What does latest jobs report mean for recovery?
As the shocking news emerged that the president and first lady tested positive for the coronavirus, some investors may have wondered if this was the “October Surprise” they feared. Presuming that the president recovers, investors are also absorbing the last employment report before the election.
The September jobs report showed that the pace of economic progress is slowing down. The economy added a lower than expected 661,000 new positions, the smallest rise since the job recovery began and a significant deceleration from the spring bounce back. (Note: Recent announcements of layoffs from large airlines, Disney, publisher Houghton Mifflin, insurer Allstate and designer Ralph Lauren were not included in the September report.)
The U.S. now has 10.7 million fewer workers employed than it did in February. To put that into perspective, for the five years starting in 2015 through 2019, the economy added a total of just over 11.6 million jobs, so the pandemic has wiped out almost five years of job gains.
The unemployment rate fell from 8.4% to 7.9%, but partially for the wrong reason — the number of people who are in the work force (the “participation rate”) dropped to 61.4%, 2% lower than it was before the pandemic. Front and center of those opting out are women, especially those with school-age children.
The September jobs report syncs up with findings from “Women in the Workplace 2020,” an annual analysis conducted by McKinsey & Company and Lean In, which surveyed more than 40,000 people across
317 companies from June to August. McKinsey found that “more than one in four women are contemplating what many would have considered unthinkable just six months ago: downshifting their careers or leaving the workforce completely.”
This was the first time in the six years of the survey that women appear to be leaving the workforce at higher rates than men, with as many as two million women considering leaving the labor market.
The September jobs report also highlighted the racial employment gap. Diane Swonk, chief economist at Grant Thornton wrote, “The unemployment rate for Black workers held at 12.1% in September, nearly double the unemployment rate for white workers. White workers are being hired back much more rapidly than Black workers, which is exacerbating inequality.”
The unemployment remains stubbornly high for Hispanic Americans, too — 10.3%. Like the gender gap, the pandemic is exacerbating the racial gap.
According to the Federal Reserve’s Survey of Consumer Finance for 2019, inflationadjusted net worth (the difference between families’ gross assets and their liabilities) rose 18% between 2016 and 2019 to $121,700.
Over the time period, Black non-Hispanic and Hispanic families saw big gains, but even with the progress, “the typical White nonHispanic family still had more than double the amount of wealth than the typical family in any other racial or ethnic group in 2019.”
Where does this leave us? The economy is recovering, but the pace is slowing. The pandemic continues to wreak havoc on household finances, especially for low-wage workers, people of color and women. The September jobs report shows that economists and Fed officials are rightly concerned that there needs to be additional stimulus to protect at-risk Americans and to propel the seemingly stalling recovery.