(Bloomberg) — The U.S. labor market probably extended its rebound last month, though the outlook for continued job growth is weakening for whichever candidate wins the White House.
The Labor Department is set to release its October report tomorrow against the backdrop of a razor-thin election vote. The figures are forecast to show payrolls grew by 585,000 in October. That would be the weakest pace since pandemic lockdowns vaporized nearly 21 million jobs in April.
The unemployment rate may have edged down to 7.6% from 7.9%. That would be around half of the April level that was the highest since the Great Depression era — and a better decline than economists expected earlier this year — but still more than double the half-century low in February.
While Americans are getting back to work faster than anticipated, the labor market’s internals reveal more worrisome signs such as women leaving the workforce and a surge in long-term unemployment. What’s more, greater headwinds may be in store after daily new Covid infections this week soared to around 100,000 for the first time, and with payrolls still more than 10 million shy of their February peak, slower hiring means it could take a year or more to fully recover.
Federal Reserve officials kept policy unchanged Thursday while noting that employment has continued to recover but remains well below levels at the beginning of the year.
“The pace of improvement in the labor market has moderated,” Chairman Jerome Powell said in a news conference. “We’re sort of half way there on the labor market recovery, at best.”
A report Thursday showed the number of Americans filing for state unemployment benefits last week remained well above pre-pandemic levels. Altogether, that means the winner of the election — whether it’s Democrat Joe Biden or President Donald Trump — will inherit a slowly improving labor market.
“If you’re looking at the rate of change every month, you’re consistently stepping down,” said Kevin Cummins, chief U.S. economist at NatWest Markets. Even so, still-solid payroll growth “is going to continue to put downward pressure on the unemployment rate as we go into year-end.”
The jobs figures could also reflect a drop of more than 147,000 temporary workers for the decennial Census count, which ended data collection in October.
What Bloomberg Economics Says
“Seasonal factors signaling a strong gain ahead of the holiday season present a downside risk — if raw hiring is not as strong as usual during this time of year, the reported number may disappoint expectations.”
–Yelena Shulyatyeva, Andrew Husby and Eliza Winger, economists
For the full report, click here
On Wednesday, ADP Research Institute data showed U.S. companies added 365,000 jobs last month, weaker than all but one estimate in a Bloomberg survey. The battered leisure and hospitality sector saw a sizable gain but but that may slow — or even reverse — as colder weather threatens to limit outdoor dining.
Among other key figures in the October employment report will be the various participation metrics, which measure the number of Americans either working or looking for work.
In September, participation among so-called “prime-age” women, or those ages 25 to 54, fell for a third straight month, in part due to childcare burdens as many schools remain virtual.
The employment-population ratio, or the share of the population that is currently working, will also offer a picture of the underlying health of the labor market. In particular, the prime-age employment-population ratio fell in September for the first time since April.
Another metric to watch is the underemployment rate, or U-6. While the main jobless rate only includes people actively looking for work, the U-6 also reflects those who quit looking for a job because they were discouraged about their prospects and those working part-time but desiring a full workweek.
In September, the U-6 stood at 12.8% compared with the headline jobless rate of 7.9% — though it typically runs about double the unemployment rate.
Higher-frequency labor-market indicators pose an array of signals ranging from solid improvement to a sharp slowdown in the month.
Between the September and October reference weeks, unadjusted continuing state jobless claims fell about 5 million. However, part of that decline reflects people exhausting regular state benefits and moving to a federal program that provides up to 13 extra weeks of support. Nearly 4 million people were claiming benefits in the program — called Pandemic Emergency Unemployment Compensation — in the week ended Oct. 17.
The number of people who had been unemployed for 27 weeks or longer surged by a record in September as the pandemic stretched on. The number will likely increase in October.
Meanwhile, data from Ultimate Kronos Group, a software and services company that tracks time-clock punches, showed monthly shift growth in the U.S. slowed from 3.3% in both August and September to just 0.8% in October.
Looking at the breakdown of job gains in the month, Aneta Markowska, chief U.S. financial economist at Jefferies LLC, anticipates some strength shifting from services to goods producers — with services appearing a bit softer — as production picks up amid depleted inventories. She expects that trend to continue for the next several months.
The current Covid-19 surge and colder weather risk further weakness in jobs for the next few months, following many permanent business closures resulting from the pandemic.
(Adds Fed statement in fifth paragraph.)
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