WASHINGTON (Reuters) - U.S. job growth slowed more than expected in September and the ranks of the permanently unemployed swelled, underscoring an urgent need for additional fiscal stimulus as the COVID-19 pandemic drags on and threatens the economy’s recovery.
The Labor Department’s closely watched employment report on Friday was the last before the fiercely contested Nov. 3 presidential election for which the economic scarring from the pandemic has been a top issue.
Republican President Donald Trump, who said on Friday he had tested positive for coronavirus, is likely to tout the fifth straight month of job gains and lower unemployment as a sign of progress for an economy that plunged into recession in February.
But September’s employment gains were the smallest since the jobs recovery started in May and left the labor market a long way from recouping the 22.2 million jobs lost in March and April, indicating slower growth heading into the fourth quarter.
Former Vice President Joe Biden, the Democratic Party nominee, blames the economic turmoil on the White House’s handling of the pandemic, which has killed more than 200,000 people and infected over 7 million in the nation.
Nonfarm payrolls increased by 661,000 jobs last month after advancing 1.489 million in August. Every sector added jobs with the exception of government, which shed 216,000 positions because of the departure of temporary workers hired for the Census and layoffs at state and local government education departments as many school districts shift to online learning.
Employment in the leisure and hospitality sector increased by 318,000, accounting for nearly half of the increase in nonfarm employment in September. Payrolls are 10.7 million below their pre-pandemic level. Economists polled by Reuters had forecast 850,000 jobs were created in September. Employment growth peaked in June when payrolls jumped by a record 4.781 million jobs.
The unemployment rate fell to 7.9% in September from 8.4% in August. As in the previous months, the jobless rate was biased down by people misclassifying themselves as being “employed but absent from work.”
Without this error, the government estimated that the unemployment rate would have been about 8.3% in September.
The drop in the unemployment rate last month reflected people leaving the labor force. There were 3.8 million people who had lost their employment for good, up 345,000 from August.
Stock on Wall Street opened lower. The dollar rose against a basket of currencies. U.S. Treasury prices were higher.
MORE LAYOFFS
A further slowdown in the labor market is likely. The Democratic-controlled House of Representatives on Thursday approved a $2.2 trillion rescue package. Objections from top Republicans are likely to doom the plan in the Senate.
New coronavirus cases are rising, with a surge expected in the fall, which could lead to some restrictions being imposed on businesses in the services sector. Political uncertainty is increasing and could extend beyond the election, and make businesses cautious about hiring.
Several months after operations resumed, demand has remained poor, especially in the services sector, leading some businesses to permanently shut down or lay off more workers.
Walt Disney Co. said this week it would lay off roughly 28,000 employees in its theme parks division. American Airlines and United Airlines, two of the largest U.S. carriers, said they were beginning furloughs of more than 32,000 workers on Thursday, absent government assistance.
Third-quarter gross domestic product growth estimates are topping a 32% annualized rate, reversing a historic 31.4% pace of contraction in the April-June quarter. Growth estimates for the fourth quarter have been cut to around a 2.5% rate from above a 10% pace.
The number of people out of work for 27 weeks or more increased by 781,000 to 2.4 million in September. With many now enduring long spells of joblessness, economists believe the unemployment rate will not see its pre-pandemic level of 3.5% until mid-2024.
This risks further widening the income inequality gap. The COVID-19 crisis has disproportionately affected the lower-income population. At least 26.5 million people were receiving unemployment benefits in mid-September.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
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October 02, 2020 at 11:08AM
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