Friday’s jobs report could be the first negative reading since April, as the surging coronavirus outbreak and the exhaustion of government benefits depresses consumer spending. Or it could show that the recovery continues to chug along, albeit at a slower rate than during the summer.
For its part, Wednesday’s private-sector employment report from payroll provider ADP shows a slowdown in hiring, with businesses adding 307,000 jobs in November. That’s down from an upwardly revised 404,000 in October. The ADP report isn’t a perfect proxy for Friday’s nonfarm payrolls report.
Either way, here are three things to focus on when the Bureau of Labor Statistics publishes the latest data Friday:
Is the virus having an impact?
America’s third Covid-19 wave began in earnest in October and exploded in November. The number of Americans hospitalized with the coronavirus rose 54% in October and 103% in November. There were more than 1.1 million new confirmed cases each week at the end of November, compared to 350,000 a week in the middle of October.
The question is how this is going to affect the pace of the jobs rebound—if at all. The second wave over the summer was concentrated in a handful of localities that experienced sharp slowdowns in growth and drops in restaurant dining, but there wasn’t much of an obvious macro impact. By contrast, the third wave has been much larger, affecting almost every area of the country. It’s possible that there won’t be much of an impact. After all, daily air passenger numbers collected by the Transportation Security Administration have continued to rise despite the spread of the virus.
On the other hand, the number of seated diners eating at American restaurants—outdoors or otherwise—has been trending lower over the past month. That was also what happened in the second-wave hotspots of Arizona, Florida, and Texas over the summer, but it wasn’t enough to affect the national numbers because of the ongoing recovery elsewhere.
This time is different: The number of seated diners in American restaurants is now down about 57% from last year, down from 40% at the beginning of October. The biggest drops are in the hardest-hit states such as Illinois, Ohio, and Wisconsin.
That could flow through to lower employment in the “food services and drinking places” sector, which has been responsible for a third of all the private-sector job gains since the bottom in April.
What’s happening to the split between the fast recovery in temporary layoffs and the slow grind for everyone else?
About 30 million Americans stopped working in March and April, while an additional 6.5 million were forced to work part time when they would have preferred to work full time. Of those 30 million, about 17.3 million came from people who reported that they were on temporary layoff and expected to be recalled by their employer, 8.1 million were people who were counted has having left the labor force, and 4.6 million were people who were likely misclassified as employed with an unpaid absence. Unlike in previous downturns, there was no increase in the number of Americans who were actively looking for work because they didn’t expect to be able to go back to their old job.
That has since changed. The good news is that total employment is up and involuntary part-time employment is down significantly.
As of October, the number of Americans saying they were on temporary layoff had dropped by 14.9 million, while the number of people who were likely misclassified as employed with an unpaid absence had dropped to roughly zero. About 4.4 million Americans had officially rejoined the labor force. The bad news is that the number of people who are actively looking for work because they can’t return to their old job has surged even as the labor force remains depressed. And while involuntary part-time employment was down, there were still 2.4 million extra workers in that position in October compared to before the pandemic.
In other words, there has been a two-track jobs recovery—and as of October, millions of people were getting left behind. So be sure to check out whether that changed in November, or whether it got worse.
Are state and local government budget cuts continuing to bite?
Finally, keep an eye on state and local government employment. Public sector employment—excluding temporary Census hires—dropped by 1.3 million people from February through October. Falling tax receipts and sharp increases in mandatory spending on unemployment and welfare has been squeezing budgets and leading to big cuts. About 1 million of the lost jobs were at public schools, community colleges, and state universities, while 300,000 were in other areas of local government such as police, fire, and civil services. If Congress doesn’t fill the budget holes at the state and local level, more cuts will be likely. That’s what happened from 2010-12.
As of October, public school employment was about as low as it was at the bottom in May. The apparent recovery over the summer was an artifact of seasonal adjustment because many workers who would normally have been laid off over the summer were fired earlier in the year. By contrast, local government employment excluding public schools had been on a gradual uptrend since the bottom in June. Watch to see if those trends change in November.
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