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US sees dire jobs trends as unemployment falls to 7.9% in September

Chris Stein
·4-min read
US President Donald Trump, who has occasionally shunned mask wearing, tested positive for Covid-19, upending the presidential race just weeks before the November elections
US President Donald Trump, who has occasionally shunned mask wearing, tested positive for Covid-19, upending the presidential race just weeks before the November elections

The US unemployment rate dipped in September but government data points to a slowing recovery ahead of next month's election, with the White House race suddenly thrown into chaos by President Donald Trump's positive Covid-19 test.

The number of jobs added in September came in at a paltry 661,000, the Labor Department said on Friday, below expectations and less than half of the gains seen in August, even as the unemployment rate dipped to 7.9 percent.

The report is the last to be released before Trump, who is behind in the polls, faces Democratic challenger Joe Biden in the November election, and analysts fear the weak report and ongoing deadlock over more stimulus in Congress will undermine the economy's recovery from the coronavirus downturn.

"The economy is a deep hole, and the rate at which we're digging out is slowing," University of Michigan economics professor Justin Wolfers said on Twitter.

The United States has seen tens of millions of job losses since business shutdowns were ordered in March to stop the coronavirus's spread, sending the unemployment rate spiking to 14.7 percent in April.

Subsequent months have shown it decreasing as the economy adds jobs -- but the rate of growth is tapering off.

"We have gained back only about half of the jobs we lost in March and April, and employment growth is slowing. This is a disaster for working families in this country," tweeted Heidi Shierholz, director of policy at the Economic Policy Institute.

- Ominous signs -

The Labor Department said job gains occurred last month in sectors like retail trade, which has seen a sharp recovery from the downturn, as well as health care, and professional and business services.

Leisure and hospitality, one of the industries hardest hit in the downturn, added 318,000 jobs. However, government employment declined by 216,000, driven by job losses in local and state education as many schools remain closed amid the world's worst coronavirus outbreak.

Nonetheless, the unemployment rate dropped more than expected from its 8.4 percent level in August, but analysts pointed to ominous trends in the employment report.

The labor force participation rate declined 0.3 percentage points to 61.4 percent, erasing gains made in August. The figure was 2.0 points lower than its level in February before the pandemic struck.

The number of people on temporary layoff dropped 1.5 million, a positive sign that was undermined by the 345,000 increase in people reported as permanently losing their jobs.

"That 7.9 percent isn't as good as it looks," Robert Frick, corporate economist at Navy Federal Credit Union, said of the unemployment rate.

The rise in the permanently unemployed as temporary unemployed falls "underscores that job gains from here on will be tougher, and speaks to the need for more stimulus to help the economy and to support the more than 11 million Americans who had jobs in February and who are unemployed now," he said.

The Labor Department also acknowledged a classification error, saying the unemployment rate could be understated by as much as 0.4 percentage points.

- No progress -

Extra weekly payments to the unemployed and a program of loans and grants for small businesses paid for by the $2.2 trillion CARES Act passed in March have been credited with boosting the tentative recovery, but those have now expired.

Democrats and Republicans have been unable to reach an agreement on another spending package, and days of renewed negotiations this week changed little.

The impasse's toll on the public was illustrated by University of Michigan consumer sentiment data released Friday that showed it at a six-month high of 80.4 percent but poorer families, who benefited most from the CARES Act, fearing continued joblessness.

The coronavirus has killed almost 208,000 people in the US and infected nearly 7.3 million -- with Trump among the latest -- but that bombshell event and the worrying jobs data still may not be enough to change lawmakers' minds.

"If Congress fails to pass a relief bill before the election, such grim data ought to motivate them to act in the lame duck session, but if Republicans have lost the Senate and White House, they might prefer to do nothing, rather than give incoming President Biden a lift," said Ian Shepherdson of Pantheon Macroeconomics. 

"In that case, the next relief bill won't be until February, and that's a long way off."

cs/dw