US job growth crashes below expectations amid labour shortages
US job growth was far slower than expected in April as labour shortages left employers scrambling to meet booming demand as coronavirus restrictions ease.
Non-farm payrolls increased by just 266,000 jobs last month, well below estimates of 1m, according to figures from the Labor Department.
It also marks a significant slowdown from the 770,000 jobs added in March.
The disappointing numbers — the first since the White House’s $1.9 trillion Covid-19 rescue package was approved — come as the US ramps up its vaccination rollout and the economy begins to reopen.
The country recorded a 6.4 per cent annualised growth in the first quarter, the second fastest quarterly rate of growth since 2003.
But the massive surge in demand has triggered shortages in labour and raw materials.
The shortage of workers for industries ranging from hospitality to manufacturing has been blamed on a range of factors, including generous unemployment cheques.
The slow pace of hiring could last until at least September, when the enhanced unemployment benefits run out.
Nevertheless, the jobs figures are unlikely to dampen expectations about a strong recovery in the second quarter for the US economy, which is on track for its best performance this year in four decades.
“Today’s disappointing jobs numbers will heighten investor caution and raise concerns around the resilience of the U.S. labour market – and to what extent the pace of the Covid-19 vaccination programme will boost economic activity and employment,” said Richard Flynn, UK Managing Director at Charles Schwab.
“However, across economic metrics — from GDP to retail sales to job growth — boom conditions are evident. We are yet to see the full effect of this since the unemployment rate is one of the most lagging of economic indicators.”
Sam Cooper, vice president of Market Risk Solutions at Silicon Valley Bank, said: “The shocking miss in the payroll data immediately sent US treasury yields lower, which has translated into a weaker dollar and the reason we’ve seen GBP/USD and EUR/USD exchange rates quickly move higher.
“While the market takes some time to digest any long term implications, the soft readings support the continuation of an accommodative approach from the Federal Reserve in the near term.”