participation rate, which indicates the proportion of the potentially working population who are either employed or looking for a job, may be a partial explanation for the higher unemployment rate and the increase in the number of unemployed.

Wages of production workers rose a robust 0.8% in April, the second highest monthly increase in a year. Hourly wages of $25.45 are just 1.2% higher compared to last year.

Most of the April gains were in Hospitality, which added 241,000 jobs, of which 187,000 were within the subgroups of Bars and Restaurants. Entertainment also is recovering, albeit slowly, with just under 90,000 jobs added in April. Employment in this sector is still 24% below its levels from January 2020.

Surprisingly, several industries that had grown more or less steadily since May 2020 experienced job losses. Professional & Business Services lost 79,000 jobs in April. Transportation and Warehousing fell by 74,000jobs, while Manufacturing was off by a smaller 14,000.

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