Taco Bell is now discontinuing signs posted on the window of the local Taco Bell in Emporia, Kansas on May 5th.
Mark Reinstein / Zuma Press
An economy doesn’t just live on demand. There is no clearer evidence of this dictum than Friday’s surprise job report for April, which undercut economists’ expectations by more than 700,000. Welcome to the supply-side jobs slowdown.
Employers created 266,000 net jobs in April, while the unemployment rate rose 0.1 percentage points to 6.1%. Payrolls for March and February were cut by a total of 78,000, and 48,000 of April’s new jobs were in government, mostly in local education, when schools reopened.
The report wasn’t a complete washout, as the private workforce rose 218,000, mainly due to recreational and hospitality jobs (331,000) as lockdowns continued to ease. However, there were large losses in temporary jobs (-111,400), couriers (-77,400), food and beverage stores (-49,400) and nursing homes (-19,500). Part of this reflects a reallocation of jobs as businesses reopen and consumption shifts.
The Keynesians who now run US policy in the Treasury and the Federal Reserve have used their usual demand-side game book. Bathe the country in government money, keep interest rates at zero, and the resulting surge in consumer demand will fuel everything.
They underestimated the supply chain constraints that have reigned across the economy for months – from underworking to the shortage of computer chips to rising timber and freight prices. The economy cannot produce goods and services fast enough to meet growing demand due to the easing pandemic and government policies that have shoveled cash into consumers and rewarded Americans for not working.
Employers across the country have been complaining for months that the $ 300 weekly unemployment bonus made hiring difficult. Most lower-income workers can sit more on the couch. It is noteworthy that half of the new entrants to the labor market in the past month were teenagers, most of whom are ineligible for unemployment benefits due to their short or non-existent employment histories.
All of this was predicted a year ago by these columns and several others, including Sens. Ben Sasse and Lindsey Graham, and economists Casey Mulligan and Steve Moore. But even as the economy grew rapidly again, in March the Democrats extended the $ 300 weekly bonus to September, despite taking advantage of a bonus on other transfer payments.
Democrats claimed their $ 1.9 trillion spending was needed to boost the economy, although it rebounded quickly when vaccines were introduced and lockdowns eased. Now the White House is spinning the missing jobs after blowing out the spending as something it expected.
“I want to remind everyone that it is supposed to help us in the course of a year, not 60 days,” President Biden said Friday, adding that the low job growth “is evidence of our new strategy, this economy from below.” to grow. ” up and the middle out ”and underlines the need for further government incentives.
He also said there is no “measurable” data that people don’t look for work because it pays more not to work. He should get out more and ask some small business owners. Treasury Secretary Janet Yellen responded by saying that unemployment benefits are not a “major factor”. However, the latest Jolts survey by the Department of Labor found that 7.4 million jobs were open as of February. There are many jobs available, but not enough willing workers.
The good news for those in work is that employers pay more to attract and keep them. Average hourly wages rose 8.4% per year last month and even more for lower-income jobs like retail (16.8%) and leisure and hospitality (19.2%). The risk is that these wage increases will become embedded in expectations and lead to more general inflation.
The political lesson is to ease government supply bottlenecks. That means canceling the federal bonus so as not to work. And it should mean pulling back the Biden tax hikes, which are a frontal assault on investment and supply. There is no need for any more Keynesian charms that have become part of the problem.
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Published in the print edition of May 8, 2021.