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U.S. Job Growth rises at slower than expected rate in April 2021


The U.S. economy has recently experienced lower than expected job growth according to Reuters.


This slowdown in the American job market has been mainly attributed to rising costs of raw materials such as Lumber, which in recent weeks has risen upwards 280%.


This inflation in the price of Lumber is likely attributed to lower output within the industry, News10NBC reports.


This lower output is due to the national labour shortage which has occurred across the US, thus causing the supply of Lumber to decrease resulting in cost-push inflation as carpenters and other wood-workers are more scarce.


However, this labour shortage has not just affected the Lumber market, it has yielded an increase in raw-material costs as previously illustrated across the board.


Another reason for these rising prices could also be attributed to demand-pull inflation, a direct result of the increasing economic outlook within the U.S. which has been fueled by massive fiscal stimulus and healthcare measures.


But, if demand-pull inflation was to occur, the aggregate demand fueling said inflation would also yield higher growth and output levels, thus driving the employment rate upwards and unemployment downwards, so, why have unemployment levels unexpectedly risen?


First of all, although the unemployment rate has to 6.1 as illustrated below, 266,000 new jobs were added in April according to The Bureau of Labour statistics, illustrating some growth in the job market, however, this growth is way below forecasted levels which were aimed at 978,000.

So, one possible reason why unemployment has risen within the U.S. is due to more individuals becoming voluntary unemployed. According to Reuters, jobless benefits tend to actually pay more than minimum wage jobs in America, additionally, the extension of these benefits to September has made more and more individuals comfortable with a wage subsidy.


For this reason, it could be likely that American individuals who have previously worked minimum wage jobs now prefer living off the stimulus package as it maintains their living standards, for some, it may even increase them, whilst giving them the added bonus of not having the opportunity cost, time, associated with going to work.


Therefore, American workers who have maintained their pre-COVID buying habits with the stimulus package may now be unmotivated to seek work as their life satisfaction may have increased during the pandemic, in other words, they now favour being voluntarily unemployed.


Additionally, another reason for the rise in unemployment may be due to a skill shortage which has, in turn, resulted in the national labour shortage.


The COVID-19 Pandemic has lasted a long, long time, because of this, many Americans have likely lived off the stimulus or other government wage subsidies for extended periods of time.


This may have led to a skills shortage as American workers are still being compensated for work which they aren’t even doing, so, due to them not actively working and improving their skills, some workers may now be unfit to do the work they once could do.


Therefore, the U.S. economy may have seen a rise in unemployment due to the over-reliance of American households on government fiscal stimulus.


However, according to Reuters, this rising unemployment in a weird way is attributed to rising economic growth.


The recent positive economic outlook within the U.S. has led to rising output levels, consequently, U.S. firms, especially in hospitality, have begun a “hiring spree,” the BBC reports.


This hiring spree has been due to eager, pent up demand by consumers across the U.S. who wish to return to purchasing goods and services from physical locations once the health risks associated with COVID-19 have been mitigated.


Therefore, this has led to a decrease in demand for delivery services as physical shopping becomes the more favoured alternative, a classic example of changing consumer tastes and fashions.


Consequently, due to the sharp decline in delivery services, there has also been a large number of workers working within courier delivery losing their jobs.


Hence, even though the leisure and hospitality industry saw an increase in employment, this increase in employment has been offset by the job losses within the delivery sector, thus resulting in slower than anticipated job growth in the U.S. Economy in April.


However, with the U.S. Economy gaining pace, this increase in unemployment will likely not hurt the U.S. economy in the long-term as these unemployed delivery drivers who worked for online retailers will be able to use their skills and expertise working for physical locations as they demand more imports and exports due to them being busier.

 

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Written by Hubert Kucharski Research compiled by Billy Ryan

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