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Why the latest jobs report was disappointing, and what it means for the economy

With millions of people still out of work during the pandemic, Friday's mediocre jobs report puzzled many analysts who expected hundreds of thousands more new jobs. Lisa Desjardins discusses its implications with Ellen Hughes Cromwick, a former chief economist at the commerce department during the Obama administration, and Michael Strain, an economist with the American Enterprise Institute.

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  • Judy Woodruff:

    With millions of people still out of work, today's jobs report was a puzzle to many analysts, who had expected hundreds of thousands more new jobs to have been created.

    As we heard, President Biden picked up on this today to try to make his case for large federal spending on the economy, infrastructure and addressing inequality. His plans could add $4 trillion more in spending, but it is the subject of considerable debate.

    Lisa Desjardins looks at all of that.

  • Lisa Desjardins:

    Judy, as more Americans get vaccinated, there's been much speculation that the economy could roar back this year.

    Today's report wasn't bad, by any means, but it didn't suggest that kind of recovery was in the offing yet. In fact, it left many with questions about what it means and about economic prescriptions being debated right now.

    For that, we turn to Ellen Hughes-Cromwick, a former chief economist at the Commerce Department during the Obama administration. She's now at Third Way, a center-left think tank. And Michael Strain is an economist with the conservative American Enterprise Institute.

    These were some surprising and disappointing numbers and also, I have to say, a bit confusing. Unemployment is still high, but yet I see some businesses say that they just can't find workers.

    Ellen, I want to start with you. What do you think these numbers are telling?

  • Ellen Hughes-Cromwick:

    Thank you for having me.

    It really is a snapshot from last month. And, as we know, looking across the country, there are very different ways in which states are opening up. And, therefore, the restrictions still from the COVID crisis are really impacting businesses.

    But, just to be clear, it's one snapshot. We actually lost 22 million jobs during the COVID crisis as it emerged last year. And we have gained back a substantial amount of those jobs. We're still losing about eight million as compared to our pre-COVID job level, a lot of hopefully good recovery ahead. But we're still in the middle of this. And I think maybe expectations ran a little bit over the edge of the skis when people thought about a million new jobs in April.

  • Lisa Desjardins:

    Michael, what did you get from this snapshot, as Ellen calls it?

  • Michael Strain:

    Well, I would like to just echo one point Ellen made. I think it's important not to read too much into any one month's data. And there's a risk of doing that, given how disappointing the data were for the month of April.

    To my mind, the basic story of the labor market is still the same. We have a jobs gap of about 11 million. We have a work force participation rate that hasn't really improved since June. And so talk of the jobs market being hot, I think, is just premature.

    The demand side of the labor market is in better shape than the supply side. And that could cause issues with wages spiking. It could cause issues with wages spiking. It could cause issues with what's being deemed in the press as worker shortages.

    But the important thing to do, I think, is to keep our eye on the ball. And the ball is that 11 million jobs hole in the labor market. Supply issues are going to resolve themselves. As day care centers reopen, as schools reopen, as the extra generous unemployment benefits expire in September, I would expect supply to come back.

    And I think the story for 2021 is still going to be a pretty rapid recovery.

  • Lisa Desjardins:

    You know, this seems to be one of those times where policy-makers have to make decisions before they have all the information, because, as both of you are saying, we're still in the middle of this.

    And this isn't just academic. Montana and South Carolina are both ending those are those added unemployment benefits early because, what you're talking about Michael, they believe there's a real supply issue with labor, that those unemployment benefits are helping keep people home.

    The two of you had differing opinions on this on Twitter.

    And I want to start with you, Michael. Do you believe or why do you believe that those added unemployment benefits are, in fact, keeping people home?

  • Michael Strain:

    Well, I do believe that.

    I think that, if you look at the kind of totality of the evidence on this question, the conclusions are that, the more generous unemployment benefits are, the longer workers stay unemployed. That didn't happen in the spring and summer of 2020. But, of course, that was a pretty unusual period, when lockdowns were very severe.

    If you look at the half-century before the pandemic, what you would take away from the body of evidence is that more generous unemployment benefits keep workers unemployed for longer.

    With the $300 supplement that's currently in place until September, about half of workers have a higher income from unemployment benefits than they would have from working. And I think it's just common sense that, with unemployment benefits that are that generous, workers are going to take longer to search for a job than they otherwise would.

  • Lisa Desjardins:

    Ellen, what do you think is keeping people home? Do you — is Michael right about this?

  • Ellen Hughes-Cromwick:

    I really disagree with that assessment of unemployment insurance.

    And let me give you one example that I think is very clear. In the data today, we learned that the leisure and hospitality sector grew jobs by over 300,000. And, in fact, if you look at just hotel and restaurant jobs, they rose by over 200,000 in one month.

    In fact, those jobs have grown by 60 percent since the depth of the COVID job loss in April of last year. In other words, it's grown six times more or faster than the average job gain.

    So, that suggests to me — for those workers, the average wage is $17 an hour. They're getting back to work as fast as they can that is safe to get back to work. So the people that would benefit from unemployment insurance benefits, they're coming back to the work force.

    And that's why we see restaurant and hotel workers going back, if they can, that is, if they can get day care and their kids are back in school, which was one of the other key items in the report, was that the — that, actually, women lost jobs last month.

    So you have to sit back and say, why are these women not coming back? Why aren't they getting jobs? Well, they have got challenges when it comes to day care and school.

  • Lisa Desjardins:

    And, briefly, just with our last minute left, I want to ask both of you, what do you think this moment means for the debate over the idea that President Biden is putting forth that government should go big?

    Ellen, first to you. Should government go big now, and why? In just 30 seconds.

  • Ellen Hughes-Cromwick:

    Absolutely.

    We need investment. We need investment in infrastructure, investment in people. We have underinvested for many years. Let's think about this opportunity right now to really make a difference, go bold. Austerity doesn't work. Austerity means that we're going to shrink, not grow.

  • Lisa Desjardins:

    And Michael.

  • Michael Strain:

    I think that there are good things that the president is proposing to spend money on. There are certain aspects of the infrastructure plan and the Families Plan that I think would invest in people, invest in the economy and provide long-term benefits.

    I think the American Rescue Plan, the stimulus, was much, much too large. And if we do have a period of several months where demand is booming, and supply can't keep up, which is what it looks like currently, then we're going to have the size of the president's stimulus plan partially to blame. And that's going to make it harder for him to do other big things.

  • Lisa Desjardins:

    A very robust debate that we hope we will keep up with you both on.

    Ellen Hughes-Cromwick and Michael Strain, thank you so much.

  • Michael Strain:

    Thank you.

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