Goldman Sachs thinks the surprisingly lackluster April jobs report could be partially explained on the generosity of Uncle Sam.
"We see two partial explanations for the payrolls disappointment. First, reopening effects likely overlapped with normal seasonal hiring patterns, resulting in less-impressive job gains on a seasonally-adjusted basis. Second, labor supply appears to be tighter than the unemployment rate suggests, likely reflecting the impact of unusually generous unemployment benefits and lingering virus-related impediments to working. It is hard to know how exactly much of the miss these factors account for, and there is likely some residual weakness in the report too," said Goldman Sachs chief economist Jan Hatzius in a new research note to clients.
Recall that as part of the recently passed American Rescue Plan, those qualified for unemployment insurance receive $300 per week in addition to state unemployment benefits. That extra level of income will continue through Sept. 6, 2021.
The U.S. economy created 266,000 jobs in April compared to the 1 million estimate. March's non-farm payroll gain was revised sharply lower, showing a rise of 770,000 versus the 916,000 previously reported.
U.S. Labor Secretary Marty Walsh told Yahoo Finance Live the April jobs report was "good" all things being considered and the economic recovery from the pandemic has been "strong." Walsh was quick to downplay the notion the unemployment top up was holding back the jobs recovery.
"When you think about it, we still have millions of Americans out of work. Those millions of Americans, many of them would prefer to be working in a job rather than collecting unemployment because the unemployment is a short-term benefit that's going to run out whereas these people would like to get back to their careers, get back to their jobs, find new opportunities and new careers," Walsh said.
That hasn't stopped economists such as Hatzius from going back to the drawing board on the pace of jobs growth for this year.
"The main implication for the path of the labor market for the remainder of this year is that job gains and declines in the unemployment rate are likely to be less front-loaded than we had previously thought, at least on a seasonally-adjusted basis, but should look better than we had assumed in H2 because seasonal patterns will smooth out the impact of reopening on seasonally-adjusted data and the extra unemployment benefits are set to expire in September," predicts Hatzius.
Hatzius projects the U.S. economy will create on average 800,000 jobs a month from May to September.
Yahoo Finance's Emily McCormick contributed to this story.
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