The U.S. labor market continued to rebound in August, with the economy recovering 1.37 million jobs. But behind that headline number remains a grim picture of an American economy and workforce reeling from the COVID-19 crisis for the foreseeable future. Total nonfarm payroll employment rose by 1.37 million jobs in August, according to the U.S. Bureau of Labor Statistics report released on Sept. 4. The unemployment rate, meanwhile, fell to 8.4 percent from an April high of 14.7 percent. That, however, is the full extent of the "good news," as the report also showed that the overall pace of the labor market's recovery is slowing. Private sector gains were softer than expected, permanent job losses surged to 3.4 million, and total non-farm payrolls remain 52 percent below February's level.
The slowed jobs improvement from previous months, and the spike in Americans permanently unemployed, casts considerable doubt on the sustainability of the labor market's recovery, which the overall strength of the U.S. economy depends on. Even if economic forecasters are humbled by the speed and depth of the U.S. recession, many expect a plateauing (if not reversal) of job recovery in the coming months.
- Overall gains in August were buoyed by the hiring of 238,000 temporary Census workers.
- Much of the recovery was in low-wage service sector jobs, with manufacturing payrolls up only a disappointing 29,000 in August and private sector gains also lagging expectations.
- The Labor Department's data, which showed 13.6 million Americans as "officially" unemployed in August, understates the full extent of unemployment, as the initial U.S. jobs claims data for the most recent week showed 29.2 million people claiming some form of unemployment benefits.
- The report also showed a sharp jump in unemployment duration, with the median increasing to 16.2 weeks from 13.7 weeks in July. The percentage of those who have been unemployed from 15-26 weeks jumped from 39 percent in July to nearly 50 percent in August.
- There was a slight tick up in the labor force participation rate in August. But the percentage of employed working-age Americans is back to 1960s levels, prior to a large increase in women entering the labor force. Seasonal adjustments, including the effects of online schooling, may not be fully reflected in August data. In addition, many discouraged workers may leave the labor force in the coming months.
The U.S. labor market outlook depends partially on a renewal of federal stimulus, but talks in Washington on the topic appear to have stalled. The administration of U.S. President Donald Trump and Democratic legislators in the U.S. House of Representatives have agreed on a resolution to temporarily keep the government operating into the fiscal year, which begins Oct. 1. The August jobs improvement, however, may reduce a sense of urgency among the Senate Republicans who have balked at a sizable renewed stimulus, making a compromise harder to reach.
But the ongoing loss of productivity from lockdowns to contain COVID-19 outbreaks across the country, as well as the loss of business investment, may have already caused irreparable harm to U.S. employment. Losses in productivity from layoffs, as well as part-time or remote work, cannot be made up by an acceleration of productivity gains. A drop in business investment will leave the U.S. capital stock and economy permanently smaller than its previous trend growth.
- Data from the U.S. Census Bureau show 5 percent of small businesses in the United States expect to close in the next six months, presaging further job losses, including temporary layoffs and furloughs potentially turning into permanent job losses.
