Unemployment falls, consumer sentiment rises ahead of election

Unemployment falls, consumer sentiment rises ahead of election”

The US economy added 661,000 jobs in September and the unemployment rate has fallen to 7.9 percent, according to the final monthly employment report before the election.

Consequently, employment as a percentage of the working-age population gives us a clearer picture of the U.S. labour market - see chart below. At 56.6 percent, it is still 4.4 percentage points below its year-ago level.

The number of people out of work for 27 weeks or more increased by 781,000 to 2.4 million in September.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.4% from 61.7% in August. "This underscores that job gains from here on will be tougher, and speaks to the need for more stimulus to help the economy", Frick said in a note.

A further downturn in the labor market is likely.

There are also large racial differences in the impact of the recession.

We are now forecasting 4Q GDP growth of 4.5% annualised, which would leave 2020 output around 2.2 percentage points below 4Q19 levels.

This compares to an upwardly revised 1.49 million jobs gains in August, when the unemployment rate fell by 1.8 percentage points to 8.4 percent. The number of people choosing to work part-time is down 2,641,000 (12.3 percent) from its year-ago level.

Moreover, it's hard to find a clear pattern linking unemployment rates to turnout in presidential elections, or to the outcome.

These numbers were slightly lower than economists' expectations for 800,000 new jobs. The unemployed due to voluntary quits is actually the same share of the workforce as in September of 2019. Federal government employment fell 34k on some of the temporary census hiring being laid off.

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"This is a very disappointing jobs report, suggesting that the rebound from the early, temporary layoff from COVID-19 are nearing their end", said Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Indiana. Still, the economy remains far from recuperating the jobs lost during the nadir of the pandemic period in March and April.

"Job growth is moderating just as fiscal aid is expiring - a toxic cocktail", economists Kathy Bostjancic and Gregory Daco of Oxford Economics wrote in a research note. The leisure and hospitality sector added 318,000 jobs, accounting for nearly half of the total. Retail added 142,400 jobs, while health care and social assistance added 107,700 jobs. Mining reversed the pattern of sharp job losses and added 900 jobs. It is still 2.3 million jobs short of its pre-pandemic high, or just under 20% short.

The only drop in employment took place in government, largely in education.

This is, at best, a mixed report.

The Labor Department also acknowledged the impact of a classification error, which means the unemployment rate could be understated by as much as 0.4 percentage point.

But the figures from the US Labor Department on Friday showed the smallest increase in jobs since employment started picking up again in May.

As the best-known summary statistic of the labor market, the U.S. unemployment rate is a "a psychologically important number" for voters, said Michael Brown, principal USA economist at Visa.

The variety of Americans submitting brand-new claims for jobless advantages fell for the week endedSept 26 however stayed high, the federal government reported on Thursday, and individual earnings dropped in August, highlighting the value of another federal government rescue bundle that financial experts state is required to keep the healing from flagging additional.

With several sectors, such as airlines and state and local governments, looking at another round of layoffs, the immediate picture does not look good. Other lapses have had a more direct impact on the labor market: The phase-out this week of federal aid aimed at keeping workers on payrolls has already led airlines to move ahead with tens of thousands of job cuts, based on announcements this week.

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