“A HUGE miss”……….That was the headlines after the April’s jobs report release. Investment professionals, economists and pundits were all expecting a large employment gain for April with an expectation close to one million jobs to be added, due to the U.S. economy reopening and a return to normal lifestyles. But, the number came in at just 266,000 jobs added. Rarely is data so far off from expectations like this one was.
Is the economy stalling?
The economic, consumer and business data does not support a stalling economy. The data exhibit classic signs of the early recovery phases of an economic cycle. This is a unique recovery given the health-based COVID induced slump, with all expectations and data showing COVID recovery equals economic recovery.
What Happened?
It is important to recognize that economic data is released in three stages; preliminary, revised and final. Friday’s jobs number is the preliminary number with two revisions ahead. Admittedly, the number is not likely to be revised up two or three fold.
A review of other data offers some insight, mostly notably the Jobs Openings and Labor Turnover Survey or JOLTS report. The JOLTS report offers detailed insight to the labor market breakdown. The latest data released on Tuesday indicated there are 8.123 million job openings1! This is the highest job openings ever recorded. Hence, the anemic April jobs number is not from a lack of available jobs.
Government Support
The federal government has learned from past macro-economic dislocations that government support is the best course of action as dictated by Keynesian economic theory. Extraordinary government intervention got us through COVID, however extended unemployment benefits seem to be adding to the lack of jobs added. A survey by the National Federation of Independent Business (NFIB), a small business lobbying group, cited 44% of small business job opening went unfilled2. Many small business cited candidates claimed higher income from unemployment.
Other Situations
Excess government support doesn’t explain the whole story. Online schooling (preventing parents from leaving minors unattended), health safety concerns and limited public transportation have also contributed to the lack of job seekers. This was recognized in the recent Beige Book3, a detailed report by the Federal Reserve about current economic conditions and anecdotal information.
As with most aspects of life, things are not as simple as they appear. Digging into the numbers and trying to understand the influences is most important which is what we try to do as we manage portfolios. Enjoy the weekend and the warmer temperatures!
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