April adds 175,000 jobs, signaling economic stress test: CEI analysis

The US economy added 175,000 jobs in April, a significantly lower number than economists were anticipating and signaling a major economic stress test has begun: How will policymakers and employers respond to slower job and GDP growth?

CEI Senior Economist Ryan Young:

“This is the big stress test. How policymakers respond to slowing employment growth will determine whether we are in for years of stagflation or a small blip that nobody will remember a year from now.

“GDP and jobs are both still growing but at a slower rate and on a downward trajectory. This is creating a temptation for stimulus that Congress, President Biden, and the Federal Reserve must resist. If they cave in, inflation will go back up which will cause economic problems far worse than a few months of tepid job market news.

“Two facts should calm worried politicians. One, April’s employment growth is about the same as it was in October and November when the economy grew at 4.9 percent. And two, the economy is close to full employment. Growth will slow down at some point and that’s not necessarily a bad thing because nearly everyone who wants a job will have one. There are still more job openings than there are available workers.”

CEI Research Fellow Sean Higgins:

“The Labor Department’s report that 175,000 jobs were added in April, significantly below economists’ projections, and also included the news that February and March’s gains had been revised downwards by a combined 22,000 jobs. Hiring has cooled as employers are facing a new economic reality: a chronic shortage of available workers. The official unemployment rate has hovered between 3.7 and 3.9 percent since August. 

“Employers have offered higher wages and more flexible hours and working conditions in an attempt to fill positions. Wages increased by another 7 cents in March and are up by 3.9 percent over the last year. Meanwhile the average work week has shrunk to 34.3 hours.  Yet workforce participation numbers didn’t budge at 62.7 percent. Employers have not been able to find enough workers for years now and may have reached the limits in what they can offer through higher pay or by using automation to circumvent the problem.”