Jobs remain far below pre-pandemic levels
Cumulative change in all jobs since August 2016
By Ella Koeze·Data is seasonally adjusted.·Source: Bureau of Labor Statistics
Employers continued to bring back furloughed workers last month, but at a far slower pace than in the spring, and millions of Americans remain out of work.
The U.S. economy added 1.4 million jobs in August, the Labor Department said Friday, down from 1.7 million in July and down sharply from the 4.8 million added in June. Payrolls are still more than 11 million jobs below their pre-pandemic level.
The unemployment rate fell to 8.4 percent, down significantly from 14.7 percent in April and 10.2 percent in July. The drop brings the rate below the peak of the last recession a decade ago, when unemployment briefly hit 10 percent, but joblessness is still higher than the peak of many past recessions.
“We still have a long way to go,” said Beth Ann Bovino, chief U.S. economist for S&P Global.
By Ella Koeze·Unemployment rates are seasonally adjusted.·Source: Bureau of Labor Statistics
The figure for August job growth was buoyed by the hiring of close to 240,000 temporary workers for the 2020 census, most of whom will be laid off when census canvassing ends later this month. Private-sector payrolls, which were not affected by the census hires, rose by one million in August, down from 1.5 million in July.
The report on Friday provides some of the first clear data on the state of the economy as emergency federal spending winds down, including a $600 weekly supplement to unemployment benefits that helped keep many households afloat early in the pandemic. Economists warn that without that supplement, which expired at the end of July, millions of families will struggle to pay rent and buy food, reining in the broader economy.
But because the August jobs data was collected early in the month, it may not reflect the full impact of the loss of benefits, economists warn. That quirk of the calendar could have political ramifications: The relatively solid jobs report could ease pressure on Congress to agree on a new round of emergency spending.
“If the labor market data continue to hold, if we don’t see a big destruction to consumer spending on the back of the loss of the unemployment benefits, that reduces the sense of urgency that something needs to be done prior to the election,” said Michelle Meyer, head of U.S. economics for Bank of America.
Economists warn that would set the stage for a big drop in spending in the fall, leading to more job losses and a wave of small-business failures. Already, major corporations such as American Airlines have announced they are laying off more workers or, as in the case of the department store stalwart Lord & Taylor, going out of business entirely.
“I am more concerned about where the economy is now than I was in April,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative. “In April, it was fixable. We’re just letting the scars build up now.”
A sell-off in U.S. stocks continued on Friday. The S&P 500 was down over 2 percent while the tech-heavy Nasdaq composite plunged 4 percent, leaving it nearly 9 percent below the all-time high it hit on Wednesday.
Market analysts expected a break in a rally that has lifted the S&P 500 nearly 50 percent since its low in March, but the steepness of the recent declines could stoke more fear and further selling.
Tech companies hold significant sway over the S&P 500 index by virtue of their size. Investors have been optimistic about the tech firms, whose market dominance and online business models appear poised to benefit from the prospect of a work-from-home world. Apple’s market value has fallen below $2 trillion, the remarkable milestone it achieved last month.
And big tech companies helped drive Friday’s fall: Apple was down 5.8 percent shortly before midday, and Amazon was down 6 percent. The chip-maker Nvidia was down 7 percent.
A day earlier the S&P 500 suffered its worst drop since June: 3.5 percent. The Dow Jones industrial average closed down more than 800 points.
Stocks had been on a significant tear. Before Thursday, the S&P 500 had been up in nine of the last 10 sessions.
European markets also fell on Friday, and Asian markets closed lower after Wall Street’s plunge.
Investors were digesting the monthly jobs report from the U.S. Labor Department on Friday morning, which showed that 1.4 million jobs were added in August — a slower pace of recovery than in previous months. Thursday’s report on weekly jobless claims showed that filings remained high.
Some industries are approaching pre-pandemic employment, but leisure and hospitality jobs are lagging far behind
Cumulative change in jobs since August 2016, by industry
By Ella Koeze·Data is seasonally adjusted.·Source: Bureau of Labor Statistics
Signs of a slowing recovery were seen across industries in the jobs data released by the Labor Department on Friday. The construction sector is fewer than half a million jobs short of its level before the pandemic, but only 16,000 construction jobs were added in August.
The leisure and hospitality sector, which had the worst job losses in March and April, is still 4.1 million jobs below where it was in February and gained only 174,000 jobs in August, significantly fewer than the more than 600,000 it gained in July.
Similarly, jobs in education and health increased by almost 150,000 in August as schools began to reopen across the country, but that number was still lower than the prior month’s gains. Manufacturing followed the same pattern — gaining jobs, but at a slower rate.
