The latest jobs report is a shocking disappointment. Economists had expected American businesses to add 1 million nonfarm workers to their payrolls in April, thereby reducing the unemployment rate to 5.8 percent. Based on the historical economic trend that robust economic recovery and job growth usually happen after significant economic contraction, such an expectation was reasonable.
Instead, however, the April jobs report bucked the trend and revealed that U.S. employers only added 266,000 nonfarm employees last month. As a result, the official April unemployment rate — which only counts those without jobs actively looking for employment — was at 6.1 percent, slightly worse than the 6 percent rate for March. To make the matters worse, the Department of Labor revised March’s jobs number from 916,000 down to 770,000.
It’s not just the raw job numbers that are worrisome, but the trend as well. As the following chart shows, the U.S. unemployment rate has barely improved since Joe Biden became president.
This latest jobs report was so awful that when the jobs data was announced by CNBC’s senior economics reporter, Steve Liesman, he had to double-check to make sure he had the number right. Even left-leaning corporate media couldn’t hide their disappointment by using phrases such as “huge letdown” and “way worse than expected” to describe the numbers.
What’s even more bizarre is that there are plenty of American jobs available — 7.4 million as of April. Still, millions of American workers who became unemployed during the pandemic remain on the sidelines, not actively looking for work. There are two main reasons for such a mismatch.
Slow School Reopenings
About a third of the U.S. labor force is made up of parents with school-aged children. The pandemic-related school closures and moving classes online have forced many families to choose to have one parent — typically mothers — stay at home to look after the children.
American women already suffered worse job losses than men during the government-imposed lockdowns. According to data from the Bureau of Labor Statistics, 55 percent of the 22 million jobs lost in March and April 2020 were held by women. Consequently, the overall female labor participation rate fell back to a level not seen since the mid-1980s. The job loss was especially severe for minority women since many work in industries heavily affected by the lockdowns, such as leisure and hospitality.
President Biden promised to re-open most schools within his first 100 days in office. As of now, however, only 42 percent of students are going back to school full-time. The pace of school re-opening is so slow because the Biden administration is beholden to the teachers’ unions, one of the most influential donors to the Democrat Party.
As long as schools do not reopen for full-time in-person classes, many working parents, especially moms, cannot work full-time. Instead, they will have to remain either unemployed or under-employed. The negative effects school closures have on working moms is stunning.
According to the U.S. Census Bureau, about 1.5 million fewer moms of school-aged children were actively working in March 2021 than in February 2020. Unfortunately, as plenty of research shows, suspending one’s career for a long time reduces career advancement and life-long earning power.
Government Handouts Discourage Employment
In addition to preexisting state unemployment benefits, the Democrat-led U.S. Congress and Biden administration sweetened unemployment benefits by adding $300 a week, extending these enhanced benefits until September. So, an American receiving unemployment receives an average of $700 a week, higher than the equivalent of working full time at $15 an hour.
According to the Wall Street Journal, more than 16 million Americans received unemployment benefits as of April, including gig workers and those self-employed who were previously ineligible for such benefits. More importantly, roughly 42 percent of those 16 million earn more from unemployment than they did in their previous jobs, not even accounting for the temporary health insurance and multiple stimulus checks offered through the federal government’s stimulus packages.
These Americans who receive unemployment are not the ones to be blamed. No one is living large on $700 a week. For Americans making more money from government handouts than working, it’s only rational to stay put until either the benefits run out or a higher-paying opportunity comes along.
Consequently, American businesses are struggling to find workers. The U.S. Chamber of Commerce blames the relatively generous unemployment benefits for preventing people from looking for work. Indeed, the Biden administration’s policy-induced labor shortage hits small businesses especially hard. A March survey by the National Federation of Independent Business showed that “42 percent of owners had job openings that couldn’t be filled, a record high.”
Unlike large multinational businesses, small businesses do not have much financial capacity to raise wages. This adds to how small businesses have been hit the hardest during the government-imposed lockdowns. A Federal Reserve Bank study found that three out of 10 small businesses in the United States may be forced to shut their doors forever in 2021.
A pandemic lockdown-induced supply shortage of everything from computer chips to lumber has squeezed small businesses even further. Additionally, many small businesses — such as restaurants — operate on thin profit margins. Labor remains their most considerable expense and there is barely any wiggle room for wage increases.
Small businesses traditionally drive the growth of the U.S. economy and employ 50 percent of the nation’s private workforce. If a significant number of small businesses go under due to the burdens of lockdowns and being priced out of the labor market due to government handouts, our economy will be in for a hard time.
Even for mid to large businesses that can afford to raise wages high enough to compete against government handouts, a rapid and widespread wage hike will likely accelerate inflation eventually. Thanks to excessive money supply from the government’s trillions of dollars of stimulus, inflation in the United States is already creeping upward.
Anyone who put gas in their car or went to a grocery store lately likely noticed they paid more for food and gas. As businesses find various ways to pass the cost of wage hikes to consumers, Americans of all stripes will soon learn higher wages don’t necessarily increase real purchasing power if they have to pay more for goods and services as well.
The labor shortage our nation face today is a man-made problem, the direct result of the wrong-headed policies from the Biden administration and the Democrats in the U.S. Congress. Nevertheless, both President Biden and House Speaker Nancy Pelosi refuse to acknowledge their policy failures.
Instead, both used the disappointing jobs report as proof more government stimulus is needed and that Congress must quickly move to approve Biden’s $4 trillion spending plan. Until reality sinks in, American workers and their families will continue to pay a steep price for the predictable errors of the Democratic Party.