U.S. Job Gains slow as more Layoffs become Permanent

Economy added 661000 jobs in September; unemployment rate fell to 7.9%

By guest author Sarah Chaney from Wall Street Journal

Caption and Graphics courtesy by Wall Street Journal

Hiring gains slowed sharply headed into the fall as more layoffs turned permanent, adding to signs that the U.S. economy faces a long slog to fully recover from the coronavirus pandemic.

Employers added 661000 jobs in September, the Labour Department said Friday, October 2, 2020. The increase in payrolls showed the labour market continued to dig out of the hole created by the pandemic, but at a much slower pace than over the summer.

The U.S. has replaced 11.4 million of the 22 million jobs lost in March and April at the beginning of the pandemic. Job growth, though, is cooling, and last month marked the first time since April that net hiring was below 1 million.

Friday’s Labour Department jobs report is the final one before the presidential election, which faces fresh uncertainty after President Trump and first lady Melania Trump tested positive for Covid-19. Mr. Trump and Democratic presidential candidate Joe Biden have promised to create millions of jobs to advance the economy’s recovery from the pandemic-induced shock this spring.

Other signs of a slowing U.S. recovery include a drop in household income at the end of the summer and smaller gains in consumer spending, the economy’s main driver.

The unemployment rate fell to 7.9 % in September from 8.4 % the prior month. Though the jobless rate is down sharply from a pandemic high of near 15 % in April, last month’s drop partially reflected more people leaving the labour force and an increase in permanent layoffs. Unemployment is in line with previous recessions and remains well above the historically low levels seen before the coronavirus struck.

Large corporate layoffs are sweeping across the U.S. Walt Disney Co. earlier this week announced permanent layoffs for 28,000 theme park workers who were previously on temporary furlough. American Airlines Group Inc. and United Airlines Holdings Inc. will proceed for now with a total of more than 32000 job cuts after lawmakers were unable to agree on a broad coronavirus-relief package.

The recent layoff announcements aren’t reflected in the September jobs report, which includes data gathered in the first half of the month.

Employers continue to bring back workers, but many factors are converging to hinder the economic recovery in the coming months. For one, the initial hiring rebound from business re-openings is easing as states lift restrictions at a slower pace than earlier in the summer. Further, layoffs remain elevated compared with pre-pandemic peaks, as business uncertainty persists.

“The pace of jobs recovery apparent in today’s report suggests that we will be counting the employment recovery in years, not months or quarters,” said Marianne Wanamaker, a labour economist at the University of Tennessee, Knoxville. “We’re not going to gain jobs as rapidly as we did in May and June.”

Government jobs declined in September, mainly at public schools. Large payroll gains occurred in the leisure-and-hospitality, retail and health-care sectors, some of the hardest hit at the onset of the pandemic.

The number of unemployed individuals saying their layoffs were temporary declined in September, which could reflect more people returning to work. Some temporary layoffs also appear to be turning permanent. The number of workers who saw their layoffs as permanent rose in September, a sign joblessness may remain elevated in the coming months.

Austin Halliday of Cleveland, Tenn., was laid off from his consulting role at a data-analytics company in June after nearly a year on the job. When he first became unemployed, Mr. Halliday said he was optimistic about quickly finding a new position. He later realized the labor market was crowded with many other people seeking employment.

Layoffs occurring today reflect a shift in employers’ mentality from the beginning of the crisis. Companies that were holding on to workers are now facing the reality that revenues are weaker than they previously imagined, Ms. Wanamaker said.

“There’s no sense that a layoff under those circumstances would be temporary,” Ms. Wanamaker said. “It’s a ‘facing-reality’ sort of layoff.” Mr. Halliday said he has submitted 250 job applications since June, some for entry-level roles and others for positions requiring more experience. He said he has had a few interviews but doesn’t yet have a job. The 23-year-old is collecting unemployment benefits as he lives at home with his family and hunts for work.

“Sometimes I am very motivated and thinking, ‘yeah, I can find a job somewhat soon,’” he said. “And then other times, it’s like, ‘why am I doing this?’”

E.D. Mondainé, owner of Po’Shines Cafe De La Soul in Portland, Ore., had to furlough half his staff earlier this spring when the coronavirus hit.

The soul-food restaurant and catering company was able to bring its employee count back up this summer, thanks in part to a grant from humanitarian aid organization Mercy Corps. Mr. Mondainé said the neighborhood restaurant also gave out thousands of free meals like catfish and eggplant Parmesan during the pandemic, building awareness of its business in the community and, in turn, boosting revenue down the road.

Still, consumer caution toward the virus is keeping a lid on sales, which remain down about 30% compared with pre-coronavirus, Mr. Mondainé said. He plans to keep payrolls steady until revenue improves further.

“This isn’t going to last forever,” he said of the pandemic. “As long as we’re able to keep our heads above water, we’ll be there when it does end.”

Businesses that rehired a fraction of their workers when states lifted lockdown restrictions in early summer now need to see stronger demand to raise employment to precrisis levels, economists say. For many, though, sales remain depressed as businesses operate under capacity constraints.

Andrew Fritz, co-owner of Citizen Public House restaurant in Scottsdale, Ariz., voluntarily reduced his dining room hours and capacity in July as new coronavirus cases in the state spiked. He said he increased those hours and rehired workers about a month later, but said the restaurant is still operating with less than half of its pre-pandemic staff. Sales over the past two months have fluctuated around half the levels seen a year earlier, he said.

Mr. Fritz said demand has been strong on the weekends. During the week, he added, business has been much weaker and more customers are ordering carryout meals, which tend to have a lower sales value.

“We’re shedding money every week,” Mr. Fritz said. He expects the restaurant could break even if revenue rose by another USD 5000 to USD 10000 a week. “But a break-even scenario is a really ugly scenario, because we’re doing it by cutting peoples’ salaries and wages and hours.”

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