What Caused the Biggest Jobs Miss on Record?

In the run-up to Friday morning’s U.S. employment report, the forecasts of both economists and Wall Street analysts had migrated higher and pointed to an incredibly strong job creation number for April. What materialized, however, was a huge disappointment that constituted the biggest data miss on record. While firm conclusions about the reason will have to wait for more data over the next few weeks and months, the available partial evidence suggests possible stress and strains in the labor market’s ability to match workers to what seems to be an ample demand for them.

The increased expectations — with the median forecast calling for 1 million new jobs within an unusually wide range of 700,000 to more than 2 million — did not happen in a vacuum. One economic data release after another, as well as corporate observations during quarterly earnings season, pointed to a “red hot” economy (using Warren Buffett’s description) in which many employers are looking to hire. This is also consistent with two other labor-market indicators: weekly initial jobless claims, which fell last week to below 500,000 for the first time since the outbreak of Covid-19, and the Job Openings and Labor Turnover Survey, or JOLTS, which shows a growing number of unfilled job vacancies.