Continued Progress for the Labor Market – September 8, 2020

The government reported another monthly increase in employment, and a much better-than-expected drop in the unemployment rate in August.

The graphic below illustrates the steep drop in employment and the rebound in the number of jobs generated since the April low. It also highlights that more progress is needed, but we’re moving in the right direction.

In August, nonfarm payrolls rose by nearly 1.4 million per the U.S. Bureau of Labor Statistics. Private sector payrolls rose by just over 1 million. Most of the difference can be traced to temporary workers hired for the 2020 census.

Meanwhile, the unemployment rate fell from 10.2% in July to 8.4% in August, easily beating a projected decline to 9.8% (Econoday survey of economists).

The jobless rate has fallen faster than nearly anyone could have anticipated amid the reopening of businesses, government support, and the massive response by the Federal Reserve.

In June, the Federal Reserve had projected an unemployment rate of 9.3% by December, with a range of estimates from Fed officials of 7-14% (Federal Reserve Quarterly Economic Projections).

Over 10.6 million jobs have been generated since April, but the economy must add another 11.3 million jobs to get back to February’s peak. Furthermore, an unemployment rate of 8.4% is still well above the 3.5% low registered in February.

But it’s a far cry from April’s peak of 14.7% and talk at that time of an even higher rate.

For instance, in remarks made in an interview on Fox News Sunday in May, U.S. Treasury Secretary Mnuchin said the unemployment rate could approach 25%.

Today, we’re no longer hearing about Depression-level jobless numbers.

More progress is needed to keep temporary job furloughs from turning into permanent job losses. Plus, those on the lower rungs of the economic ladder, who had benefitted significantly during the economic expansion, have been hit especially hard.

The table below illustrates the one-year ago jobless rate, the peak rate, and the subsequent declines by level of education.

We haven’t made a full recovery, and no one expected one would occur this quickly, but we are moving forward.

 

Created 2020-09-08 14:39:32