1.4 Million Jobs Gained in August; Unemployment Rate Falls to 8 Percent

Roy Maurer By Roy Maurer September 4, 2020
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restaurant worker with mask

U.S. payrolls rose by 1.4 million in August as the pace of rehiring has slowed and furloughs increasingly turn into permanent layoffs. The unemployment rate fell to 8.4 percent last month from 10.2 percent in July, the first time since the economic devastation wrought by COVID-19 earlier this year that the rate has fallen back below 10 percent, according to the latest report from the Bureau of Labor Statistics.

"The labor market continues to heal after the initial shock from the coronavirus," said Nick Bunker, an economist at the Indeed Hiring Lab. "There is still massive damage, and the speed of repair is slowing down. Notably, improvement seems to be slowing down the most in industries that are the most hard-hit, which suggests that the easy wins are going away."

Becky Frankiewicz, president of ManpowerGroup North America, said there's "a long way to go but today's numbers show great progress to mending our labor market—single digit unemployment, growth across critical sectors including big moves from retail, professional and business services, hospitality and leisure, and manufacturing, and important progress for furloughed workers with more than half of those displaced during the pandemic back at work."

The pace at which employers are hiring or bringing back furloughed workers is slowing however—1.7 million jobs were added in July, and 4.8 million in June.

When public-sector gains largely inflated due to temporary Census employment are subtracted, private-sector payroll growth was just 1 million jobs in August, explained Julia Pollak, a labor economist at online employment marketplace ZipRecruiter. "Private-sector employment is still 10.7 million below its pre-Covid February level, so the recovery still has a long way to go," she said. "The private sector has now recovered 10.5 million of the 21.2 million jobs lost at the start of the pandemic. But if the pace of recovery decelerates further, returning to pre-COVID employment levels will take years, not months." 

Increasingly, the economy is transitioning from a "natural disaster" pattern to a "deep recession" pattern, said Josh Wright, chief economist at Wrightside Advisors, an economic research and consulting firm based in New York City. "As the former pattern masks the latter, policy makers face less pressure to act, and the longer they wait, the more they will exacerbate the sluggishness, if not risk an outright double-dip recession."

A continuing labor-market rebound likely depends on controlling the coronavirus, experts agree. "With federal stimulus programs still lapsed and the threat of a second wave of the virus this fall, it's not clear the labor market can keep improving on its own," Bunker said.

Permanent Layoffs Increase

Economists are worried about the rising number of permanent job losses impacting previously furloughed workers as scores of companies announce job cuts. Permanent job losses in August rose by 534,000 to 3.4 million. Laid-off workers who returned to jobs fell by 263,000 to 2.1 million. About 6 million workers remain on temporary layoff, down from 18 million in April.

"Job losses are becoming increasingly permanent, and now outweigh temporary layoffs for the first time since March," Wright said.

The number of Americans counted as unemployed in August fell by 2.8 million to 13.6 million. Broken out among demographic groups, unemployment rates declined in August for men (8.0

percent), women (8.4 percent), teenagers (16.1 percent), Asians (10.7 percent), whites (7.3 percent), Blacks (13.0 percent), and Hispanics (10.5 percent).

However, long-term unemployment is rising, Pollak said. "The median duration of unemployment continued to rise to 16.2 weeks, up from 13.7 in July and 8.6 a year ago. One concern is that the current crisis could lead to scarring in the labor market, and that the long-term unemployed could end up in lower-paying jobs or leaving the labor force altogether."

Meanwhile, the U-6 rate, also known as the underemployment rate, declined to 14.2 percent from 16.5 percent in July, but is still above twice the U6 level from February, Wright said.

The labor force participation rate—the share of the population that is either working or actively looking for work—rose to 61.7 percent in August from 61.4 percent in July, possibly reflecting the expiration of the supplemental $600 in weekly jobless benefits, a top-off which ended July 31. The prime-age participation rate among those ages 25-54, has held just above and below 81.4 percent since June.

Retail Leads Job Gains

The report showed broad-based gains across industries. Retailers added about 249,000 jobs, with almost half the growth occurring in general merchandise stores. Professional business services increased by 197,000, with more than half of that gain reported in temporary help services and employment in leisure and hospitality increased by 174,000 in August, with most of that growth taking place in bars and restaurants. Employment in the hard-hit sector is still down by 2.5 million since February.

The slowdown in leisure and hospitality hiring is especially concerning, as the sector had accounted for 621,000 new jobs in July. "After being the major source of bounce back in job gains, leisure and hospitality employment has slowed considerably after being devastated early in the crisis," Bunker said. "If this sector has run out of steam, high levels of joblessness will last longer than initially thought."

Public-sector employment increased by 344,000 in August, mostly reflecting the hiring of 238,000 temporary Census workers. Transportation payrolls rose by 78,000 due to a spike in warehousing and storage jobs, health care jobs increased by 75,000, and manufacturing increased by 29,000 new jobs.

"This was the second straight month that job gains in goods-producing sectors are relatively normal sized, while services continue to come roaring back," Wright said. "Among services, reopening-related job gains continue to dominate. The most heavily COVID-sensitive industries continue to see the most growth, but they are still deepest in the hole."

Pollak pointed out that several industries are still shedding jobs amid disruption caused by the pandemic, including nursing and residential care facilities (-13,700 jobs), travel agencies (-2,900 jobs) and office facilities support services (-2,500 jobs).

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