The retail and business services sectors saw bigger gains in August than July, though both are still below their February employment levels.
Job losses are more likely to be permanent than earlier in the pandemic
Share of jobs lost each month that are temporary layoffs
By Ella Koeze·Data is seasonally adjusted.·Source: Bureau of Labor Statistics
One sign of how the economic crisis is evolving: Back in April, nearly 80 percent of unemployed workers reported being on temporary layoff or furlough. In August, that figure had fallen to less than half.
That development is the result of a combination of good news and bad. The good news is that as the economy gradually reopens, companies are recalling furloughed employees. The number of people on temporary layoff fell to 6.2 million in August, from a peak of 18.1 million in April.
But as companies reopen, many are discovering that with demand still weak, they don’t need — or can’t afford — as many workers as before the pandemic. Other companies aren’t reopening at all. The number of people reporting that their job losses were permanent rose to 3.4 million in August, from 2.9 million in July. (Another four million people were unemployed for other reasons, such as entering the labor force.)
The shift from temporary to permanent job losses is worrying, economists say, because it suggests that companies don’t foresee a quick rebound — and because it means jobless workers will have to start their job searches from scratch.
“There’s a fragility in the numbers,” said Diane Swonk, chief economist at the accounting firm Grant Thornton. “There are cracks in the underlying foundation.”
Black unemployment rates are higher than those for other demographics
Unemployment rates by race for men, women and over all
By Ella Koeze·Rates are seasonally adjusted except those for Asian men and women.·Source: Bureau of Labor Statistics
The pandemic-induced downturn sent the unemployment rate for women skyrocketing, but the figure is also falling relatively quickly as business lockdowns ease and the job market recovers.
The unemployment rate for women 16 or older declined to 8.6 percent in August, a report from the Labor Department showed, down from 16.2 percent at its peak in April. Women have staged a faster rebound than men, albeit from much worse levels.
Male unemployment fell to 8.3 percent in August, down from 13.5 percent in April. Women’s joblessness remains 5.2 percentage points above February levels, while male joblessness is about 4.7 percentage points higher than it was before the crisis.
Along other demographic lines, people of color continue to face a worse job-market impact from the pandemic recession than their white counterparts. The unemployment rate for Black workers remains the highest among large racial groups at 13 percent, which up from 5.8 percent in February. Asian workers have seen a particularly large sustained unemployment hit: Their jobless rate is now 10.7 percent, up from 2.5 percent before lockdowns started.
For Hispanic and Latino employees, unemployment fell to 10.5 percent in August, up from 4.4 percent in February. And for white workers, it eased to 7.3 percent in August, up from 3.1 percent before the crisis.
The share of Americans who are either working or looking for a job continued to rebound in August as the labor market heals from the depths of the pandemic recession.
The labor force participation rate increased to 61.7 percent, a report from the Labor Department showed, up from 61.4 percent the prior month and roughly in line with the median forecast in a Bloomberg survey of economists.
The rate is down from 63.4 percent in February, before the pandemic-induced downturn.
Economists closely watch participation measures, which provide a more complete picture of labor market strength than the jobless rate alone. A rise in the unemployment rate that happens because more people have chosen to look for work can actually be a sign that job market prospects are improving, for example. That participation is rising even as joblessness falls signals that the job market is staging a genuine rebound.
A closely watched measure of labor force attachment among prime-working-age Americans, the participation rate for those 25 to 54 years old had been holding roughly steady over recent months. It stood at 81.4 percent in August, little changed from 81.3 percent in July. That is better than the recent low of 79.9 percent in April, but still down sharply from 83 percent before the crisis.
A long rebound in prime-age participation before the pandemic had been a bright spot in the broader U.S. labor market performance.
When Sharmah Wardlaw lost her job as a receptionist at an Atlanta convention center in March, she was meant to be on a temporary furlough. But as the weeks and months went by, she was not recalled to work. Then, on Aug. 10, the hammer fell: She got a letter from her employer telling her she was permanently laid off.
Ms. Wardlaw, 55, had been making ends meet thanks to the $600-a-week federal supplement to her unemployment benefits. That allowed her to pay the $1,100 rent and other bills for her apartment in Stonecrest, Ga., where she lives with her 19-year-old daughter.
When the supplement ceased at the end of July, she was left with $300 a week in state benefits. She had tucked away enough from each unemployment check to pay her rent for August, but not for September. So in mid-August, she withdrew $25,000 from her 401(k) account to pay her coming bills.
Then, on a whim last Sunday, she bought three lottery tickets, all with the same number. She woke up on Tuesday to the news that all of her tickets were winners. She had won $15,000 — enough to pay her rent through the end of the year.
