(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, May 7th at 8:30 AM Eastern Time.)
The economy added 916,000 jobs in March, it will likely do even better in April. With the vaccination process moving rapidly, infection rates falling, and pandemic restrictions being relaxed almost everywhere, people are returning to their pre-pandemic lifestyles. This means going to stores and restaurants, taking vacations, and a return in-person schooling. We can expect to see large jumps in employment in hotel and restaurant sectors, retail, and state and local governments.
A jump in employment that could exceed 1 million is likely to be associated with a drop in the unemployment rate of 0.3 to 0.4 percentage points, putting the April unemployment rate in the 5.6 to 5.7 percent range. By way of comparison, in the recovery from the Great Recession, the unemployment rate didn’t hit 5.7 percent until October of 2014. It didn’t hit 5.5 percent until February of 2015. This time, we are doing far better in repairing the economic damage caused by the recession.
Share of Unemployment Due to Voluntary Quits
There have been many accounts in the media of employers claiming that they can’t hire workers because of the generosity of unemployment benefits under the Recovery Act. Specifically, they argue that, with the $300 weekly supplement, many workers can get more in unemployment benefits than they would get from working.
One way to evaluate the extent to which this is a problem is to look at the percentage of workers who report being unemployed as a result of voluntarily quitting their jobs. In principle, workers are not supposed to be eligible for unemployment if they quit their job (they also are not supposed to be eligible if they refuse a job). If workers feel comfortable about their labor market prospects, we should see substantial increases in the quit rate.
The quit rate fell to a record low of 2.5 percent in April of 2020, but has recently been rising. It was 8.0 percent last month. Before the pandemic hit, it had averaged more than 14.0 percent in the second half of 2019.
The other major evidence that sectors are seeing labor shortages is that wage growth should be accelerating, and we should see a lengthening of the average workweek. Through March, there was not much evidence of either.
The annual rate of wage growth for production and nonsupervisory workers, comparing the last three months to the prior three months, was 3.4 percent, roughly the same pace as before the pandemic hit. The length of the average workweek for production and nonsupervisory workers was 34.1 hours. This is higher than the pre-pandemic average of 33.6, but shorter than for many months in 2020, including months where the supplements were not available.
Share of Long-Term Unemployment
The share of people unemployed for more than 26 weeks rose sharply in the last quarter of 2020 and has continued rising this year. It hit 43.4 percent of the unemployed in March, just more than 2.0 percentage points below the all-time peak hit in April 2010. The long-term unemployed are people who lost their job at the start of the pandemic and have not gotten them back. As many businesses are reopening, the share of long-term unemployed should be dropping.
Jobs in Construction and Manufacturing
The construction and manufacturing sectors both had very strong job growth in March, adding 110,000 and 54,000 jobs, respectively. Both sectors are likely to again show strong gains in April. Construction employment is now down just 182,000 from its pre-pandemic level. While part of the March job growth in construction was a bounce back from jobs lost due to bad weather in February, it’s clear job growth in the sector is strong. The April growth in the sector could eliminate half of the remaining pandemic falloff.
State and Local Government
State and local government employment is still down more than 1.2 million jobs since last February. These sectors added 129,000 jobs in March. We are likely to see even faster growth in April, as more schools return to in-class instruction.
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