WASHINGTON – The disappointing job report released by the Department of Labor on Friday represents the biggest test yet of President Biden’s strategy to revitalize the economy. Corporate groups and Republicans warn that the president’s policies are causing labor shortages and that his broader agenda risks runaway inflation.
However, the Biden government showed no signs of changing course on Friday. Defending the more generous unemployment benefits included in the $ 1.9 trillion bill he signed in March, the president said his proposed $ 4 trillion spending on infrastructure, childcare and Education and other measures would help create more and better-paying jobs after the pandemic.
At the White House, Mr Biden pushed for a “perspective” on the report, which created only 266,000 new jobs in April. He said it would take time for his relief bill to revive the economy and welcomed the more than 1.5 million additional jobs since he took office. And he rejected what he called “loose speech” that Americans just don’t want to work.
“The data shows that more workers are looking for jobs,” he said, “and many cannot find them.”
Republicans cited the report as a sign of the failure of Mr Biden’s policies, although job creation has accelerated since Mr Biden replaced President Donald J. Trump in the White House. They called on his government to end the $ 300 weekly unemployment benefit while several Republican governors – including those in Arkansas, Montana and South Carolina – ended unemployment benefits in their states, citing labor shortages.
“This is an amazing economic setback and clear evidence that President Biden is sabotaging our job restoration by promising higher taxes and regulations for local businesses that hinder and encourage overseas job creation,” said Representative Kevin Brady from Texas, the top Republican on the Ways and Approach Committee, said in a press release. “The White House also denies that many companies – both small and large – cannot find the workforce they need.”
Business groups such as the US Chamber of Commerce, which have supported parts of Mr. Biden’s broad business agenda, also suggested the aid is holding back hiring.
The job report “is beginning to acknowledge that this is an obstacle – not the only obstacle, but an obstacle to filling open positions during recovery,” said Neil Bradley, executive vice president and chief policy officer of the chamber.
“We absolutely have to start preparing to turn the supplement off,” he said. “The sooner we do that, the sooner it becomes clear how it has held us back.”
The unemployment supplement has quickly become the Republican weapon of choice when it comes to attacking Mr Biden’s economic responsibility. Lawmakers and conservative economists argue that its heavy spending will negatively impact recovery and will ultimately slow growth. While Democrats have a narrow majority in Congress, Republicans are trying to turn public opinion against Mr Biden’s approach and halt plans to spend $ 4 trillion on measures that would be offset by higher taxes on corporations and the rich.
Republicans supported a weekly $ 600 surcharge in the first stimulus bill approved by Mr Trump, but said the need for it no longer existed and that it created a negative incentive to look for work. Economists who support this view cited details of the employment report – including rapid wage increases in the hospitality industry – and stated that employers are rapidly raising wages to encourage new hires to take up jobs.
White House officials denied this reading. White House Economic Advisory Council members Heather Boushey and Jared Bernstein both cited 300,000 jobs in the recreational and hospitality sectors and a declining number of workers who told the department they had left the workforce out of concern about the contagion with the coronavirus as a sign that the unemployment supplement did not deter employees. Other officials noted that under unemployment benefit rules, workers could not turn down suitable job offers and still be eligible for assistance.
When asked whether he believed that the improved performance had an impact on employment growth, Mr. Biden replied: “No, nothing measurable.”
Administrative officials say any clogging in the job market is likely to be temporary and that once Americans of working age are fully vaccinated again, schools and daycare are fully open, and people are more comfortable returning to work, the recovery will smooth again .
“This is progress,” Ms. Boushey said in an interview. “We are creating an average of over 500,000 jobs a month over the past three months,” she said.
“This is proof that our approach works, that the President’s approach works,” said Ms. Boushey. “It also underscores the steep rise resulting from this crisis.”
Administration officials were optimistic that the pace of job creation would accelerate in the coming months. Substantial parts of the aid money approved in March still have to flow into the economy. That includes the $ 350 billion allocated to states and communities that have 1.3 million fewer jobs than their pre-pandemic peak.
States and cities are waiting for guidance on how exactly the money can be spent and what the conditions are. Republican-led states have filed a lawsuit against the Biden administration for its position that states cannot use aid money to subsidize tax cuts, which could further slow adoption.
Mr Biden said at the White House that this month the government will begin releasing the first amount of money to state and local governments. He said the money wouldn’t restore all lost jobs in a month, “but you will see those jobs return for state and local workers.”
The government also took steps on Friday to get money out the door faster. The Treasury Department would release $ 21.6 billion in rental assistance, included in pandemic relief legislation, to provide additional assistance to millions of people who could face eviction in the EU in the coming months.
Officials said they expected increased vaccination rates to allay some lingering fears about return to work amid the pandemic. The number of fully vaccinated Americans between the ages of 18 and 64 rose by 22 million from mid-April, when the job report poll was conducted, to Friday. That was an acceleration compared to the previous month. Some White House officials said the government’s urge to keep increasing the number of those vaccinated could be the main policy variable for the economy this summer.
Treasury Secretary Janet L. Yellen said at the White House that a lack of childcare combined with irregular school schedules makes it a challenge to get the job market back on track. She also said health concerns about the pandemic held some workers back from being able to return to the market.
“I don’t think the unemployment benefit increase is really the factor that makes the difference,” said Ms. Yellen.
She said she believed the job market was healthier than the numbers released Friday suggested, but she allowed the economic recovery to take time.
“We had a very unusual blow to our economy,” said Ms. Yellen, “and the way back will be a bit bumpy.”
Ms. Boushey and Mr. Bernstein said the economy appears to be going through a number of rapid changes related to the pandemic, including supply chain disruptions that have affected automobile manufacturing by reducing the availability of semiconductor chips and businesses that are being shut down after a year who have decreased from depressive activity because of the virus.
“We believe these misalignments and bottlenecks are temporary,” said Bernstein, “and they are what you want in an economy that goes from closure to reopening.”
Other key business figures saw the report as a sign that the imminent labor recovery is likely to prove unpredictable. Robert S. Kaplan, the president of the Federal Reserve Bank of Dallas, said in an interview that his economic team had warned him the April report could show a significant slowdown as material shortages – including wood and computer chips – and labor plummeted job growth.
He said he hoped these supply bottlenecks would be resolved, but he will be watching closely in case they cannot be resolved quickly.
“It shows me that there will be fits and starts to lower the unemployment rate and improve employment in the population,” said Kaplan. He noted that sectors that were struggling to acquire materials, such as manufacturing, had lost jobs, and he said that leisure and hospitality companies would have created more jobs if there had been no job search challenges.
“It’s just a job report,” warned Tom Barkin, president of the Richmond, Virginia Federal Reserve Bank. But he said labor supply issues might play a role: some people might have retired, others might have health concerns, and unemployment insurance might encourage poorly paid workers to stay at home or allow them to join theirs return on own terms.
“I feel like people are picky,” said Mr Barkin. “The first question I have on my mind is: is it temporary or more structural?”
He said that supply constraints would likely wear off over time and that while companies may have to complain about rising input costs and possibly raise entry wages a bit, he is having trouble seeing that it would lead to much higher inflation – like this one the case would be to worry about the Fed.
The Fed is trying to achieve maximum employment and stable inflation averaging 2 percent. It is committed to maintaining its cheap money policy, which makes borrowing inexpensive, until it sees realized progress towards these goals.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said disappointment with payroll confirms the Fed’s slow stance.
“I feel very good about our results-based policy approach,” Kashkari said in a Bloomberg television interview shortly after the report was published. “If we actually let the labor market recover, we don’t just forecast that it will recover.”