Job growth in the United States slowed in August as the unemployment rate fell below 10%


WASHINGTON (Reuters) – Job growth in the United States likely slowed further in August as government financial aid drew down, threatening the recovery of the economy from the COVID-19 recession.

FILE PHOTO: Hundreds of people line up outside a Kentucky career center hoping to find help with their jobless claim in Frankfort, Ky., United States June 18, 2020. REUTERS / Bryan Woolston

The employment report closely watched by the Labor Ministry would come on Friday as companies from transportation to manufacturing industries announce layoffs or holidays. This could put pressure on the White House and Congress to restart stalled negotiations for another budget package, and will likely become political ammunition for Democrats and Republicans just two months away from the presidential election.

Programs to help businesses pay wages are either obsolete or on the verge of being phased out. A weekly unemployment supplement of $ 600 expired in July. Economists credited the government’s largesse with the strong rebound in economic activity after it nearly came to a halt after businesses closed in mid-March to control the spread of the coronavirus.

“The pandemic has really torn our economic and social fabric apart,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles. “The end of the fiscal stimulus has not improved the situation.”

Non-farm payrolls likely increased by 1.4 million jobs last month, some of the expected gains from hiring for the 2020 census, according to a Reuters survey of economists. Employment has increased from 1.763 million in July and its growth peaked at 4.791 million in June.

Friday’s report is one of only two monthly labor market dashboards left on the schedule ahead of the November 3 presidential election.

President Donald Trump, who lags behind in the polls behind former Democratic Party candidate Joe Biden, is likely to tout the continued job gains as a sign the economy is improving after suffered his biggest shock in at least 73 years during the second. trimester.

But employment would still remain around 11.5 million below its pre-pandemic level. Most of the job gains have been from workers recalled from time off or temporary layoffs. Although new COVID-19 infections have abated after a large resurgence throughout the summer, many hot spots remain.

United Airlines (UAL.O) said on Wednesday it was preparing to lay off 16,370 workers on October 1. American Airlines (AAL.O) announced that its workforce would decrease by 40,000 people, including 19,000 involuntary cuts. Ford Motor Co (FN) said it aimed to eliminate 1,400 U.S. salaried jobs by the end of the year. Public transport rail operators are also seeking time off.

A report this week from the Federal Reserve, based on information gathered from US central bank contacts on or before August 24, showed an increase in employment. The Fed, however, noted that “some districts have also reported slower job growth and increased hiring volatility, particularly in service industries, with an increase in cases of permanent layoffs. due to low demand.

“Restaurants and other service industry companies won’t continue to call workers back when the demand isn’t there,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pa. “We need the stimulus like weeks ago.”


The unemployment rate is expected to fall to 9.8% in August from 10.2% in July, according to the Reuters survey. That would leave it just below the peak of 10% shortly after the end of the great recession of 2007-2009.

But the measure of the unemployment rate has been skewed downwards by people mistakenly classifying themselves as “employed but absent from work”. At least 29.2 million were receiving unemployment benefits in mid-August.

Lydia Boussour, senior economist at Oxford Economics in New York, estimated that a rise in the wage bill as expected would leave one in two laid-off workers still unemployed, with an increased risk of a prolonged spell of high unemployment.

“The fact that employment is settling into a trend of slow and gradual improvement is a worrying sign for a broader recovery,” Boussour said. “The combination of slow progress in employment and poor health conditions, as well as the lack of budget support, threatens to undermine the rebound in consumer spending in the months to come.

Slowing job growth is likely to have a limited impact on gross domestic product in the third quarter, which economists say could rebound at an annualized rate of 30% after falling to a historic rate of 31.7% during the quarter from April to June. But it will hurt fourth-quarter GDP, as consumer spending suffers.

Although wages rose during the height of the pandemic, it was because job losses were concentrated in low-wage service industries like restaurants and bars.

Average hourly earnings are forecast to be unchanged in August, after increasing 0.2% in July. This would reduce the annual wage increase to 4.5% from 4.8% in July.

The services sector should be behind most of the gains expected in August. Manufacturing is expected to have added an additional 50,000 jobs. The government’s payroll has likely been increased by hiring at least 250,000 workers for the population, although some could offset a decline in education employment in state and local governments.

“We are looking for particularly weak education-related jobs because the start of the school year will be abnormal in many areas,” said Daniel Silver, economist at JPMorgan in New York.

Reporting by Lucia Mutikani; Edited by Chizu Nomiyama

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