The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for April 2021 on Friday, May 7th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 14 months since the Covid-19 economic lockdown and surprised most forecasters with its interruption of anticipated strong job growth of at least one million. While strong job growth is still expected over the next year, April demonstrates that month-to-month figures will be uneven as the labor market reestablishes itself post-pandemic.
Employment in the U.S. rose by 266,000 jobs, only a fraction of the 1.6 million jobs expected in the Geographic Solutions, Inc. forecast. The WSJ Economist Survey forecast at 1.0 million jobs was closer but still nearly four times actual employment. The overestimation of jobs was partially due to excessive weight placed on full vaccination rates which went from 10.7% on March 12th to 22.6% on April 12th, the date the labor market survey is conducted. March job growth fell from 916,000 to 770,000. January was originally reported at 379,000 new jobs but finalized at 536,000, underscoring the elevated volatility and unpredictability of employment. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, and job searchers. The forecast used unemployment claims data from the U.S. Department of Labor (USDOL) as an external indicator in the forecast.
The unemployment ticked up to 6.1%, above the Geographic Solutions and WSJ forecasts of 5.7% and 5.8%, respectively. The unemployment rate forecast used internal data on job openings, job severances, job searchers, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.
Explosive job growth was expected in the service-providing sector but subdued increases in the goods-producing sector. Instead, the goods-producing sector lost jobs (-16,000) and service-providing job growth was soft (+282,000).
Job declines were most pronounced in Trade, Transportation, & Utilities (-81,000), most likely the consequence of static goods-sector employment activity which is closely linked to employment in transportation and logistics. Professional & Business Services (-79,000) had similar losses, mostly dragged down by a severe drop in temporary administrative jobs (-111,000). The positive interpretation is that many of these temporary workers are encouraged by their chances of getting a permanent job, and are quitting temp positions to focus on that.
The Leisure & Hospitality sector in April was the only one with job increases in line with the explosive job growth expected as the vaccines are distributed. It totaled 311,000 new jobs. Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 16.8% below February 2020. No other major industry has employment more than 10% below its February 2020 total.
The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate increased slightly to 6.1% from the previous month.
The labor force participation rate increased to 61.7% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.3% to 10.4%. The increasing U-3 rate along with a declining U-6 rate demonstrates that previously discouraged job-seekers are jumping back into the labor market.
Bluntly stated, the April labor market report was a shocker. Despite news of shortages in semiconductors slowing manufacturing, lumber prices as a dragging force on construction, and supply chain issues, overall demand for labor is high. U.S. job openings in February 2021 were 7.4 million plus hourly earnings and average weekly earnings jumped in April. It appears that going forward that employment changes will mostly depend on the labor supply, and its ability and willingness to meet the robust demand in the labor market.