Press Release

Gordon’s Guesstimate: April Jobs Report

Each month, AAF’s Director of Fiscal Policy Gordon Gray predicts the results of the monthly employment survey. This month, Gray writes:

This guesstimator is expecting a 1.2 million employment gain, the largest employment increase since last August. In historical terms, this gain would be the 5th largest on record and would take a healthy bite out of the 8.4 million jobs lost since last April that have yet to be replaced. U3 should fall to 5.7 percent. Average hourly earnings remain distorted due to compositional effects and should stay flat or possibly may decline with a large influx of workers if those workers are in comparatively lower-paid industries such as leisure and hospitality.

See below for his full analysis.

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Today the Department of Labor released weekly unemployment insurance claims data that showed claims had fallen to 498,000, the lowest level since the pandemic began a year ago. Whereas initial claims data often served as the canary in the coal mine for the unprecedented job losses throughout the pandemic, claims now, though still significantly elevated, are in precedented territory. Indeed, initial claims exceeded today’s figure in at least one week during the last 6 recessions. Initial claims roughly averaged today’s number for a year in the mid-70s. To be sure, initial claims are not the sole indicator of labor market health. Continuing claims remain high but, again, are no longer in uncharted territory.

The magnitude of the disruption to the labor market caused by the pandemic – most conspicuously reflected in the loss of 22 million jobs within about 60 days but borne out by other data as well – was truly unprecedented, and required an unprecedented policy response. Policymakers responded with nearly $6 trillion in fiscal support, buttressed by trillions more in assistance from the Federal Reserve. Those supports have sustained households and businesses, and the trajectory of the recovery suggests a rapid recovery. The sweep of recent economic indicators suggests this rebound is well underway, not least of which is the marked decline in unemployment insurance claims.

Perhaps the most conspicuous indicator of tomorrow’s employment gain is the ADP National Employment report, which posted a 742,000 increase in private sector employment in April. ADP has tended to understate employment growth of late, though given the magnitude of the labor flows, significant differences in the initial ADP and Bureau of Labor Statistics prints is understandable. Consumer confidence now stands at the highest level since February 2020, when unemployment was 3.5 percent. This last indicator is particularly understandable given the strength of household finances. Disposable personal income has grown over 10 percent, in large part due to federal policies, over the last 12 months. While no doubt many households and communities continue to struggle – and there remain in place extraordinary assistance policies – aggregate household finances a year into the pandemic are healthy. While both ISM indices gave back some recent gains, they both remain comfortably in expansion territory.

This guesstimator is expecting a 1.2 million employment gain, the largest employment increase since last August. In historical terms, this gain would be the 5th largest on record and would take a healthy bite out of the 8.4 million jobs lost since last April that have yet to be replaced. U3 should fall to 5.7 percent. Average hourly earnings remain distorted due to compositional effects and should stay flat or possibly may decline with a large influx of workers if those workers are in comparatively lower-paid industries such as leisure and hospitality.

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