The Bureau of Labor Statistics released the employment numbers for August this morning and the news was both good and bad. The good news was that nonfarm payroll increased by 1.4 million jobs and the unemployment rate declined from 10.2 to 8.4 percent. The bad news is that the job numbers were below expectations, possibly indicating that the recovery from the Coronavirus recession is slowing. This is especially concerning considering that much of the recent hiring reflected temporary jobs created by the Census.
Although employment has rebounded sharply over the summer, the new report still puts nonfarm payroll well below pre-pandemic levels from February. Current employment levels are 11.5 million jobs, or 7.6 percent, below the February numbers. The August numbers are below the 4.8 million jobs reported in June and the 1.8 million in July.
Government accounted for about 25 percent of August job creation with most of those jobs being temporary work for the Census. Other industries that posted large gains included retail, professional and business services, leisure and hospitality, and education and health services.
Among the details of the report were the a decrease in temporary layoffs and involuntary part-time workers and an increase in permanent job losses. Layoffs declined by 3.1 million to 6.2 million, which is far below the April high of 18.1 million. The number of workers who were limited to part-time jobs by the poor economy declined by 871,000 to 7.6 million. On the other hand, permanent job losses increased by 534,000 to 3.4 million.
The slowing jobs recovery likely indicates that the low-hanging employment fruit has been picked and that we are approaching the limits of how much the economy can quickly recover without beating COVID-19. Heavy government restrictions remain in place in some states, but in others, like Georgia, most of the restrictions are voluntarily imposed by businesses. Even though Gov. Kemp allowed restaurants to reopen months ago, many remain operational only for carryout or delivery.
Demand remains low in many industries because many people, both consumers and workers, don’t want to risk catching and/or spreading the virus. Those concerns were validated over the summer with a surge in cases related to premature reopenings, the abandonment of social distancing, and widespread protests.
As I said months ago, the economy will not fully recover until people feel safe. That requires a vaccine or treatment, neither of which we have at this point.
And it will take a vaccine or treatment. The latest statistics show that the United States has had 6.17 million confirmed cases. Considering an estimated US population of about 330 million people, that means that less than two percent of the population is known to have been exposed to COVID-19.
There are reports that about 40 percent of cases are asymptomatic and may have gone undiagnosed. If we assume that there were actually twice as many cases as have been confirmed, it still means that less than 3.8 percent of the population has been exposed. Being very, very generous and assuming that COVID has been five times more common than has been confirmed, we are still less than 10 percent of the way to herd immunity. It seems likely that a vaccine will be ready long before the virus runs its course.
And that assumes that herd immunity is possible. There is increasing evidence that COVID-19 can be contracted more than once. It is not known how long antibodies will protect recovered COVID patients.
Another economic consideration is Mr. Trump’s trade wars. The tariff wars began in 2018 and were slowing the economy even before the pandemic, which actually provided the Trump Administration with a handy excuse.
In reality, the Trump tariffs strangled US manufacturing, which fell into a recession in 2019. The National Bureau of Economic Research reported that the rest of the economy followed in February 2020, news that was overshadowed by the onset of the pandemic in the US. Mr. Trump doubled down on this bad policy by imposing more tariffs on Canada in August, despite hailing the USCMA as a landmark trade success. In the meantime, Chinese exports are surging as the communist nation emerged from the viral lockdown after halting new infections. In the US, hiring in the manufacturing sector was slow, with only 29,000 jobs created in August.
Even though August was a disappointing month economically, it could be better than September. The CARES Act expires this month and the two parties have not yet agreed on an extension of the Coronavirus relief package. If no agreement is reached soon, provisions of the law that kept many businesses from laying off workers will run out and possibly lead to a new wave of layoffs.
Many of my friends in the airline industry are among those who have received notices that their jobs will soon disappear. The travel industry has been hard-hit by a falloff in demand due to the concerns about the safety of traveling in the pandemic. Many of these jobs only lasted through the summer due to the Payroll Protection Program.
The August jobs report, while not a disaster, should be a wakeup call. The pandemic recession won’t go away until the pandemic does. Wishful thinking and denial of the problem, along with attempts to force people back to business as usual, will fall flat as long as people perceive the situation to be unsafe.
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