The U.S. economy added 1.4 million jobs in August as businesses shuttered by the COVID-19 pandemic continued to reopen and bring back workers, more than offsetting a fresh wave of layoffs by firms that have exhausted their federal loans.
The unemployment rate fell sharply to 8.4% from 10.2% in July, the Labor Department said Friday.
Economists surveyed by Bloomberg had estimated that 1.35 million jobs were added last month.
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August’s payroll gains were healthy but mark the second straight monthly slowdown in hiring after employers added a record 4.8 million positions in June and 1.8 million in July. That’s a troubling sign considering the nation has recouped slightly less than half the unprecedented 22 million jobs wiped out in early spring as states closed down nonessential businesses such as restaurants, malls and movie theaters.
“The fact that employment is settling into a trend of slow, grinding improvement is a worrisome sign for the broader recovery,” economist Lydia Boussour of Oxford Economics wrote in a note to clients.
The latest figures were inflated by the hiring of 238,000 temporary workers for the 2020 Census who likely will be laid off in coming months. The private sector added 1 million jobs, down substantially from 1.5 million in July.
Many states have allowed businesses to reopen in phases but others, especially in the South and West, paused or reversed their relaunch plans in July and August amid coronavirus surges. Recently, cases in those hot-spot states generally have trended down but the results have been mixed. Positive test rates have stayed high in Texas and Florida and edged down just slowly in California, Goldman Sachs says.
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As a result, many businesses are running at just partial capacity because of lingering state restrictions and consumer fears of contagion. Many struggling firms recently have exhausted the cash they received through federal loans that were forgivable as long as they retained or rehired workers. After meeting those terms, many are letting workers go again.
Last month, the number of Americans on temporary layoff fell by 3 million to 6.1 million as more laid-off workers were called back. At the same time, the number of workers permanently laid off jumped from 2.9 million to 3.4 million, indicating that some temporary layoffs have become permanent.
About 45% of unemployed workers said they were on temporary layoff, down from 56% the previous month.
“The number of permanent job losses is mounting which is concerning and could result in scarring of the labor market,” says economist Rubeela Farouqi of High Frequency Economics.
Meanwhile, Congress remains deadlocked over a new stimulus package that would provide more funds for teetering businesses and renew at least part of the $600 federal supplement to state unemployment benefits that expired in late July.
“The need for a further stimulus package remains acute,” says economist Ian Shepherdson of Pantheon Macroeconomics.
A separate survey released by Cornell University earlier this month showed that 31% of temporarily laid off or furloughed workers who have been rehired said they were cut a second time and another 26% have been told by their employer that they may be laid off again.
Jessica Oyanagi, 40, of Maui, Hawaii, points up the bind ensnaring many workers as they try to stay afloat and recover from the crisis. In March, business came to a standstill for the freelance photographer who relied heavily on tourists requesting portrait shots, a service so popular that she had employed six contractors.
It took two months before Oyanagi received unemployment benefits but the $863 allowed her and her husband, John, a welder, to pay their bills. Now that the $600 federal supplement is gone, “We’re just burning through savings,” as they did while Jessica awaited jobless benefits. They’re also eliminating frills, such as eating out and ordering takeout for themselves and daughters ages four and seven.
They have deferred credit card and car loan payments but those bills are now due just as the unemployment bonus has vanished.
“Our bills have gone up, and unemployment has gone down,” she says.
After her photography business evaporated, Oyanagi took an online course and got her real estate license. But with her seven-year-old daughter at home this fall as schools remain closed for all but virtual classes, she can’t seek a job as a real estate broker.
“It’s really frustrating,” says Oyanagi, a member of a group called MomsRising that works to increase economic security for families and reduce discrimination against women and mothers. She added that the couple will deplete their savings in six months.
Other measures of economic activity also underscore a slowdown in the recovery from the steepest and shortest recession on record. Employment at small businesses tracked by Homebase — which makes scheduling software – was up just slightly in August and has been roughly flat the past couple of months.
And Kronos, which track worker shifts, says average weekly shift growth slowed for the third straight month in August to just 0.5%.
Industries that are hiring
Retailers led the August payroll gains with 249,000. Professional and business services added 197,000 jobs but more than half came from temporary staffing agencies, indicating that many wary employers are filling openings with contingent workers amid lingering uncertainty.
Leisure and hospitality, the sector hardest hit by the pandemic, added 174,000 jobs, mostly at bars and restaurants. Transportation added 78,000 and health care, 75,000. Manufacturing, still recovering from a sharp drop in demand and supply disruptions from overseas, added 29,000 jobs.
Pandemic alters labor market
About 24 million Americans said they couldn’t work last month because their employer closed or lost business during the crisis, down from 31.3 million in July. And about 5.2 million people were prevented from working or looking for jobs because of the outbreak. Nearly a quarter of workers teleworked, down from 26.4% in July.
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Labor force participation rises
In August, the share of Americans working or looking for jobs – which together make up the labor force – rose from 61.4% to 61.7%. That’s good news because it means the unemployment rate fell even though the competition for jobs increased as the improved labor market drew in people who had been on the sidelines. It could also signify that the expiration of the extra $600 in jobless benefits prodded many people to look for work, says economist Andrew Hunter of Capital Economics.
This article originally appeared on USA TODAY: Economy added 1.4M jobs in August as unemployment fell to 8.4% amid persistent COVID-19 outbreaks
Video: Here’s what the latest jobs numbers say about the economy (CNBC)