April Jobs Report: Recovery Hits Surprise Speed Bump

May 7, 2021

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.

Today’s jobs report shows the recovery hit a speed bump in April, causing a bit of whiplash after what was anticipated to be another month of accelerating improvement. The labor market added just 266,000 jobs in April, well short of expectations and down from the revised 770,000  jobs added in March. The deceleration is a surprising result given the increasing distribution of vaccines and continuing economic reopening.

Payroll Growth Decelerates

Payroll employment added 266,000 jobs, well below expectations and almost one third of the 770,000 jobs added in March. Jobs added in March were also revised downward from 917,000, another black mark against the report. Payrolls are now down 8.2 million below pre-crisis levels, only slightly better than the worst point from the Great Recession.

Service Industries Make Gains Despite Reports of Labor Shortage

Leisure & hospitality gained 331,000 jobs despite widespread reports of labor shortages. While shortages may make finding workers more difficult, they don’t appear to be stopping jobs growth in the hard-hit sector. It’s unusual that leisure & hospitality where reports of shortages were the most common saw the strongest jobs growth even as other sectors like temporary help services (-111,400 jobs) and transportation & warehousing (-74,100) saw job losses.

Unemployment Rises to 6.1 Percent

The unemployment rate rose to 6.1 percent in April, up from 6.0 percent in March. Labor force participation, however, rose to 61.7 percent, a sign that the reopening economy is pulling workers back into the labor force, even if they had trouble finding jobs in April. Temporary layoffs rose to 2.1 million and permanent job losers rose to 3.5 million. The increase is less concerning if it’s being driven by rising labor force participation, however, it is a surprise that rising participation is not driving more significant job gains.

Was the Slowdown Caused by Labor Shortages?

The data in today’s report is not wholly consistent with the idea that labor shortages have crimped the recovery. Leisure & hospitality was the industry where reports of labor shortages were most common, but it also saw the strongest job growth. While it’s possible that gains would’ve been even higher without these labor shortage challenges, it is unusual that they would show up in other industries more severely. Regardless of what the cause of the slowdown is, today’s jobs report will be interpreted as being caused by labor shortages, raising the temperature on the political debate surrounding extended unemployment benefits. As a result, we may see more states follow Montana and South Carolina in ending their participation in the federal unemployment benefit programs.

Looking Ahead

April’s jobs report tempers recent projections of a smoothly accelerating economic recovery. By all accounts, the improving public health situation should drive faster job gains, but the report is a humbling reminder that the road to recovery is not a straightforward one during a pandemic. While vaccine distribution and an economic reopening should still drive significant job gains in the summer, today’s report tempers optimism with caution.

More Insights

Non-farm payroll employment rose by only 266,000, well below expectations of nearly 1 million jobs added and leaving payrolls 8.2 million below pre-crisis levels. This tempers optimism for accelerating job gains in the spring.

Job gains were largest in leisure & hospitality (+331,000 jobs added) and government (+48,000), driven by the reopening economy. Job losses were mixed across services-providing and goods-producing sectors with transportation & warehousing (-74,100) and temporary help services (-111,400) seeing the largest declines.

Some have speculated that seasonal adjustment is hiding big job gains. While non-seasonally adjusted job gains were north of 1 million, the gain was in line with what we see during a normal April. As the economy recovers, we expected an even larger gain from the reopening economy and improving public health situation on top of the normal seasonal effects.

The seasonal adjustment may matter more at the industry-level where some industries like construction and professional & business services (includes temporary help services) saw large non-seasonally adjusted improvements but no improvement on a seasonally-adjusted basis.

Average hourly earnings growth dropped to 0.3 percent, but this is a mechanical quirk due to composition (lower-wage workers returning to the workforce) and base effects (lapping the spike in average hourly earnings last April). Read more about the composition and base effects in average hourly earnings with this explainer from the White House Council of Economic Advisers.

The unemployment rate rose to 6.1 percent, but this was largely due to rising labor force participation which pulled in 430,000 workers, around three-quarters of whom found employment.

The labor force gain is an optimistic data point in the report, but we needed a much larger gain to drive the predicted job gains near 1 million. Roughly a quarter of the workers driving the labor force increase were unemployed, an unusual increase suggesting some friction in labor force reentrants finding jobs.

Additionally, the labor force gains were entirely driven by men in April. 493,000 men joined the labor force while 64,000 women exited.

Temporary and permanent layoffs both rose slightly: temporary layoffs up to 2.1 million and permanent layoffs to 3.5 million. The rise in both categories points to some backsliding in the recovery, though labor force gains do temper the bad news. The increase in temporary layoffs point to some increasing churn even as the recovery continues.

The Black unemployment rate rose in line with the overall unemployment rate, due in part to increasing labor force participation. The rates for other racial/ethnic groups were unchanged or declined in April.

The increase in the Black unemployment rate was due to rising labor force participation, but overall employment rose for Black and white workers. Employment dropped for Hispanic/Latinx and Asian workers.

To speak with Daniel Zhao about this report, please contact pr@glassdoor.com. For the latest economics and labor market updates follow @DanielBZhao on Twitter, connect on LinkedIn, and subscribe to Glassdoor Economic Research.