Non-farm payroll employment increased by 266,000 in April as the unemployment rate declined to 6.1 per cent

The American economy grew at an annual rate of 6.4 per cent for the first quarter of 2021 according to the advance estimate released by the US Bureau of Economic Analysis (BEA).

This follows an increase of 4.3 per cent in the fourth quarter. The first quarter GDP increase reflected continued economic recovery, reopening of establishments and continued government response related to the COVID-19 pandemic.

The BLS reports that, “in the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits and Paycheck Protection Program loans, were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act”.

The upward movement in real gross domestic product (GDP) for the first quarter was mainly attributed to increases in personal consumption expenditures (PCE), non-residential fixed investment, federal government spending, residential fixed investment and state and local government. However, this was partly offset by declines in private inventory investment and exports.

Moreover, imports decreased. Notably, the increase in PCE was due to increases in durable goods led by motor vehicles and parts, non-durable goods, which was led by food and beverages and services led by food services and accommodations.

Non-residential fixed investment is on the increase

There was also an increase in non-residential fixed investment which revealed increases in equipment led by information processing equipment and intellectual property products (led by software). The BEA reports that, “the increase in federal government spending primarily reflected an increase in payments made to banks for processing and administering the Paycheck Protection Program loan applications as well as purchases of COVID-19 vaccines for distribution to the public”.

Moreover, the decrease in private inventory investment primarily reflected a decrease in retail trade inventories. Current dollar GDP rose 10.7 per cent, or $554.2 billion, in the first quarter to a level of $22.05 trillion.

In the first quarter of 2021, the price index for gross domestic purchases went up 3.8 per cent when compared to an increase of 1.7 per cent in the fourth quarter of 2021. In addition, the PCE price index rose 3.5 per cent relative to a rise of 1.5 per cent the previous quarter.

With the exception of the food and energy prices, the PCE price index climbed 2.3 per cent versus a rise of 1.3 per cent.

Unemployment declining, as employment rises

Total non-farm payroll employment increased by 266,000 in April, as the unemployment rate declined to 6.1. The BLS mentioned that in April, “job gains in leisure and hospitality, other services, and local government education were partially offset by employment declines in temporary help services and in couriers and messengers”.

Leisure and hospitality employment rose by 331,000 in April 2021. Notably, employment increased in both other services by 44,000. Employment rose by 31,000 in local government education and by 23,000 in social assistance while financial activities added 19,000 jobs in April.

Employment in temporary help services declined by 111,000. Employment in couriers and messengers fell 77,000, manufacturing was minus 18,000, retail trade minus 15,000 and healthcare was minus 4,000.

Meanwhile, employment in construction and mining, wholesale trade and information showed little change in April. Notably, the number of persons on temporary layoff in April also showed little change at 2.1 million.

In the meantime, the number of long-term unemployed (those jobless for 27 weeks or more) stood at 4.2 million. Moreover, the number of unemployed persons who were jobless less than five weeks in April relatively rose by 237,000 to 2.4 million.