A resurgence of coronavirus cases in the United States is having a plateau effect on the economic recovery. The July 2020 jobs report from the government shows the pace of hiring has slowed significantly after a short-lived rebound in the spring. (Aug 6)

AP Domestic

U.S. employers added a disappointing 661,000 jobs in September as Sunbelt states resumed business reopenings that were disrupted over the summer by COVID-19 spikes.

The gains offset persistent layoffs at businesses that have exhausted federal aid.

The unemployment rate fell to 7.9% from 8.4% in August, the Labor Department said Friday. But that’s because the labor force — which includes people working and looking for jobs — shrank by about 700,000.

Economists surveyed by Bloomberg had estimated that 870,000 jobs were added last month.

The jobs report is the last before a Nov. 3 presidential election that could serve as a referendum on President Trump’s handling of the pandemic and its economic fallout. Overall, the economy is still recouping jobs in outsize fashion after shedding a record 22.1 million in early spring but the recovery is slowing, raising the specter of a deficit that could take several years to close.

September marks the third straight monthly pullback in payroll gains after employers added a record 4.8 million in June, 1.7 million in July and 1.5 million in August. All told, the nation has clawed back 11.4 million jobs, slightly more than half the total wiped out as states shut down nonessential businesses and Americans avoided travel and public gathering spots out of contagion fears.

“The slowing momentum in the labor market bodes poorly for the broader recovery and points to increasing scarring effects from the crisis,” economist Kathy Bostjancic of Oxford Economics wrote in a note to clients.

Kent Syler, a political scientist at Middle Tennessee State University, said the disappointing jobs report could damage Trump’s chances for re-election.

“Managing the economy is one of the few areas where polling favors President Trump,” Syler said. “Any sign that the recovery is weakening could cost him that already narrow advantage. The lack of a stronger jobs report is also a lost messaging opportunity for the Trump campaign on a day when they could have used some good news. “

Several factors held down job gains last month. Janitors and other school staffers didn’t return to work as usual last month because of remote learning in many regions, leading to 231,000 local government education losses on a seasonally adjusted basis, according to Labor figures and a Goldman Sachs analysis. Plus, the research firm says, parents who can’t get child care may not be able to work.

And federal government payrolls fell by 34,000 as temporary workers brought on for the 2020 Census were let go. The private sector added a sturdier 877,000 jobs.

At the same time, states have been reopening in phases and some in the South and West that halted those plans are now easing restrictions, Goldman Sachs says, potentially paving the way for hundreds of thousands of job gains. San Francisco, for example, allowed limited indoor dining this week following similar moves in some California counties weeks ago.

Such steps mean many employees furloughed by restaurants, shops and movie theaters are being rehired. Last month, the number of Americans on temporary layoffs fell by 1.5 million to 4.6 million. About 36% of unemployed workers said they were on temporary layoff, down from 45% the previous month.

Yet the ranks of workers permanently laid off jumped from 3.4 million to 3.8 million, underscoring that a growing number of temporary layoffs have become permanent.

With COVID-19 cases and hospitalizations rising across the U.S., some states are keeping business constraints in place. And Congress remains deadlocked over a new stimulus package that would provide more funds for beleaguered firms and renew at least part of a $600 federal supplement to state unemployment benefits that expired in late July.

Many businesses that exhaust their forgivable federal loans are laying off workers a second time after rehiring them when they first received the money in the spring, according to a Cornell University survey.

Other measures of labor market activity are also flagging. The number of small business employees declined last month for the first time since the start of the pandemic, a drop that can only partly be traced to the Labor Day holiday, according to Homebase, which makes scheduling software.

If that trend continues, it could signal a loss of 500,000 jobs this month, says economist Ian Shepherdson of Pantheon Macroeconomics. That would be the first fall in employment since the depths of the pandemic in April.

Industries that are hiring

Leisure and hospitality, the sector hardest hit by the crisis, led the payroll gains with 318,000, mostly at bars and restaurants. Retail added 142,000; professional and business services, 89,000; and transportation and warehousing, 74,000.

Manufacturing, still recovering from a sharp drop in demand and supply disruptions from overseas, added 66,000 jobs in a sign the sector’s recovery may be picking up. And construction added 26,000 jobs amid a healthy housing sector driven by low mortgage rates and many Americans’ desire to move to rural and suburban areas less affected by the outbreak.

Labor force participation falls

In September, the share of Americans working or looking for jobs – which together make up the labor force – fell to 61.4% from 61.7%. That’s disappointing because the rate generally had risen since April as an improving labor market drew in people who had been on the sidelines.

Some economists also believed the expiration of the extra $600 in weekly jobless benefits should be prodding more people to hunt for work.

The drop in participation highlights “a potential long-term risk for the economy as the pandemic may have created lasting unemployment for many people,” Contingent Macro Research said in a note. 

For example, many older workers who have lost jobs in the crisis have struggled to find new positions and are retiring early. 

Morgan Stanley, however, at least blames the decline on home schooling that resumed last month in much of the country and that’s keeping many parents from working or looking for jobs.

Contributing: Michael Collins


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