Yet even when accounting for these factors, much of the April weakness remains unexplained. One theory that has gained currency particularly among the right is that people are not taking jobs because of the weekly $300 unemployment insurance supplements in the American Rescue Plan, which will be available until early September. By this logic, workers have an incentive to not work.
The April report provided some evidence to support this theory. Wages for nonsupervisory workers in retail and restaurants, two of the lowest-paying sectors, both rose rapidly in the month — consistent with employers having trouble finding workers. Also, for restaurant workers, the length of the average workweek jumped more than 2 percent in April, suggesting employers were giving their existing staff members more hours.
But while low-wage employers may have had a hard time finding workers, it’s far from clear that the $300 supplements were the problem. Back in April 2020, the CARES Act included weekly $600 supplements. A study by economists at the University of Chicago and JPMorgan Chase found that employment shrank by only 0.2 to 0.4 percentage points as a result of the supplements. One could reasonably assume that the effect of supplements half as large would be considerably smaller.
What’s actually happening here? As businesses rush to reopen, they might find it tough to attract all the workers they need. One statistic that would support this possibility is the ratio of hires to job openings, a measure of the difficulty of finding workers, is somewhat higher in the South than in the rest of the country. In the March data, the most recent available, employers in the South reported they hired 2,322,000 workers, while they reported 3,068,000 job openings, for a ratio of hires to openings of 75.7 percent. By contrast, in the rest of the country employers reported 3,687,000 hires and 5,055,000 openings, for a ratio of 72.9 percent.
This gap is noteworthy. If the $300 supplement, explains why employers have had difficulty finding workers, we would expect it to have a bigger effect in the low-wage South. Since this supplement would represent a larger share of wages there than in the rest of the country, it should be making it more difficult for employers to find workers in the South. But it doesn’t seem to be having this effect.
Beyond Friday’s report, in the second quarter of 2021, G.D.P. growth — that is, productivity — is virtually certain to exceed prepandemic levels. If the economy produces more but with substantially fewer workers, this implies that productivity is growing rapidly. Higher productivity growth not only helps keep inflation in check, but also, in the long run, determines our standard of living. From the first quarter of 2020 to the first quarter of 2021, productivity increased at a rate of 4.1 percent. That is up from a rate of just over 1 percent annually between the fourth quarter of 2009 and the fourth quarter of 2019.
Of course, productivity data are highly erratic, and subject to large revisions. But the more sustained the growth, even at levels below 4 percent, the greater the likelihood that it’s no fluke.