April Showers Soak Jobs

Have April showers dampened the U.S. economic recovery?

In a word, no. Despite a disappointing April jobs report, when just 266,000 jobs were added, versus the 1 million that economists had predicted, the labor market should strengthen and gain momentum in the second half of spring and summer.

Many are wondering why there was such a big miss. The answer is not clear yet, but economist Joel Naroff warns that “the strange employment report is not an accurate indicator of the state of the labor market.” He believes that the April numbers are likely to be revised higher in the two subsequent months and that we may look back at April and classify it as an aberration from the recent trend of upbeat economic news.

I was asked repeatedly whether the report “proved” that “lazy” people were happy to sit on the sofas and collect unemployment benefits, rather than go to work. My answer is that if this is a contributing factor, then these people are acting quite rationally: why on earth would you not remain safe and collect more money in the process? (Citing the soon to be released Survey of Household Economics and Decision-making report, Fed Chair Jerome Powell said about one in five of the people who are not working or working less, are doing so because of disruptions to childcare or in-person schooling.)

“Several factors accounted for the weakness we saw in the April jobs number,” according to Grant Thornton Chief Economist Diane Swonk. “What was once considered a sprint is now viewed as a marathon, with employers and workers both skittish on declaring victory before we cross the finish line of herd immunity.”

Because there have been some false starts in many sectors of the economy, employers want to make sure that we are on the other side of the pandemic, not just moving in the right direction. As a result, leisure and hospitality added 331,000 jobs, far less than expected; retail, which was supposed to be gearing up for the in-person shop ‘til you drop influx, actually lost 15,000 positions; and temporary help dropped by 111,000.

Let’s take a collective deep breath here and provide a little more context. A year after the pandemic ripped through the nation’s labor market, leaving more than 20 million Americans out of work and causing the headline unemployment rate to soar to 14.7 percent, there has been enormous progress. Millions of jobs have been recouped and the government’s actions have helped to shield the nation’s most vulnerable, including women (especially those of color), low-income, and younger workers, from the worst of the pandemic’s financial fallout.

Meanwhile, as the summer hiring season kicks into gear, the competition among younger workers will be fierce. The unemployment rate is 10.5% among 20 to 24 year-olds, and 13% among 18 to 19 year-olds, compared with the 5.3% unemployment among those over 25. The high rates among these Gen Z workers (born after 1996) occurred because even before the pandemic, the group was overrepresented in service sector industries.

I fear that many of these Gen Z workers could be facing similar financial and career hurdles as Millennials (1981 to 1996), whose biggest issue is not “laziness”, but unlucky timing. Millennials, who came of age after 9-11, were slammed when the Great Recession hit. While they were able to get back on their feet, they did so with lower paying jobs, which can limit career earnings for decades and prompt a delay in life events like getting married, having a child, leasing a car, or buying a home.

The Washington Post’s Andrew Van Dam put a fine point on the issue: “After accounting for the present crisis, the average millennial has experienced slower economic growth since entering the workforce than any other generation in U.S. history.”

Unfortunately, the COVID recession could be setting the stage for another generation to start their work lives at an unlucky time.