Slow jobs growth may not be a bad sign for America’s recovery

AMERICA’S LATEST jobs reports landed with resounding thuds. Upbeat Wall Street forecasters had expected firms to add 1m new jobs in April. Employers made them look foolish, taking on just under 300,000 new workers instead. Punters lowered their expectations for May but still wound up disappointed, when on June 4th the Bureau of Labour Statistics reported net employment growth of just 559,000: a decent showing in normal times, but unsatisfying when millions remain out of work. Underwhelming job gains look increasingly mysterious given firms’ desperation to hire. With roughly one job vacancy available for every person out of work, you would think that America’s labour-market problems could be solved soon enough. But a leisurely pace of jobs growth does not necessarily indicate that the economic recovery has gone wrong. A deeper dive into the figures suggests that it could simply reflect the difficulties of matching millions of workers with jobs at a time of unprecedented economic flux.On the surface, the American jobs market does appear to be behaving oddly. The economy is unquestionably booming. Real output rose at an annualised pace of 6.4% in the first quarter of 2021 and is projected to have grown at an annualised clip of nearly 10% in the second. Firms are keen to hire. The 9.3m job openings posted in April were easily the most on record. Employers—some, at least—are attempting to lure workers with generous pay. Though overall wage growth remains subdued, rates of pay for newly hired workers are soaring in the service-sector occupations that are suffering most from labour shortages. In the first quarter of this year, the real wage for new hires in such positions (say, in restaurants or hair salons) stood about 8% above the level you might have expected them to earn before the pandemic, according to a recent analysis by Julie Hotchkiss of the Federal Reserve Bank of Atlanta. And faster job gains are certainly within the realms of possibility: employment rose by nearly 5m in June 2020, and by nearly 11m over a four-month stretch in the middle of last year.