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U.S. job growth slows; nearly four million Americans permanently unemployed

Economic Indicators Oct 02, 2020 03:10PM ET
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© Reuters. FILE PHOTO: A new business advertises for workers as it prepares to open up during the outbreak of the coronavirus disease in California,

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. employment growth slowed more than expected in September and over 300,000 Americans lost their jobs permanently, dealing a potential blow to President Donald Trump ahead of the fiercely contested Nov. 3 presidential election.

The Labor Department's closely watched employment report on Friday underscored an urgent need for additional fiscal stimulus to aid the economy's recovery from a recession triggered by the COVID-19 pandemic. The slowdown in hiring compounds problems for Trump, who announced overnight that he had tested positive for coronavirus.

Just over half of the 22.2 million jobs lost during the pandemic have been recouped. Former Vice President Joe Biden, the Democratic Party nominee, blames the economic turmoil on the White House's handling of the pandemic, which has killed more than 200,000 people and infected over 7 million in the nation.

"The jobs report adds to Trump's woes," said James Knightley, chief international economist at ING in New York. "Betting odds signal a diminished chance he will win re-election and a much higher probability of a Democrat clean sweep."

Nonfarm payrolls increased by 661,000 jobs last month, the smallest gain since the jobs recovery started in May, after advancing 1.489 million in August. Every sector added jobs with the exception of government, which shed 216,000 positions because of the departure of temporary workers hired for the Census and layoffs at state and local government education departments as many school districts shift to online learning.

Employment in the leisure and hospitality sector increased by 318,000, accounting for nearly half of the gain in nonfarm employment. Payrolls are 10.7 million below their pre-pandemic level. Economists polled by Reuters had forecast 850,000 jobs were created in September. Employment growth peaked in June when payrolls jumped by a record 4.781 million jobs.

(Graphic: Nonfarm payrolls - https://graphics.reuters.com/USA-STOCKS/azgvoaeqevd/nfpr.png)

The unemployment rate fell to 7.9% in September as 695,000 people left the labor force from 8.4% in August. The jobless rate was again biased down by people misclassifying themselves as being "employed but absent from work."

Without this error, the government estimated that the unemployment rate would have been about 8.3% in September. There were 3.8 million people who had lost their jobs for good, up 345,000 from August. More experienced long bouts of unemployment, with the number of people out of work for more than 27 weeks surging 781,000 to 2.4 million.

The slowing labor market recovery is the strongest sign yet that the economy has shifted into lower gear heading into the fourth quarter. Growth got a boost over the summer from fiscal stimulus. Third-quarter gross domestic product growth estimates are topping a 32% annualized rate, which would reverse a historic 31.4% pace of contraction in the April-June quarter.

Growth estimates for the fourth quarter have been cut to around a 2.5% rate from above a 10% pace.

"The virus is in the driver's seat in controlling the speed of the recovery and right now the economy is in the slow lane unless Congress and the White House can settle their differences and provide additional stimulus," said Chris Rupkey, chief economist at MUFG in New York.

Stocks on Wall Street fell. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.

WOMEN LEAVING LABOR FORCE

The Democratic-controlled House of Representatives on Thursday approved a $2.2 trillion rescue package. Objections from top Republicans are likely to doom the plan in the Senate.

New coronavirus cases are rising, with a surge expected in the fall, which could lead to some restrictions being imposed on businesses in the services sector. Trump's positive coronavirus test added to political uncertainty that could extend beyond the election, and make businesses cautious about hiring.

Walt Disney (NYSE:DIS) Co. said this week it would lay off roughly 28,000 employees in its theme parks division. American Airlines (NASDAQ:AAL) and United Airlines, two of the largest U.S. carriers, said they were beginning furloughs of more than 32,000 workers on Thursday, absent government assistance.

With many enduring long spells of joblessness, economists believe the unemployment rate will not see its pre-crisis level of 3.5% until mid-2024 and it could take a year to regain the lost jobs. This could further widen the income inequality gap.

The COVID-19 crisis has disproportionately affected the lower-income population and women, who have dropped out of the labor force to look after children.

(Graphic: Labor market participation - https://graphics.reuters.com/USA-STOCKS/gjnpwjzqrvw/lmparticipation.png)

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.4% from 61.7% in August. The participation rate for women dropped to 55.6% from 56.1%. It was little changed for men.

"It may very well be the case that more home schooling is putting incremental downward pressure on the labor force participation rate, which fell meaningfully more in September for women," said Robert Rosener, an economist at Morgan Stanley (NYSE:MS) in New York.

Though people worked more hours, a proxy for take-home wages declined on a year-on-year basis for a sixth straight month.

"This along with reduced fiscal support will temper consumer spending in the coming months," said Kathy Bostjancic, chief U.S financial economist at Oxford Economics in New York.

U.S. job growth slows; nearly four million Americans permanently unemployed
 

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Comments (5)
Jo Va
Jo Va Oct 02, 2020 1:51PM ET
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30+ MILLION now claiming unemployment, 36.5 MILLION now unemployed, all under trumps watch as a result of his absolute failures to protect our nation. He had his chance to show us what he can do and boy-oh-boy did he! Everything he touched turned to garbage. We need to get rid of this loser in November before he has the chance to make things any worse!
Jim Robertson
Jim Robertson Oct 02, 2020 12:48AM ET
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Where would this world or country be without the high quality journalism from CNN hack Chris Coumo.Yes HACK!!!
John Hat
John Hat Oct 02, 2020 12:45AM ET
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The most pain has come from Democrat controlled states.
Jim Robertson
Jim Robertson Oct 02, 2020 12:44AM ET
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Why didn't the Clinton financed dossier on Trump warn us about his ability to handle a pandemic. Really Hillary , you paid too much for too little. Now look what you got us into. What difference does it make now. Only a democrat can righteously blame a covid death on their political opponent.
Khalid Rashid
Khalid Rashid Oct 02, 2020 12:44AM ET
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You are being reported as SPAM
Skidmark Stain
Skidmark Stain Oct 02, 2020 12:16AM ET
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its slowed because ignoring a pandemic because of a narcisist president. all else is perpipheral.
 
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