Friday’s jobs report will shed some light on whether August’s disappointing numbers were just a blip — or the start of an unwelcome trend. Either way, the recovery could be bumpy until America gets all the way through the Covid crisis.
And numbers did improve.
Unemployment claims fell by 38,000 to 326,000, the first drop in four weeks, the Labor Department said Thursday. Since surpassing 900,000 in early January, the weekly applications, a proxy for layoffs, had fallen more or less steadily all year. Still, they remain elevated from pre-pandemic levels: Before COVID-19 hammered the U.S. economy in March 2020, weekly claims were consistently coming in at around 220,000.
After hitting a pandemic low of 312,000 in early September, claims had risen three straight weeks, suggesting that the highly contagious delta variant was at least temporarily disrupting a recovery in jobs.
Contingent Macro Advisors said the recent uptick was also partly caused by backlog in processing orders in California and other states. Shutdowns at auto plants resulting from a shortage of computer chips could make the numbers volatile over the next few weeks, Contingent said, but “the trend towards lower jobless claims remains intact.”
Overall, the job market has been rebounding with surprising strength since the spring of 2020. Forced to shut down or restrict hours as a health precaution, employers slashed more than 22 million jobs in March and April last year. But massive aid from the federal government and the rollout of vaccines has supported an economic recovery, providing consumers with the financial wherewithal to spend and the confidence to return to restaurants, bars and shops.
So far this year, employers have been adding 586,000 jobs a month, and this month’s employment report, due Friday, is expected to show they tacked on another 488,000 in September, according to a survey of economists by the data firm FactSet.
Companies are now complaining that they can’t find workers fast enough to fill their job openings, a record 10.9 million in July.
Altogether, 2.7 million Americans were receiving some type of jobless aid the week of Sept. 25, down by 97,000 from the week before. In early September, the federal government stopped additional aid — including $300 a week on top of traditional state benefits — that was meant to ease the economic impact of the pandemic.
The road ahead
“The pandemic has always been in the driver’s seat of this recovery,” said Nela Richardson, chief economist at ADP, during a call with reporters Wednesday. “The name of the jobs recovery game is still ‘uneven’.”
Last year, the labor market was quite fragile, and during the colder months, the battered leisure and hospitality industry lost jobs — something that could happen again this year. Meanwhile, hundreds of thousands of women left the labor force in September 2020 as children returned to virtual classrooms and parents had to step in as teaching assistants.
Whether either of these phenomena return remains to be seen.
Economists polled by Refinitiv predict 473,000 jobs were added to the economy last month, for an unemployment rate of 5.1%, just a hair below the August rate of 5.2%.
That would be more than double the disappointing 235,000 jobs that were added in the August report, which underperformed expectations by about half a million.
The ADP Employment Report, a different count of private-sector jobs, showed 568,000 positions added in September, more than economists had expected. The ADP numbers and the government’s official tally aren’t correlated, but last month both reports sharply underperformed forecasts.
Widespread worker shortages have been a big asterisk on the recovery, as concerns such as child care, virus exposure and some workers waiting for better job opportunities, kept people at home.
“While jobs improved from August … initial claims for unemployment insurance have pushed higher in recent weeks,” Richardson said. “Leisure and hospitality was the fastest growing industry again. … However, businesses are still struggling to find workers.”
The government’s enhanced unemployment benefits expired at the start of September. Economists are undecided as to how much the generous pandemic benefits contributed to the worker shortage. Friday’s report might offer some evidence one way or the other.
“The report will most likely reflect a mix of constraints in hiring related to Hurricane Ida and the reopening of schools and day care centers, as well as seasonal adjustments inside the education sector that may dampen the top-line estimate,” RSM Chief Economist Joe Brusuelas said in a note.
The Federal Reserve will be watching Friday’s data closely. The central bank has provided guidance that it will soon roll back its huge pandemic stimulus program. Some of the central bank’s policymakers still want to see more progress in the labor market, but Fed Chair Jerome Powell said last month that he didn’t need to see a “knock-out” report.
