The labor market is recovering, but barely.
In the final monthly jobs report ahead of the U.S. elections next month, it was hard to say that the rate of employment growth was making substantial gains and that an economic recovery was in place.
Nonfarm payrolls employment rose by 661,000 in September, lowering the unemployment rate to 7.9 percent. But that number could actually be 8.3 percent after adjusting for a misclassification error—workers recorded as employed but absent from work due to other reasons, when they might have unemployed on temporary layoff— that occurred in May, which would have added about 3 to 5 percentage points to the 13.3 percent unemployment rate that was reported. Regardless of which tally is used, the unemployment rate is now the highest it’s been ahead of a presidential election since 1948, when the federal government began following the monthly rate.
And while the number of unemployed Americans has since fallen from a high of 14.7 percent in April, the height of the coronavirus, or Covid-19, outbreak, it’s still at a higher rate than the 4.8 percent when the presidential incumbent Donald Trump took office in January 2017. Trump and his vice president Mike Pence are running for re-election, although questions have now arisen about his health and the elections after news broke Friday morning that the president tested positive for Covid-19. Pence tested negative for the virus.
So, what’s next?
September’s numbers are significantly down from the 1.4 million jobs added in August. But even the August number might be somewhat suspect. That 1.4 million figure was boosted by nearly 250,000 hired on a temporary basis to conduct the 2020 census. The good news is that roughly half of those unemployed at the height of the Covid-19 outbreak are employed again, but for how long?
While the labor market seems to be continuing in what can only be described as a slow recovery, the “attention has already shifted to the tenuous outlook,” a Wells Fargo Securities economic report on Friday said.
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“Recent layoff announcements among household-name companies highlight that despite the torrid pace of economic growth in recent months, activity still remains well below pre-virus levels in many industries,” the report said.
This past week, Disney said it is laying off 28,000 employees, impacting 67 percent of part-time workers at its Parks, Experiences and Products units. The airline industry last month threatened to layoff tens of thousands of employees if the federal government didn’t provide additional relief. The terms of the first economic stimulus package from March, which provided the industry with $25 billion in payroll protection grants and up to $25 billion in government loans, also barred the industry from conducting any layoffs until Oct. 1. The Republican-controlled Senate and the Democrat-controlled House this week failed to agree on any new stimulus package.
“With no end to the pandemic in sight, businesses are adjusting their staffing needs, which threatens the recovery’s gains, especially with fading fiscal support to both businesses and the unemployed. With millions of American’s still in precarious financial situations, prospects of additional stimulus remained top of mind this week. But, an additional fiscal relief package remained unsettled and we still believe it as unlikely another stimulus bill will get passed prior to the presidential election in November,” Wells Fargo economists concluded.
The U.S. is still knee deep in its first wave of the virus. So far, the world has tallied a total of 34.4 million Covid-19 cases, and more than 1 million deaths. While parts of the U.S. are still grappling with the first wave, new spikes overseas—such as in Albania, the Czech Republic, France, the U.K. and Spain—suggest that they could be on the brink of the dreaded second onslaught of infections. And those concerns will only rise moving later into the fall months and winter flu season.
While a re-election of incumbent Trump could mean more of the same if infections spike again, Democratic presidential nominee Joe Biden has said that if he wins the presidential election, he wouldn’t hesitate to impose a national lockdown if that was needed to curb the spread of the virus. That’s a move that would see more furloughs ahead as nonessential retailers temporarily shut down again, severely impacting what looks to be the slow start of a nascent economic recovery in the U.S.