WASHINGTON- The 266,000 jobs that US firms added in April were “nowhere near” what was expected, a Federal Reserve official said Friday, and added little to the “substantial further progress” officials want to see before considering changes to monetary policy.
“I hoped to see a stronger report today,” Richmond Federal Reserve president Thomas Barkin said in webcast comments to a West Virginia business group.
Barkin said he thought the results were largely driven by labor supply issues and “frictional” barriers to employment such as mismatches between available workers and job skills, and workers still facing child care and other constraints. Many, he said, flush with savings and with enhanced unemployment benefits still available, have the “wherewithal” to wait to return to work and may be doing so.
Still, it gives Fed policymakers little reason to do anything but keep the monetary policy tap wide open until the economy is on a clearer path back to full employment.
“This puts less pressure on the Fed to prematurely talk about tapering. They wanted to be patient and hold off on it,” said Larry Adam, chief investment officer at Raymond James in Baltimore, Maryland, in reference to the process of reducing the $120 billion in monthly bond purchases the Fed currently makes to help hold down long-term interest rates that influence family and business spending decisions.
The Fed in December said it would not consider changing its bond purchases until there had been “substantial further progress” in reaching its full employment and 2 percent inflation goals.
Fed Chair Jerome Powell has said he wants to see a “string” of strong monthly job reports before opening debate on when and how fast to reduce the support provided to the economy through the coronavirus recession, including the bond purchases and the promise of near zero interest rates for years to come.
Officials had cheered data showing more than 900,000 jobs added in March as the expected start of that procession, and analysts said they thought the Fed might begin debate this summer over when to trim the bond purchases as a first step toward shifting monetary policy from crisis mode.
But the March payrolls gain was revised down to 770,000, and the April disappointment raises questions about the economy’s, and the Fed’s, path.
A Reuters poll of economists had predicted the United States would add 978,000 jobs in April. Atlanta Fed president Raphael Bostic had said Thursday he looked for “a really strong number” of perhaps more than 1 million.
US President Joe Biden said the report showed there was a “long way to go” before the economy recovered from the pandemic-induced slump.
