- Nonfarm payrolls rose by 1.4 million in August, beating expectations for 1.35 million. However, payrolls remained 7.6% below their pre-Covid February level.
- The unemployment rate also made a solid improvement. It dropped to 8.4% from 10.2% in July, and down from a peak of 14.7% in April. This was all the more encouraging as it came on top of a 0.3%-point rise in labor force participation to 61.7%. The number of unemployed persons fell by 2.8 million to 13.6 million.
- Government hiring accounted for one fourth of the overall gain (+344k), reflecting the hiring of 238k temporary Census workers. Retail trade added 249k jobs, although the sector remains 655k jobs below its February level. Strength was also seen in professional and business services (+170k), led by temporary help (+107k). Initially hard-hit, leisure and hospitality (+174k) added back more jobs in August. Other gains were seen in health care and education (147k). On the goods side, manufacturing employment rose 29k, but employment was little changed in mining and construction.
- In an interesting supplement to the household survey, the BLS found that 24.3% of employed persons teleworked in August due to the pandemic, downs from 26.4% in July. 24.2 million people reported that they were unable to work, or worked fewer hours due to the pandemic, down from 31.3 million in July. But 11.6% of these people received at least some pay from their employer for the hours not worked. Also, 5.2 million people who were not in the labor force, were prevented from looking for work due to the pandemic. These survey answers shed some light on the gap that has opened up between the official number of unemployed persons (13.6 million) and the number of people collecting jobless benefits in mid-August (29 million).
Key Implications
- Despite the surge in infections over the summer, and renewed shutdowns in some areas and sectors, the U.S. job market continues to heal from the worse of the coronavirus impact, defying this dismal scientist. At 8.4%,the unemployment rate has fallen faster than we assumed at the time of our last forecast.
- That said, the economy still has a long road ahead to put people back to work. There are still 11.5 million fewer people on payrolls relative to February, and if the current pace of hiring continued it would take over eight months to return to “normal”. However, the pace of hiring on a monthly basis continues to slow, and we expect it will take much longer for many of these jobs to return. As long as the pandemic persists, the necessity of social distancing will reduce demand for many “nonessential” services sector jobs in areas like travel and recreation.
- In the meantime, the millions of Americans who saw their generous unemployment benefits expire at the end of July are waiting on Washington for further assistance. At the time of writing, Congress is on recess, and there is no news of a deal for further relief for unemployed Americans, state and local governments, or small businesses. We expect Congress to eventually pass additional measures, which will help to buoy growth in the coming months, but the contours remain uncertain.
