The unemployment rate dropped below 10 percent for the first time since the pandemic began and smashed expectations of economists.
The economy added 1.4 million jobs in August, bringing the unemployment rate down to 8.4 percent. A survey of economists by Dow Jones before the release of the labor report showed expectations were that the rate would drop to 9.8 percent.
The partial lockdowns across the country have slowed the recovery but there’s no sign of a “double-dip” recession. Still, there are problems ahead that could slow the recovery even further.
And there are more headwinds looming. Those include looming layoffs from local and states governments, which are facing huge budget shortfalls. New York City has plans to layoff 22,000 city workers.
And unemployed Americans, who lost their $600 enhanced unemployment benefits in July, could see their $300 enhanced unemployment benefits phase out as early as this week if not replaced by Congress. That cut could drag down consumer spending—which accounts for two-thirds of the economy and is already slowing.
The president was obviously pleased.
Great Jobs Numbers! 1.37 Million Jobs Added In August. Unemployment Rate Falls To 8.4% (Wow, much better than expected!). Broke the 10% level faster and deeper than thought possible.
— Donald J. Trump (@realDonaldTrump) September 4, 2020
And economists continue to be bullish on the future.
“We are still moving in the right direction and the pace of the jobs recovery seems to have picked up, but it still looks like it will take a while – and likely a vaccine – before we get back close to where we were at the beginning of this year,” said Tony Bedikian, head of global markets at Citizens Bank. “We continue to be optimistic that the economy has turned a corner and that we’ll continue to see steady progress.”
One-fourth of the job gains were from the government as the Census Bureau hired 250,000 temporary workers and state governments added 77,000 employees. Otherwise, job gains were spread out across the economy.
Other notable gains came from retail, which added 249,000 new jobs, and professional and business services, which jumped by 197,000. Leisure and hospitality, the hardest-hit sector during the pandemic, increased by 174,000 positions, a majority of which stemmed from bars and restaurants.
Education and health services jumped by at 147,000, and transportation rose by 78,000. Financial activities increased by 36,000, manufacturing rose by 29,000 and wholesale trade was up by 14,000.
A stimulus bill of any kind would keep the unemployment rate falling. We’ve already gained back about half the jobs lost in March and April when the pandemic took hold. And as the job picture brightens, so do Donald Trump’s hopes for re-election.
The slower than expected lifting of lockdown orders in the states has caused many business owners to pull back and take a breath to see where the economy is headed. That has slowed job creation and has had an effect on everything from inventories to consumer spending.
But the one statistic that could turn that around is a falling unemployment rate. Right now, people are nervous about the near future and the security of their jobs. A mid-August survey found that only 27 percent believe that things are getting better. That’s why Democratic charges that Trump is ruining the economy resonate with voters.
Conversely, job gains before Election Day will give people more confidence and play to Trump’s strengths. Few blame him for the bad economy, but voters want to see real progress toward recovery. As that progress continues, Trump’s chances improve.
It’s still the economy, stupid. It’s no accident that as the unemployment rate falls, Trumps numbers go up. And Biden can only stand by and hope for the worst.