That stroke of luck changed everything.
“I can breathe a sigh of relief,” she said. “If I hadn’t won, I’d be draining my retirement savings to pay my rent.”
Ms. Wardlaw hopes to find a new job before the lottery money runs out.
Hourly wage growth remained high in August, as shifts in the composition of the labor force that have been distorting the figures continued to muddle the numbers.
While wage data in the United States have risen rapidly during much of the pandemic era, the trend reflects a statistical quirk. Workers at the lower end of the earning spectrum have disproportionately lost jobs, taking smaller data points out of the pool and pushing up the overall average in what economists call a “compositional shift.”
“The large employment fluctuations over the past several months — especially in industries with lower-paid workers — complicate the analysis of recent trends in average hourly earnings,” the Labor Department report said.
Average hourly wages were 4.7 percent higher in August than they were a year earlier. That is slightly weaker than the July figure, but still sharply elevated from the 3.3 percent average gain for the data series in 2019.
On the ground, the wage story has been complicated, based on anecdotal evidence. While some employees have received hazard pay for coming to the workplace while infection remains a risk, others have taken wage cuts as companies tried to avoid furloughing workers even as revenues sank. Employers have at times reporting raising pay to compete with expanded unemployment insurance, which lapsed in late July.
“A number of staffing agencies reported that before enhanced unemployment benefits had expired, the benefits motivated them to raise wages to attract workers,” according to the Federal Reserve’s Beige Book business survey for August, based on interviews from the Cleveland district. In the Philadelphia area, companies reported retaining so-called “hero” pay, while some in the Atlanta region reported rescinding salary cuts even as others made them permanent.
The August jobs number comes with a quarter-million-job asterisk.
The headline payroll figure of 1.4 million new jobs includes nearly 240,000 workers hired temporarily to carry out the 2020 census. Most of them will be laid off when census canvassing ends later this month — meaning next month’s figure will also carry an asterisk, just in the other direction.
Private-sector payrolls, which aren’t affected by census hiring, rose by one million, down from 1.5 million in July.
Unlike many of the other data quirks during the pandemic, the census issue is a familiar one to economists. In 2010, census hiring added 410,000 jobs to the May payroll figure, then shaved off roughly the same number over the next two months. This year, census hiring came later than usual, because of delays caused by the pandemic, and the total number of jobs is smaller, in part because of an increased emphasis on getting Americans to respond to the census online and by phone.
H. Brandon Williams was supposed to spend this month celebrating the third anniversary of FishScale, his restaurant in Washington, D.C. Instead, he is trying to keep his business afloat.
The restaurant, which specializes in burgers made from sustainably caught wild fish, survived the initial blow dealt by the pandemic, which wiped out many other Black-owned small businesses. FishScale already relied heavily on takeout orders, which made the adjustment to pandemic-era restrictions comparatively easy, and Mr. Williams was able to obtain an emergency loan under the federal Paycheck Protection Program.
But the business isn’t out of the woods. Nearby Howard University recently announced that it would shift its undergraduate classes online for the fall semester and close its dormitories. A seasonal farmers’ market, which provides additional revenue most summers, didn’t open this year.
Now, with the federal unemployment supplement and other aid programs gone, Mr. Williams, 39, notices customers pinching their pennies — which is forcing him to do the same. He has cut back to three employees from six and has won rent concessions from his landlord, which he said should get him through the end of the year. He isn’t sure what will happen after that.
“We’re still at that area where we could go either way,” Mr. Williams said.
Julia Pollak, a labor economist for the employment site ZipRecruiter, said many businesses are facing similar decisions heading into a winter season that is a challenge for many small businesses in the best of times.
“There are many companies that after a summer of gathering way too few acorns are going into a hibernation that may not sustain them,” she said.
Widespread business failures, Ms. Pollak said, “could have a cascading effect on those local economies.” That is especially true of Black neighborhoods that often struggle to draw investment from large corporations.
Mr. Williams said he wanted to stay in business not only for himself but also for his community. “There are a lot of people who couldn’t get a job if it weren’t for Black-owned businesses,” he said. “I want young boys and girls to look and see somebody doing something that’s out of the box.”
The British economy has rebounded faster than expected out of its deepest recession on record, but the circumstances that let that happen are already disappearing, a central banker warned.
It is “quite likely” that the U.K. will need more monetary stimulus, Michael Saunders, a member of the Bank of England’s interest rate-setting committee, said in a speech on Friday.
“The economy in June, July and August has benefited from a relatively benign confluence of factors,” Mr. Saunders said. Government spending and other fiscal support were very high, while the easing of lockdown restrictions boosted spending. “Even that very limited sweet spot may now be fading,” he said.
