The United States is adding jobs. But the recovery could take years


What’s happening: The U.S. government is expected to announce on Friday that just under 1.4 million jobs were created in August. This would bring the total number of jobs recovered to around 10.8 million.

These gains are substantial, but are only half of what was lost in March and April.

As summer draws to a close, the pace of Covid-19 infections and what happens in Washington depends a lot.

American Airlines (AAL) said he will have to lay off or lay off 19,000 workers unless the airline industry receives more help from Congress. United Airlines (UAL) warned it would be forced to quit around 20% of its pilots.

Airlines received up to $ 50 billion in aid through the latest stimulus package, but had to agree not to lay off their employees until Oct. 1 in order to tap the funds. Months later, the industry is still in crisis.”It was assumed that by September 30, the virus would be under control and demand for air travel would have returned,” US CEO Doug Parker and President Robert Isom said in a letter to employees. ” This is obviously not the case. ”

There are also concerns that the hospitality industry is running out of time as travel remains weak. MGM Resorts (MGM) reportedly announced on Friday it was laying off 18,000 workers on leave as casinos struggled to bounce back.

“There is a particular part of the economy which consists in bringing people together and feeding them, making them travel across the country, making them sleep in hotels, entertaining them,” the president of Federal Reserve Bank Jerome Powell at the Jackson Hole Central Bankers Symposium. “This part of the economy will have great difficulty recovering. That’s a lot of workers. ”

Powell said it was important to “stay with these people” with the job market taking a hard hit for “probably at least two years”.

How do the biggest economies resist? We have the numbers

The world’s most developed economies are all officially in recession. What happens next is far from certain.

In the books: Canada, France, Germany, Italy, Japan, the UK and the US – the G7 – all reported that their economies had shrunk significantly in the first half of 2020 due to the pandemic.

Now, six months after the coronavirus outbreak began to accelerate rapidly outside of China, it is increasingly clear that countries will not rebound in unison. The impact of the virus, public health policy and stimulus measures are creating divergent paths, with ramifications that could last for years.

“It’s the virus and vaccine pathway that is critical to recovery,” James Knightley, ING’s chief international economist, told me.

Bottom line: Covid-19 has had a brutal impact on the economy of every country, but the magnitude of the shock has varied considerably across the world.

The UK was the worst of all its G7 peers, with its economy shrinking by more than a fifth between April and June.

Ben May, director of global macroeconomic research at Oxford Economics, attributes this weakness in part to statistical factors, including how the government accounts for inflation. But he also highlighted the importance of consumer spending to the UK economy, which amplifies the negative economic effects of social distancing, as well as the government’s initial reluctance to impose strict quarantine measures.

The special case among the major economies is China, which catapulted into recovery mode in the second quarter after a decline in GDP between January and March, its worst performance in a three-month period in decades.

As the initial hub of the epidemic and the first in the world to impose drastic measures in an attempt to control the spread of the virus, China was the first major economy to reopen. This gives it a head start.

And then: It depends on what’s going on with the spread of Covid-19, Knightley said. Some economists warn of the possibility of a double-dip recession in which output falls again.

Government relief efforts also have a vital role to play in determining the next stage of savings.

In the United States, Democrats and Republicans still cannot agree on a fourth stimulus package. Goldman Sachs strategists estimate that the $ 600 forfeiture of federal unemployment benefit will result in a $ 70 billion drop in personal income in August. Germany, meanwhile, recently extended the length of its program that keeps workers on corporate payrolls by cutting wages until 2021.


Monday: Manufacturing data in China; Focus on earnings

Mardi: Unemployment in Germany; ISM manufacturing index

Wednesday: Australia’s GDP; ADP employment report; Macy’s income

Thursday: Initial jobless claims in the United States; ISM non-manufacturing index; Campbell Soup and Broadcom Results

Friday: US Jobs Report


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