May 11, 2021

The Labor Market Recovery Slowed in April

New data from the Bureau of Labor Statistics (BLS) show that the unemployment rate increased to 6.1 percent in April from its March level of 6.0 percent. April was the first month in which the unemployment rate increased since April of last year.

The unemployment rate for April remains high relative to its pre-pandemic level

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In April, the economy added 266,000 jobs. The industry sector with the largest number of gains was leisure and hospitality, and BLS notes that the gains in that sector were primarily driven by new jobs in food services and drinking places as pandemic-related restrictions eased in various parts of the country. However, just three of the other 10 industry sectors had gains in excess of 2,000 in April and temporary help services lost more than 100,000 jobs last month.

The job gains in April were mainly in the leisure and hospitality industry

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The Unemployment Rate Does Not Tell the Whole Story

A large number of workers continue to file for unemployment compensation. In the week that ended on May 1, there were 498,000 new claims (such data are released on a weekly basis). While that is considerably lower than the number of weekly claims that were being filed just a few months ago, it is still much higher than the weekly claims that were being filed before the onset of the pandemic.

Claims for regular unemployment insurance remain high

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In addition, the rate of unemployment remains higher than before the pandemic for all races. Black, Hispanic, and Asian workers all exhibit rates of unemployment about 3.5 percentage points above the levels recorded in February 2020. In April, the unemployment rate for white workers was 2.3 percentage points higher than it was before the onset of the pandemic.

Unemployment rates are higher now than they were before the pandemic, especially for non-white workers

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Standard unemployment rates do not capture all of the negative effects that the coronavirus pandemic is having on the labor market. For example, the overall unemployment rate would be 7.2 percent if it included people who have stopped looking for work during the past four weeks — the headline unemployment rate does not count those people as unemployed because they are considered outside of the labor force. Including the 5.2 million people that are working part time despite desiring full-time work would bring the rate to 10.4 percent. In other words, one in 10 American workers are currently affected by the ongoing downturn in the labor market.

The official unemployment rate does not include many workers that have been affected by the COVID-19 outbreak

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The labor market recovery from the pandemic remains uncertain and unpredictable, and there will continue to be meaningful implications for the federal budget and the economy overall. Income and payroll tax receipts will be lower than would otherwise occur because fewer people are working. Also, payments for unemployment compensation and other safety net programs will remain relatively high, in part as a result of recent legislation to continue certain unemployment benefits. Enacted legislation to provide relief to individuals and businesses from the pandemic is projected to add about $5.3 trillion to the cumulative deficit from 2020 to 2030. However, there has been no alternative — providing assistance to individuals who have lost their jobs during the global health crisis can mitigate the economic suffering in the future.


Related: Here’s Everything Congress Has Done to Respond to the Coronavirus So Far


Image credit: Photo by John Sommers II/Getty Images

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