A bad jobs report is no reason to panic

The April jobs report is out, and the results were a deep disappointment. Just 266,000 jobs were created last month, far below expectations of at least a million, and the unemployment rate edged up to 6.1 percent. March's report was also revised downward, from 916,000 to 770,000.

This was a strange result for many reasons. America is still about 8.2 million jobs in the hole relative to February 2020, and the stimulus from the American Rescue Plan should be boosting jobs and output far more than this. Many analysts and businesses have argued that the boost to unemployment benefits (which expires in September) is motivating workers to stay home, but restaurant owners have been the loudest complainers about this, and their sector of leisure and hospitality saw the biggest gains at 331,000 new jobs (counterbalanced by losses elsewhere). Nor did the report show the broad-based wage gains that would indicate a labor shortage.

Ultimately, the central factor here must be that the pandemic is not remotely over yet. Despite many cities returning to something like normal, the U.S. is still seeing about 45,000 new cases of COVID-19 every day, and about 700 deaths — and that is because only about a third of the population is fully vaccinated so far. Even many vaccinated people are understandably hesitant about going back to normal, given the carnage of the last year, while many parents are still caring for kids at home for fear of infection or lack of access to day care.

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Meanwhile, the pandemic created all manner of shortages and snarls in global supply chains — which were already in a poor state thanks to weak demand after the Great Recession. Jobs in auto manufacturing, for instance, were down 27,000, thanks to an ongoing shortage of computer chips. Those problems are simply going to take time to be sorted out.

It would therefore be highly premature to base any sweeping policy conclusions on this report. It will take months for real trends to show up, and indeed this report might be revised later. As Minneapolis Federal Reserve Bank President Neel Kashkari argues, it is wise to keep pushing for economic recovery until we have better data on what is really happening.