With new data showing that American employers were creating jobs at a decent, but not exceptional, pace in May, President Biden stressed Friday that his administration would not seek the improved unemployment benefits criticized by Republicans as a key driver of labor shortages extend.
To what extent the additional $ 300 in weekly unemployment benefits can sideline workers is unclear. Some economists say inadequate childcare and health concerns could be the main reasons Americans stay out of work, while unemployment insurance and other pandemic-era policies give people the financial flexibility to choose to stay unemployed.
But the hiring pace has been a bit disappointing in recent months and there have been many complaints from companies about labor shortages. The US created 559,000 jobs in May, a solid number that fell short of analysts’ expectations of 675,000. The previous month was a major failure: only 278,000 jobs were added when analysts reckoned it was one million.
The Biden government celebrated May job gains on Friday as a sign that the labor market is recovering from the pandemic downturn and that its policies are working. However, White House officials said they would not try to extend the September extended unemployment benefits, and said they were temporary.
“It will expire in 90 days,” said Mr. Biden of Rehoboth Beach, Delaware. “That makes sense.”
At least 25 states have already begun to end the additional $ 300 as of this month, a decision White House press secretary Jen Psaki said Friday is entirely within their jurisdiction. While the government sees the benefit as “extra help” to workers, some governors disagree and “that’s fine,” she said.
“Each governor will make his own decision,” she said.
The White House’s move to neglect the benefits Democrats added to the $ 1.9 trillion economic relief bill passed in March risks angering progressives. But it could also help shift the narrative towards the broader priorities that the Biden government seeks to adopt in the coming months, including a huge infrastructure plan.
“This is progress – historical progress,” said Mr Biden. “Advances that will bring our economy out of the worst crisis in 100 years.”
He added that the recovery will not go smoothly – “we will hit some bumps along the way” – and that further support is needed to support the economy in the longer term.
“Now is the time to build on the foundation we laid,” said Biden.
Payrolls are still 7.6 million jobs below their pre-pandemic levels. Economic officials, including those from the Federal Reserve, had hoped for a string of strong labor reports this spring as vaccinations spread and the economy reopened fully after state and local lockdowns designed to contain the pandemic. In AprilFed chairman Jerome H. Powell referred approvingly to the March employment report, which showed that payrolls had increased by nearly a million jobs.
“We want to see like this for a number of months,” he said.
Instead, profits have developed unevenly. The number of job vacancies is high and wages are rising, suggesting that at least part of the interruption is due to labor shortages. That’s surprising at a time when the unemployment rate is officially 5.8 percent, and even higher when you factor in the people who left the job market during the pandemic.
Economists say many things could fuel labor shortages – it takes time to reopen a large economy, and there is still a pandemic – but the trend has opened a line of attack for Republicans. They blame improved unemployment benefits for preventing people from returning to work and preventing a faster recovery.
“Long-term unemployment is higher than it was at the start of the pandemic, and labor force participation reflects the stagnant 1970s,” Texas Representative Kevin Brady, the Republican topmost on the House Ways and Means Committee, said in a press release. “It is time for President Biden to give up his assault on American jobs, his tax hikes, his anti-growth regulations, and his obsession with more emergency spending and endless government controls.”
Republican governors across the country have in the past few weeks cut off the additional unemployment benefits that began under President Donald J. Trump. The idea is that this will push potential workers back into jobs.
Many progressives disagree with this assessment. Democratic leaders in Congress cited the latest employment report as a sign that lawmakers should implement the rest of Mr Biden’s plans to invest in roads, water pipes, low-carbon energy, home nursing, paid vacation, and a host of other infrastructure and welfare programs – but also that the government should continue to support workers who remain on the sidelines.
“The American people need all the support they can, especially the black and Hispanic communities hardest hit by the pandemic,” said Donald S. Beyer Jr., Democrat of Virginia and chairman of the Joint Economic Committee of Congress in a press release, in which the legislature is asked to “strengthen”.
Fed officials, who are responsible for creating the conditions for full employment and stable prices by managing borrowing costs, are likely to interpret the May report with caution. The acceleration in employment growth was good news, but the report also provided clear evidence that the job market is far from healed.
“I consider it a solid employment report,” said Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, on CNBC after it was released. “But I would like to see further progress.”
The central bank buys $ 120 billion worth of bonds every month and keeps its policy rate near zero, a policy that will keep borrowing cheap and help stimulate demand. Fed officials said they would need to make “substantial” further progress towards their two goals – maximum employment and stable inflation – before they begin scrapping monetary support by scaling back their bond-buying program.
Ms. Mester made it clear that the May report did not meet this standard.
“I would like to see a little more on the job market to really see that we are on the right track,” she said.
Officials have an even higher hurdle for the rate hike: They want a return to full employment and signal that inflation is likely to remain above 2 percent for some time.
Inflation has risen this year, but Fed officials have said they expect much of the price hikes to be temporary, caused by a lack of data and a temporary mismatch, when the economy reopens and demand exceeds supply.
While the Fed is primarily responsible for controlling inflation, the Biden administration has also been reviewing supply chain issues and is hoping to address some of them.
Brian Deese, director of the White House’s National Economic Council, said the government had identified concrete steps and a long-term strategy to make supply chains for things like semiconductors more resilient. In other areas, such as housing materials, the solution can be to bring private actors together to develop a possible strategy.
Ms. Psaki said the White House would talk about her plans “when we have more details to share, and hopefully that will be next week.”