This week brings two key readings on the state of the labor market.
On Thursday, the Labor Department will report the latest weekly numbers on initial claims for unemployment, while Friday the Bureau of Labor Statistics will report the monthly unemployment rate for September.
As the third quarter rolls to an end, the labor market is showing signs of recovery from the pandemic-induced crash of the spring. But economists worry that may be short-lived.
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The unemployment rate is down from its peak of 14.9 percent in April as the nation shut down in response to the coronavirus. It stands at 8.4 percent, still well above its pre-COVID-19 peak of 3.5 in February.
Initial jobless claims, however, have stalled. Last week, the Labor Department reported that seasonally adjusted claims for the week ending Sept. 19 were 870,000. That was above the estimates of economists, who expected claims of 850,000, but down slightly from the previous week’s 860,000.
“As of now, the labor market is losing steam,” Indeed economist AnnElizabeth Konkel says in an email. Konkel notes the job market rebounded from its initial shock in March but adds, “as of late, the recovery seems to have petered out.”
Worrying Konkel and other economists is what happens as temperatures cool and the nation enters the fall and winter, when businesses such as restaurants no longer have the luxury of serving patrons outside.
“As temperatures drop and days shorten, businesses that shifted to outside operations again have to regroup. Additionally, if case clusters accelerate as more people spend time indoors, that’ll contribute to the hiring slowdown we’re already seeing, especially in higher wage sectors,” Konkel says.
Adding to concerns was the announcement Wednesday that Disney will lay off 28,000 workers, mostly part-time employees, as its theme parks struggle with attendance since reopening. And the airline industry is bracing for up to 35,000 layoffs that could begin this week, absent any sort of federal assistance.
One unknown is whether women will start participating in the labor force again at the rate they were pre-pandemic. Women’s participation fell 2.7% from February as many had to stay home to take care of children who could no longer attend school in person and as they were disproportionately affected by closures of retail outlets and restaurants. Male participation fell 1.3%.
Economists are generally looking for a continued drop in the unemployment rate: The median prediction of 28 quantitative macroeconomists who participated in a Sept. 8 survey from FiveThirtyEight.com stands at 8.0%. Some 63% of the site’s panel of economists think the rate will drop below 8% between now and the end of the year.
The economists were less sanguine about the rate of gross domestic product growth in the fourth quarter with some expressing concern that with key parts of this spring’s stimulus package having expired, consumer spending might have taken a hit.
“All of this is to say that now is a pivotal – but confusing – moment for the economy,” senior writer Neil Paine wrote for FiveThirtyEight. “Things certainly aren’t as bad as the economists in our survey thought they would be a few months ago. But it’s all a matter of perspective. After all, over half the jobs that were lost in March and April still haven’t returned. And with millions of people still out of work and an enormous amount of uncertainty about the trajectory of the virus, it’s easy to understand why economists aren’t celebrating yet.”
On Wednesday, the Conference Board reported its consumer confidence index soared in September, with both the current conditions and future expectations measures posting big gains. Measures of home sales and house prices have also been showing steady gains.
President and Chief Economist Joel Naroff of Naroff Economics LLC jokingly said in a note to clients that the improved outlooks reflected the opinions of parents exuberant at being able to send their kids back to school in some states.
“What happened that could have changed perceptions so much?” Naroff asked. “We get the employment report on Friday and that will provide an indication of what is happening in the labor market. The numbers should be good, but probably not nearly as strong as we have seen for the last few months.