May Jobs Report: Still Not What Stimulus Backers Promised

The monthly jobs report for May released this morning found that nonfarm payrolls rose by 599,000 jobs last month, with the unemployment rate falling to 5.8 percent. That’s an improvement from April, when job creation was a relatively dismal 278,000 (as updated in this morning’s report) and the unemployment rate actually rose to 6.1 percent. But news reports suggested the May jobs figure “disappointed again” because it fell short of economists’ expectations of 671,000 more jobs.

It fell below another key measure as well: the job growth supporters of the $1.9 trillion American Rescue Plan, enacted in March, said Americans could expect under that legislation. In fact, average monthly job creation since that legislation was enacted (now 438,500 for April and May) continues to fall below what nonpartisan experts predicted the economy would see even without that legislation. As I noted last month:

On February 1, the nonpartisan Congressional Budget Office (CBO) projected that even without further legislation an average of 521,000 jobs per month would be created between the fourth quarters of 2020 and 2021. Those 6 million jobs would result from the continued recovery from the pandemic as well as the significant bipartisan stimulus enacted in December 2020.

White House economists on February 3 cited an analysis by Moody’s Analytics that projected the American Rescue Plan would create an additional “4 million jobs in 2021” compared with that “baseline without additional fiscal stimulus” described by CBO. Viewed from February, that would have required the economy to produce over 900,000 jobs per month for the rest of this year. But if the economy is not even creating the jobs forecast without the American Rescue Plan, it is nowhere near producing even the first of the additional four million jobs supporters suggested that legislation would create.

It’s not for lack of job openings. The Wall Street Journal today reported that “the number of people in the labor force held nearly steady, suggesting that ample open jobs and some improvement in wages didn’t draw more workers off the sidelines in May.” As Becky Frankiewicz, president of the staffing company ManpowerGroup, said, “Employees are acting like consumers in how they’re consuming work.”

Despite the widespread availability of vaccines and the lifting of pandemic restrictions, part of the reason for that consumer mentality remains unprecedented federal pandemic unemployment benefits that remain payable into September under the American Rescue Plan. Those benefits exceed prior wages for millions of recipients and stretch to nearly two years per recipient in some states.

Recent polling suggests a majority of Americans believe these policies are keeping workers on the sidelines of the economy. A mid-May Harvard Center for American Political Studies/Harris poll found that 76 percent of registered voters agree “some people are staying on unemployment because they can make more money by not working.” Most registered voters polled (54 percent) believe these extraordinary benefits should be cut off in July, instead of continuing into September as current law provides. Those opinions are echoed by recent moves by 25 Republican-led states to reject federal pandemic unemployment benefits in the coming weeks, which should accelerate returns to work there.

President Biden this morning seemed to acknowledge those concerns by stating that federal pandemic unemployment benefits expire in 90 days while noting “that makes sense it expires in 90 days.” He also suggested that the “historic progress” he saw in today’s figures is “due in no small part … to the bold action we took in passing the American Rescue Plan.” But further progress “is not assured,” Biden added, and requires enactment of his next two trillion-dollar stimulus plans. That echoes his sentiments after last month’s job report, when he “cast the disappointing development as a call to arms, announcing measures to speed up job creation and insisting the weak April employment numbers just showed why the country needs his next two spending packages enacted.”

In effect, the president believes that, whether the latest jobs data are “dismal” or “historic,” they always argue for trillions of dollars in additional stimulus spending. While that may not be surprising, negative public opinion and the outright rejection of current benefit expansions by half of the states are signs large parts of the country are not buying what the president is selling.