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Recovery Slows Down as Economy Adds Back 1.4 Million Jobs

Continuing on a downward trend, the American economy recovered just 1.4 million jobs in August while the unemployment rate dropped to 8.4%.

(CN) — Continuing on a downward trend, the American economy recovered just 1.4 million jobs in August while the unemployment rate dropped to 8.4%.

The labor market is still 11.5 million jobs short of where it was before the Covid-19 pandemic delivered a crushing blow to the economy in the spring.

The modest gain reported Friday by the Labor Department lags behind the revised 1.7 million jobs recovered in July and falls well short of the 4.8 million positions added back in June.

Nick Bunker, economic research director at Indeed Hiring Lab, said there is still a lot of economic 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,” he wrote.

Government jobs grew by 344,000 last month, but a large chunk of that gain – 238,000 jobs – came from the temporary hiring of census workers. The public sector is still 831,000 jobs below its February level.

In the private sector, retail trade led the way with 249,000 more jobs in August. Professional and business services added back 197,000 positions. The leisure and hospitality industry, which includes restaurants and bars, recovered 174,000 jobs last month.

“The source of the payroll slowdown is concerning,” Bunker said. “After being the major source of bounceback in job gains, leisure and hospitality employment has slowed considerably after being devastated early in the crisis. If this sector has run out of steam, high levels of joblessness will last longer than initially thought.”

The jobs report comes as Congress remains deadlocked over another stimulus package to boost the economy. Democrats have agreed to drop their proposed $3.4 trillion price tag in the House-passed Heroes Act relief package down to $2.2 trillion, but Republicans have been calling for a bill closer to $1 trillion. An extra $600 in weekly unemployment aid, part of the CARES Act passed in March, expired in July.  

The unemployment rate from August is the lowest since the pandemic shut down the economy in March. But Elise Gould, senior economist at the Economic Policy Institute, explained that the 8.4% figure doesn’t take into account all virus-related job losses.

“In August, there were 13.6 million workers who were officially unemployed. But there were an additional 1.1 million workers who were temporarily unemployed but who were being misclassified as ‘employed not [at] work.’ There were also 4.3 million workers who were out of work as a result of the virus but who were being counted as having dropped out of the labor force because they weren’t actively seeking work,” she wrote.

She added, “Altogether, that is 19.0 million workers who were either officially unemployed or otherwise out of work as a result of the virus in August. If all these workers were taken into account, the unemployment rate would have been 11.5% in August.”

The education and health services industry gained back 147,000 jobs last month, but is still 1.5 million below the pre-pandemic level. There were 78,000 more jobs in transportation and warehousing in August, while the manufacturing sector added back 29,000 positions.

Joel Naroff of Naroff Economics called Friday’s jobs report strong and said the recovery is on track.

“The labor market has come back faster than expected and we are seeing improvement in all segments of the economy and the workforce. But as usual, the question of whether these gains are sustainable remains,” he wrote. “The unemployment rate is still about five percentage points above where it was in February and payrolls are down by 11.5 million workers. There is still a lot of work to do.”

Categories / Economy, Employment, National

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