Wednesday, June 16

The US economy recovers only 266,000 jobs in April due to a sharp slowdown in hiring | United States economy


American employers again added far fewer jobs than expected in April, in a sign that is interpreted to show that many companies are now struggling to find enough workers as the economic recovery strengthens.

The latest snapshot from the U.S. Department of Labor showed the number of nonfarm payroll jobs rose for the fourth month in a row by 266,000 in April, after 770,000 growth in March, but well below Wall’s forecast. Street from an increase of about 1 million.

The unemployment rate rose to 6.1% in April, up from 6% the previous month. A year ago, when the pandemic hit and employers quickly laid off staff, unemployment hit 14.7%.

Economists had been forecasting stronger growth in American jobs as pandemic restrictions gradually relax and the Biden administration injects trillions of dollars in new stimulus into the economy, with checks for $ 1,400 (£ 1,005) paid directly to eligible US households.

Millions of consumers have started spending their extra money on restaurant meals, airline tickets, road trips, and new cars and homes. The US economy grew sharply by 6.4% annually in the first quarter of 2021.

Oxford Economics, a consulting firm, predicts 8 million US jobs will be added this year, bringing the unemployment rate to a low of 4.3% by the end of the year.

The economic rebound has been so rapid that many companies, particularly in the hospitality sector, which includes restaurants, bars and hotels, have been surprised and unable to fill all their vacancies.

Some unemployed people have been reluctant to seek work because they fear contracting the virus.

Others have entered new occupations instead of returning to their old jobs. And many women, especially working mothers, have left the workforce to care for their children.

However, the relaxation of the lockdown measures helped boost employment in the most affected sectors of the economy, with an increase of 331,000 jobs in leisure and hospitality, while the reopening of face-to-face education meant that the Local government education payrolls increased by 31,000.

More than half of the increase was recorded in food services and places to drink, where payrolls increased by 187,000.

However, those gains were lower than anticipated and were offset by declines in other sectors, including auto manufacturing.

Michael Pearce, a senior US economist at consulting firm Capital Economics, said the snapshot suggested that a labor shortage was becoming a significant drag on the US recovery. “Most of the other evidence suggests that economic activity is recovering rapidly, but it is a stark reminder that the recovery in the labor market is lagging behind the rebound in consumption,” he said.

The lackluster growth in employment will weigh on expectations among financial investors that the US Federal Reserve will raise interest rates, amid concerns that a stronger Covid-19 recovery would trigger an inflation outbreak.

“For the Fed, we suspect that means many months will pass before it judges that the economy has made ‘additional substantial progress’ toward its ‘broad and inclusive’ full employment target. That means any talk of downsizing, let alone rate hikes, is still a long way off, “said Pearce.

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Although the Fed has forecast strong growth and a drop in unemployment this year, it has resisted calls to slow down its quantitative easing bond buying program or consider raising interest rates soon. Some economists also said that higher levels of unemployment support, including a government-funded $ 300 weekly supplement, pay more than most minimum wage jobs.

Neil Wilson, chief market analyst at Markets.com, said low wages could now rise, which could boost inflation. “The lowest-paying jobs that were lost in the pandemic are making a comeback, but they may not be as low-paying as they used to be,” he said. “This suggests more upward pressure on inflation in the coming months as companies look to attract staff.”

Silvia Dall’Angelo, Senior Economist at Investment Manager Federated Hermes, said: “The US labor market will continue to improve as the economy reopens and confidence regains, supported by further progress in launching vaccines and fiscal stimulus. However, as the April report shows, the healing process will be long, possibly somewhat bumpy, and could be incomplete, as the crisis could leave some degree of scarring in the labor market ”.


www.theguardian.com

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