An expected U.S. hiring boom crashed into a wall in April, with employers adding a measly 266,000 new jobs – sharply missing Wall Street's expectations – amid a growing shortage of available workers.
The unemployment rate unexpectedly rose to 6.1% — while it's still well below the April 2020 peak of 14.7%, it's about twice the pre-crisis level, the Labor Department said in its monthly payroll report, released Friday morning. Economists surveyed by Refinitiv expected the report to show that unemployment fell to 5.8% and the economy added 978,000 jobs.
The figure marks a significant drop from March's downwardly revised number of 770,000 and February's upwardly revised 536,000.
There are still 8.2 million fewer jobs than there were last February, before the crisis began.
Although the accelerated vaccine rate, trillions in government stimulus and easing business restrictions seemed to be coming together to support a robust economic recovery, businesses have reported difficulty in onboarding new workers.
A recent Bank of America analyst note estimated that 4.6 million workers exited the labor force during the pandemic – and only half are expected to rejoin by the end of the year. Companies have been quick to blame the sweetened unemployment benefits provided to workers during the pandemic; the $1.9 trillion stimulus package that President Biden signed into law in March boosted unemployment aid by $300 a week through Sept 6, 2021 and included a third $1,400 payment for millions of Americans.
Americans who earned less than $32,000 before the crisis began would be better of in the near-term collecting those benefits rather than working, Bank of America said.
At the same time, the Biden administration is pushing forward with passing another $4 trillion in spending, many of which would be directed toward boosting low- and middle-income families.
"We’ve known for some time now that there are tensions or mismatches between the demand for workers and a large number of job openings and the large number of unemployed individuals," said Mark Hamrick, senior economic analyst at Bankrate. "Many employers report struggling to find available workers. Supply constraints are also limiting further improvement in output."
The leisure and hospitality industry, the hardest-hit sector, accounted for the bulk of the hiring gains, adding 331,000 workers. But the industry remains 2.9 million workers shy of where it was roughly one year ago.
Local government education increased its payroll by 31,000 as children returned to in-person learning. Social assistance, meanwhile, rose by 23,000, while financial activities increased by 19,000.
But employment in professional and business services tumbled by 111,000 in temporary help. Support services shed another 15,000 positions. Manufacturing lost 18,000 workers, and courier help fell by 77,000.
"We knew friction was coming in hiring, but no one expected it would come so soon," said Robert Frick, corporate economist at Navy Federal Credit Union. Frick said there are several reasons for the disappointing headline number, including child-care concerns and fear of contracting COVID-19.
"The hopeful news is Americans have hundreds of billions of extra dollars to spend, and while it evidently will take longer to rebuild many industries, the money is ready to be spent to bring the economy back to normal and re-employ millions of Americans," he said.
The Federal Reserve has struck an optimistic tone over the past month, but has maintained that the virus will continue to dictate the course of the nation's economy. Policymakers at the U.S. central bank have said they are committed to achieving full employment, and having inflation consistently run above their 2% target, but they raise interest rates.