Monday, September 28, 2020

Slowing US job growth raises doubts on recovery’s strength

International Business

FILE PHOTO: Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston/File Photo

WASHINGTON: US employment growth slowed considerably in July, underscoring an urgent need for additional government aid as a resurgence of Covid-19 infections threatens to snuff out the nascent economic recovery.

The Labor Department’s closely watched employment report yesterday came as Democratic leaders in Congress and top aides to President Donald Trump struggled to negotiate a fiscal package. Trump, who lags former Vice President Joe Biden, the presumptive Democratic Party nominee, in polls ahead of the Nov. 3 election, threatened to bypass Congress with an executive order.

“The jobs recovery is on very shaky ground and without seat belts for the unemployed provided by additional fiscal stimulus the economy could be in for a very bumpy ride,” said Chris Rupkey, chief economist at MUFG in New York. “There cannot be sustainable economic growth if the country has to carry on with the crushing weight of massive unemployment.”

Nonfarm payrolls increased by 1.763 million jobs last month after a record rise of 4.791m in June. Excluding government employment which was artificially boosted by a seasonal quirk related to local and state government education, and temporary hiring for the 2020 Census, payrolls rose 1.462m, stepping down from 4.737m in June.

Economists polled by Reuters had forecast 1.6m jobs were added in July. While the number exceeded expectations, the economy has regained only 9.3m of 22m jobs lost between February and April.

Blacks continued to experience high unemployment. Racial inequality is a dominant theme in November’s election.

Economists believe July was probably the last month of employment gains related to the rehiring of workers after the reopening of businesses. A $600 weekly unemployment benefit supplement, which made up 20 per cent of personal income, expired last Friday. Thousands of businesses have exhausted loans offered by the government to help with wages, which economists estimate saved around 1.3m jobs at the program’s peak.

Bankruptcies are accelerating, especially in the retail sector. Coronavirus infections have soared across the country, forcing authorities in some of the worst-affected areas in the West and South to either shut down businesses again or pause reopenings, sending workers back home. The West and South account more than a third of the nation’s employment. Demand for services has been hardest hit by the respiratory illness.

“The initial bounce from widespread re-openings is now behind us,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Further improvement will occur in fits and starts and depends on the course of the virus.”