The Headlines

After significant gains in jobs reported in March, April’s increase of 266,000 was a caught many who predicted the figure to be a million by surprise.   With the economy appearing to be making a strong recovery, vaccinations hitting a critical mass, and everyone ready to get back to life more like it once was, the April number was confounding. Furthermore, the March gain was revised down from 916,000 to 770,000. Many (Fed and White House) urge caution in jumping to conclusions. This Kiplinger article found the bright side in the jobs report. The road to recovery may be bumpy, let’s average the next few months to get a better picture. (Same can be said for inflation, but we will tackle that one next week.)

Is there a lack of labor demand, or a lack of labor supply? And why? Pundits have put forth many explanations. Some are backed by statistics, some by anecdotes. There is therefore no single policy proposal that looks like it will smooth this return to full employment.

Let’s take a look at the available data, review the hypotheses put forth, and make our own assessments.

The Data

Here are the numbers from the BLS and other sources.

Household survey data:

• unemployment rate at 6.1%
• number of unemployed at 9.8 million
• labor force participation rate eked up to 61.7%
• number of people NOT in the labor force (so NOT in unemployment number) but wanting to work at 6.6 million
• 18.3% of workers were working remotely (down from 21% in March) 

Establishment survey data:

• non-farm payroll up 266,000 in April (770,000 in March, 536,000 in February)
• gains in leisure and hospitality offset by losses in temporary help and courier/messenger services
• non-farm employment 8.2 below pre-pandemic levels
  • manufacturing down 515,000
  • retail down 400,000
  • healthcare down 542,000
  • construction down 196,000
  • graphs of employment by sector throughout the pandemic can be found here: NYT
• average earnings up 21 cents to $30.17

Other

• According to Harvard Economist Jason Furman, there are about 1.1 unemployed people for every job opening. (CNBC)
• This past week’s new unemployment claims dropped to a pandemic low of 473,000. (ABC)

The Hypotheses

1. The Federal Supplemental Unemployment benefit of $300/week is keeping people from going back to work. They are earning more not working than they were making when they were working. NYT and CNN offer both sides of this argument with anecdotes and some evidence. 
2. Many with customer facing (covid-risky) jobs are choosing to wait to go back to work than risk their health (and unemployment benefits help in the mean time). 
3. The pandemic may have led many to re-evaluate their life-plan, particularly older folks, and they decided to stay out of the workforce (retire). (NYT) Or folks (mostly women) that dropped out to care for children or other family members during the pandemic don’t have arrangements in place to return. (Even more dropped out last month.) (MarketWatch)
4. Manufacturing is having issues with supplies, and without the supplies for production, they aren’t hiring folks back yet. (Reuters)
5. There is no good way to match the unemployed with the open jobs. And the number of unemployed is almost the same as the number of job openings, so the market is very tight.
6. There is a mismatch between the unemployed and the available jobs geographically or by skill level.

Current Proposals/Efforts

Employers can't wait.  Many large employers, like Amazon, McDonalds, Chipotle, are offering higher wages, signing bonuses and wider benefits. Will this get people back to work? (Morningstar, WSJ)

At his point in time, twelve states and counting (now 18, according to Forbes) have decided to drop the supplemental unemployment payments and payments to gig workers. Will dropping these benefits get more people back on the job? (NYT) (AP news)

The Assignment

Have students review the articles/resources linked in this post, find arguments for and/or against each of the hypotheses and recommend potential solutions.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.