America’s economy added far fewer jobs than expected in April

RECOVERY FROM serious sickness is not always smooth. As with the human body, so with the economy. The American economy has been bouncing back from the deep recession associated with the covid-19 pandemic—but the latest monthly jobs report by the Bureau of Labour Statistics, published on May 7th, looks like quite a setback. Some economists had expected that 1m jobs or more might be added to non-farm payrolls in April. In fact just 266,000 were. March’s figure was revised down, too (although February’s was marked up). The unemployment rate, which had tumbled from 14.8% in April 2020 to 6% in March, ticked up to 6.1% last month, as more workers were drawn back into the labour force.

Friday’s figures will have economists pondering what lies behind them. One worry is flagging demand. Although employers in the leisure and hospitality sectors seemed especially keen to take on new workers, adding 331,000 staff last month, other sectors shed jobs (see chart above). But reading too much into one month’s figures is a mug’s game, especially at such an unusual time. And overall wage growth has been surprisingly robust, suggesting that firms are offering bigger pay packets to tempt workers. Vacancies, as a share of employment, are at their highest level in 20 years.

The figures might say more about the bumpiness of the labour-market recovery as an extraordinary reallocation of resources takes place in light of the pandemic. Employers might struggle to forecast demand, and to quickly find workers to fulfil it. Some bosses have already been complaining about a shortage of staff, even though 8.2m fewer people are in work today than before covid-19 struck (see second chart). A month ago Bloomberg reported that Delta Air Lines had cancelled 100 flights for lack of staff.

Over-generous benefits seem unlikely to explain such shortages. The latest stimulus cheques, posted in the spring, were for up to $1,400 per person. Unemployment insurance has been temporarily boosted by $300 a week. Though economic research has long concluded that more generous benefits blunt incentives to look for work, this relationship appears to have weakened during the pandemic. The time limit on the increase in unemployment insurance ought to make workers think twice about turning down a job.

Two other factors may be playing a bigger role. Fear is one. The number of people who told a government survey they were not looking for work “because of the coronavirus pandemic” fell by 900,000 in April, but was still 2.8m. The industries experiencing the most acute labour shortages—health care, recreation and hospitality—involve plenty of person-to-person contact. A mismatch between the unemployed and jobs on offer is the other. The headline growth in vacancies represents the rise in opportunities in some industries—say, clerks in DIY stores—as others decline. An out-of-work bartender in Manhattan may take time to spot and secure a job as a delivery driver in farther-out Westchester. As the economy adjusts to shifting consumer demands, the labour market’s recovery will not always be smooth.