Coronavirus infection rates in the U.K. and Europe are rising again, and consumer confidence has stalled, Mr. Saunders added. Meanwhile, the government’s plans to roll back spending measures will reduce net fiscal support to an average of £15 billion ($19.9 billion) in each of the next two quarters, about 2 to 3 percent of gross domestic product. Between April and June, fiscal stimulus amounted to 19 percent of G.D.P.
“I do not interpret the economy’s recovery in the last few months as a strong signal that further upside surprises lie ahead,” Mr. Saunders said.
Earlier this week, two other policymakers said the British economy might experience longer-term impacts and a slower recovery than the central bank had most recently forecast.
In March, when the Trump administration ordered up a study enabling the widespread release of the malaria drug hydroxychloroquine to treat Covid-19, one of the first questions the director of a government research agency that would oversee the trial asked was: “Who has talked with Oracle?”
The Silicon Valley powerhouse had already started to prepare to help with collecting data about the drug, and its founder, Larry Ellison, talked to President Trump about its possible use.
Some tech companies may have shied away from helping to test a drug that many medical experts said had potentially dangerous side effects and might not even work for Covid-19 cases. But Oracle, a business software giant founded in 1977, is a prominent ally of Mr. Trump, whose administration was invested in the drug’s use.
Oracle’s involvement in the planned drug study was its latest effort to aid the president and his administration. The company has also backed the administration’s trade plans and its positions on major tech policy issues, and its executives played roles in Mr. Trump’s transition team in 2016 and have backed his re-election campaign.
Now, as it tries to buy the U.S. operations of TikTok, the viral social media app, its embrace of the administration could be helpful. Mr. Trump ordered the app’s Chinese parent company, ByteDance, to sell the product, citing national security concerns, and his administration must bless any deal.
Mr. Trump has declined to say whether the company is a better suitor for the app than Microsoft, another major bidder. But he said last month that Oracle “would be certainly somebody that could handle it.” The negotiations hit a snag in recent days, after the Chinese government issued new export rules that seem to make a sale more complicated.
The editors and reporters for the DealBook newsletter sift through a lot of company reports and listen to many earnings conference calls. These are some of the things that caught our notice this week:
🥫 “We all knew that there would be a pivot eventually back to healthier recipes … a little more comfort-oriented initially, a little more healthier now.” — Mark Clouse, Campbell Soup’s chief executive
⚠️ “A large portion of the demand is driven by folks who are just fearful of their personal protection and safety, starting with the pandemic and moving on to the civil unrest.” — Mark Smith, the Smith & Wesson chief executive
😷 “Yesterday I bought a good amount of spectacular Christmas-decorated KN95 masks. So hopefully those masks will encourage people to get close and hug their families while still protecting themselves.” — Michael Ross, Dollarama’s chief financial officer
💻 Zoom reported a huge rise in profit this week, generating effusive praise from analysts on its conference call, including “another incredible quarter,” “a truly outstanding quarter” and “another just phenomenal quarter.” Others thanked the videoconferencing company for more fundamental reasons:
“Just thank you for keeping everybody connected.” — Heather Bellini of Goldman Sachs
“I echo my congratulations and gratitude all around, and it’s nice to see everybody.” — Brad Zelnick of Credit Suisse
“First, I want to say thank you from the analyst community and as a parent, as a husband. Yes, you’ve made a substantive difference in all our lives.” — Alex Zukin of RBC Capital Markets
Virgin Atlantic said it planned to cut another 1,150 jobs as the airline received court approval for its 1.2 billion euro private rescue deal this week. It brings the total job losses since May to 4,700, or nearly half of the airline’s work force. Virgin also plans to put 600 cabin crew on a company-financed furlough program.
FedEx said Thursday that it plans to hire 70,000 U.S. workers to prepare for an upcoming holiday season in which many consumers will be housebound and reliant on online shopping — and package delivery. That’s a 27 percent increase from last year, when the company brought on 55,000 workers to prepare for the holidays. FedEx also announced plans to expand year-round Sunday residential coverage for its FedEx Ground service to nearly 95 percent of the U.S. population, effective September 13.
The Justice Department plans to bring an antitrust case against Google as soon as this month, after Attorney General William P. Barr overruled career lawyers who said they needed more time to build a strong case against one of the world’s wealthiest, most formidable technology companies, according to five people briefed on internal department conversations. Justice Department officials told lawyers involved in the antitrust inquiry into Alphabet, the parent company of Google and YouTube, to wrap up their work by the end of September, according to three of the people.