The economy added far fewer jobs than expected in April, just 266,000, and the unemployment rate rose slightly to 6.1%, the Bureau of Labor Statistics reported Friday.
The jobs numbers indicate that the pandemic recovery is not proceeding nearly as fast as was hoped. Forecasters had anticipated that the economy would add nearly 1 million nonfarm payroll jobs and that the unemployment rate would drop from March’s 6% down to 5.8%.
“This might be one of the most disappointing jobs reports of all time,” said Nick Bunker, who leads North American economic research at the Indeed Hiring Lab. “The labor market needs to gain 8.2 million jobs to put us back where we were pre-pandemic, not accounting for the jobs that would have been created if the pandemic never happened. Every month job gains don’t accelerate puts us further behind.”
The news comes after the jobs reports for both February and March initially exceeded the predictions of analysts, and the Federal Reserve’s economic outlook for the future continues to be increasingly positive.
The major factor contributing to the country’s rapid economic rebound is the reopening and expansion of businesses that were affected by the COVID-19 pandemic. The health crisis shuttered many businesses in the United States last year, and unemployment hit a staggering high of 14.8% in April 2020.
The retail and restaurant industries were hit particularly hard by the pandemic, which forced people inside and created hesitancy for some to venture out to the stores and restaurants that still had limited capacity. The vaccine rollout and increasingly eased restrictions are now providing people with a sense of relief, and more people have begun venturing out and infusing money into the economy.
At least 45% of the U.S. has received at least one dose of the COVID-19 vaccine, and 32% are fully vaccinated. That number is much higher among vulnerable populations, with 83% of those 65 or older having a least one shot and more than 70% fully inoculated.
“In April, notable job gains in leisure and hospitality, other services, and local government education were partially offset by losses in temporary help services and in couriers and messengers,” the Friday morning report read.
The report also said that the previous two months saw 78,000 fewer jobs in aggregate than initially reported.
New data released late last month found that the first quarter of 2021 (Jan. 1 through March 31) saw historic economic expansion. U.S. gross domestic product grew at a 6.4% annual rate in the first quarter of 2021, according to the Bureau of Economic Analysis.
“Prospects for growth in 2021 have brightened on vaccine progress that is allowing restrictions to be lifted and a more complete reopening of the economy,” said Rubeela Farooqi, the chief U.S. economist with High Frequency Economics.
The forecast for the coming months is also bright. The Federal Reserve Bank of Atlanta projected Tuesday that GDP growth for the second quarter will be even higher, at 13.6%.
Despite the positive growth and optimistic predictions, the Federal Reserve has maintained its stance against hiking interest rates from their near-zero levels. Fed Chairman Jerome Powell has indicated rates won’t be raised until there is sustained 2% inflation and full employment.
The Fed’s stance coupled with President Joe Biden’s historic spending is concerning to some economists who fear too-high inflation. One of those economists is Larry Summers, who served as treasury secretary under President Bill Clinton and the director of the National Economic Council under President Barack Obama. He recently said that “all the signs are for inflation starting to break out.”
Treasury Secretary Janet Yellen also raised eyebrows this week when she indicated that the Fed may need to raise interest rates to prevent the economy from overheating. She later walked those remarks back a bit and said that while she doesn’t think there will be an inflationary problem, the Fed could be counted on if there is one.
