The unemployment rate has never been this high going into an election
Posted October 1, 2020 6:42 a.m. EDT
CNN — Friday's jobs report will be the last look we get at the American labor market before the election. Economists expect an unemployment rate of 8.2% -- only slightly less than in August -- which would be the highest jobless rate on record (going back to World War II) as Americans head to the polls.
The US economy has rebounded since the pandemic lockdown in the spring when more than 22 million jobs vanished. But the recovery has been uneven and the country is still far from being back to normal.
Economists polled by Refinitiv predict the economy added 850,000 jobs in September, a sharp slowdown from the 1.4 million added in the month before and the millions more added over the summer. Even if this forecast comes true, the country would still be down 10.7 million jobs since February, before Covid-19 raged across the country.
The Bureau of Labor Statistics' September jobs report is due on Friday at 8:30 am ET.
The recovery is slowing
Though the economy rebounded sharply in the months following the spring lockdown, the recovery seems to be running out of steam.
Economic indicators, such as retail sales or claims for jobless benefits, have been improving only gradually after bouncing back sharply in the spring.
Meanwhile Covid infections are rising again and flu season is about to start. That could be a bad omen for the winter months, when outdoor activities that have helped restaurants and leisure businesses recover will likely decline again.
And funds from the Paycheck Protection Program are running low for many small business owners that have already spent the money to help rehire employees and stay afloat. Experts think this could lead to more layoffs as the year comes to an end.
That's why America could lose jobs in October -- 600,000 according to a forecast from Ian Shepherson, chief economist at Pantheon Macoreconomics -- as small business employment tumbles.
The October jobs report will be published at the end of election week.
Meanwhile, the government itself has a hand in the decline of job growth. The Census Bureau has been hiring temporary workers for this year's official count for months, providing a tailwind for the labor market. Between July and August, the number of Census workers rose dramatically as the Bureau added 238,000 positions.
But in September, the Bureau let 41,000 workers go. So after adding to the jobs totals during the late summer, Census hiring will be a drag in Friday's report.
Worse conditions for workers
The September report will give us a glimpse at the labor market a full six weeks after the supplemental $600 weekly unemployment benefit that Congress created through the CARES Act expired.
Given that millions of families relied on government aid to make ends meet during the pandemic, the benefit cut might have led to workers making impossible decisions between running out of money or potentially putting their families' health at risk.
"The jobs being added aren't the jobs that were lost, because we're still in an uncontrolled pandemic -- people are going back to worse-quality jobs without increased pay," said Kate Bahn, director of labor market policy and economist at the Washington Center for Equitable Growth.
A situation like that has a negative effect on wages, and that's not only bad news for workers but also for the economy.
"Without that upward pressure on wages, the tenuous recovery can only go so far," Bahn said. "We need people to spend more to stimulate the economy."
We're reaching a point in the pandemic recession where the unique features of this crisis -- including the devastating effects on particular industries and the limitation of face-to-face contact -- converge with the perennial features of historical recessions, such as long-term unemployment, Bahn added.
Over the past months, economists have been concerned about workers moving from the temporarily unemployed category into the permanently unemployed category.
Federal Reserve Chairman Jerome Powell has warned repeatedly that people who are out of work for longer are at risk to drop out of the labor force altogether.
A study by the Federal Reserve Bank of New York found that the percentage of people transitioning into unemployment rose to the highest on record in July: 10.5%, with the trend most visible for workers over 45, those with a household income below $60,000 and women. The latter are two of the groups worst affected by this crisis.