Moneybox

The President Is Sick and So Is the Economic Recovery

Protesters hold up signs that say "SAVE AVIATION JOBS" and "Airline Payroll Support Now!"
Airline industry workers at a protest in Chicago on Sept. 9. Kamil Krzaczynski/AFP via Getty Images

As if the president didn’t have enough to worry about Friday, it looks like his economic recovery is sick, too.

Job growth slowed drastically in September, the Bureau of Labor Statistics reported, as employers added just 661,000 workers to their payrolls, less than half the number they hired the month before. After its rapid early stages, in which shuttered businesses first began to reopen and millions of Americans got back to the grind, the country’s big rebound is pretty clearly losing momentum.

Monthly job growth chart
Federal Reserve Bank of St. Louis

Someone absolutely hellbent on finding optimistic news in this jobs report might point to the unemployment rate, which did fall from 8.4 to 7.9 percent. But that number really obscures just how much economic wreckage remains thanks to the coronavirus. The government only counts people as “unemployed” if they are both out of a job and searching for work. But at this point, many Americans have been sidelined entirely from the job market. On top of the 12.6 million officially unemployed, for instance, 4.5 million people not in the labor force said they hadn’t looked for work because of the pandemic.

Broader measures of joblessness are also showing signs of trouble. The overall share of Americans with a job was nearly flat in September. And in a particularly ominous sign, the employment rate actually fell by 0.3 percent among adults between the ages of 25 and 54, considered the prime working years for most people.

Chart of employment-to-population ratio among people ages 25 to 54
Federal Reserve Bank of St. Louis

Despite the Pollyannaish predictions of a V-shaped rebound from the White House, economists have widely expected the recovery to give up steam as time wore on. The country added jobs quickly in the late spring and early summer, because it was relatively easy: Many Americans went back to jobs where they could telecommute or where there was little health risk at their workplace. A large number of states also aggressively nudged businesses to reopen, even if it increased the odds of spreading the virus, which meant a lot of restaurants opened up their dining rooms after shuttering entirely. But now, there’s less low-hanging fruit to be picked, especially since high-unemployment states like New York and California are still being cautious about their reopening plans. In service industries like restaurants and bars, rehiring is at a relative crawl. The economy went from 0 to 40 quickly enough, but now it’s stalling.

Part of the problem is that, judging by unemployment claims, businesses are still laying off hundreds of thousands of workers every week, even as others rehire. Some of that may be due to the fact that small businesses have burned through the aid that Congress passed in the spring; the Paycheck Protection Program was only designed to last for about two months, after all, and we are way, way past that point. But large companies in industries that have been decimated by the pandemic—particularly in tourism—are now also letting workers go, which could bode poorly for the next few months. At the very end of September, Disney announced that it would let 28,000 staffers go from its parks, while airlines could be on the verge of 50,000 cuts.

Slashing jobless benefits probably hasn’t helped matters either. The weekly $600 federal unemployment benefits that kept many families financially stable through the first several months of the crisis expired at the end of July. And while consumer spending didn’t immediately tank, as some feared, its recovery did slow a bit—growing 1 percent in August, compared with 1.5 percent in July.

The one upside to all this? Now that recovery is clearly running low on juice, the White House and Senate Republicans might feel more pressure to strike a deal with Democrats for more aid, and get people the help they need to make the next few months bearable. Maybe, just maybe, bad news could turn out to be good news.