U.S. job growth unexpectedly slowed in April compared with the previous month, as employers struggle to attract workers—a development that is dampening momentum in the labor market.

In April, 266,000 jobs were created following a downwardly revised increase of 770,000 in March, with the unemployment rate rising to 6.1% from 6.0% the previous month. The market consensus had expected an increase of 1 million jobs in April and an unemployment rate of 5.8%.

These payroll figures show that overall employment remains well below its pre-pandemic level, which is consistent, on the one hand, with recent comments from companies highlighting the challenges they face in filling open positions

That said, most of the factors preventing people from re-entering the workforce should be resolved in the coming months if vaccinations continue and as unemployment benefits expire.

One less prominent point—and one worth putting into context—is that some companies are reporting that increased unemployment benefits and the latest round of pandemic relief measures are discouraging a return to work, even as job openings approach record levels.

The shortage of job seekers has led some states to take steps to alleviate the labor shortage. For example, Montana is trying to attract people to the workforce by offering a $1,200 payment if they stop collecting unemployment benefits and work for at least four weeks. South Carolina plans to end all federal and pandemic-related unemployment programs by the end of June.

U.S. Job Creation and Unemployment Rate