Economic Update – Week of October 4, 2020

  • The recession has hit some harder than others, which has been based primarily on socioeconomic status.
  • Over 660,000 jobs were added to the economy, but jobs are beginning to taper off.
  • Unemployment is lower, but a more realistic view of unemployment that includes furloughs and discouraged workers is much higher.
  • Consumer confidence rose to a post-pandemic high showing the country is more hopeful about its prospects.

The economic collapse sparked by the pandemic is triggering the most unequal recession in modern U.S. history, delivering only a mild setback for those at (or near) the top and a depression-like catastrophe for those at the bottom of the economic scale, according to a Washington Post analysis.  Recessions often hit poorer households harder, but this one is doing so at a scale that is the worst in generations, analysis shows.  While the nation has regained nearly half of the lost jobs, several key demographic groups have recovered more slowly, including mothers of school-age children, Black men, Black women, Hispanic men, Asian Americans, younger Americans (ages 25 to 34), and people without college degrees.  The recession’s inequality is a reflection of the coronavirus itself, which has caused more deaths in low-income communities and severely affected jobs in restaurants, hotels and entertainment venues as Americans try to avoid crowded places to protect their own health and slow the spread of the virus.  The disparity has never been clearer.  With this in mind, let’s wash our hands, put on our facemasks, social distance, and stay safe.

Employment Data.  Every month, the employment data released by the Bureau of Labor Statistics is the most highly anticipated and closely watched by economists to gauge the condition of our economy.  But contrary to popular belief, it is not just one number; rather four separate components: (1) New jobs, (2) Unemployment rate, (3) Average hourly earnings, and (4) Employed.  Let’s look closely at each:  

New Jobs.  The 661,000 new jobs created in September is the smallest since the economy reopened and may mean a deceleration in our recovery.  A decline in public-educations jobs at local schools and colleges in dragged down employment in September was a decline in.  More worrisome than deceleration is nearly 700,000 people exited the labor force and stopped looking for work because jobs were so scarce.

Unemployment rate. The unemployment rate (called the “U3”) fell for the fifth month in a row to 7.9% from 8.4%, a new pandemic low. The official jobless rate peaked at 14.7% in April before falling in the following month.  It’s estimated that the 7.9% jobless rate would have been closer to 8.3% if households gave an accurate description of their employment status, the Bureau admits.  Some survey respondents continue to mistakenly refer to themselves as employed even though they aren’t actually working, a problem that’s bedeviled the BLS amid widespread furloughs.  A broader and more accurate measure of unemployment, known affectionately as the “U6,” suggests the “real” rate is really a much higher 12.8% in September.    The U6 rate is more accurate because it includes workers who can only find part-time work, furloughed workers, and those who have become too discouraged to look for jobs.

(3)  Average Hourly Earnings.  The average hourly earnings – cash earnings, excluding irregular bonuses, commissions, and fringe benefits – rose 0.1% in September and are up 4.7% versus a year ago.  Aggregate hours worked rose 1.1% in September but are down 6.0% from a year ago.

(4)  Employed.  The economy shed over 23 million jobs at the height of the pandemic.  So far the U.S. has recovered about 11.4 million jobs since a recovery got underway in May.  But how many people are still out of work is hard to know for sure.  The monthly employment survey shows 12.6 million people were unemployed last month, but a separate government report suggests as many 26 million are still collecting jobless benefits.  This underscores the need for more stimulus to help the economy and to support the more than 11 million Americans who had jobs in February and who are still unemployed.

Consumer Confidence.  The consumer confidence index rose to 101.8 in September from 86.3 in August, the Conference Board reports.  Consumer confidence rebounded in September and rose to a post-pandemic high after the number of coronavirus cases declined and the economic forged ahead.  An index that gauges how consumers feel about the economy jumped to 98.5 in September from 85.8 in the prior month.  Another gauge that assesses how Americans view the next six months—the so-called future expectations index—surged to 104 from 86.6.  The rebound in confidence almost certainly reflects a decline in coronavirus cases after a midsummer spike and even more, surprising, a reduction in federal benefits for the unemployed did little to dampen the optimism.  

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