Pickup in U.S. Employment Complicates Talks on Fiscal Stimulus
(Bloomberg) -- The latest U.S. employment gains dispelled pessimism that the jobs rebound is deflating, but also risks delaying a new round of federal aid that’s been a lifeline for millions of Americans and small businesses during the pandemic.
August’s increase in Americans entering the labor market helped drive the unemployment rate down almost two percentage points to 8.4%, better than all economist estimates though still well above the pre-crisis level. Employers added 1.37 million people to payrolls, about one-sixth of whom were temporary workers for the decennial census.
Republicans, who put forth a smaller stimulus proposal than Democrats, took the report as a sign that the $600 supplemental weekly jobless payments that ended in late July had discouraged people from seeking jobs. While that may be true for some people, economists said the latest gains largely reflected continued reopenings. Further improvement is likely to be slower, with beleaguered states preparing job cuts, large firms announcing layoffs and online schooling taking a toll on parents.
The positive report “removes any kind of urgency for bills to get done over the next couple weeks,” said Justin Weidner, an economist at Deutsche Bank AG.
While the expiration of the supplemental payments may have helped with hiring, the bigger reason driving the improvement “was kind of a continuation of the stories we’ve been seeing as the economy reopened and the labor market has improved,” Weidner said.
The August payroll data support that: Of the major private-sector industries, retail added the most jobs, about 249,000 -- particularly in general merchandise and motor vehicles. Restaurants and bars, along with temporary help services, also accounted for a significant part of hiring.
President Donald Trump tweeted “Great Jobs Numbers!” after the report, while White House economic adviser Larry Kudlow underscored Republicans’ demand for a smaller stimulus.
“Why don’t we pass a more modest package instead of something that goes into multitrillion dollars that we do not need and would be counterproductive in the long term?” Kudlow said on Bloomberg Television Friday.
Meanwhile, Democrats repeated their call for a more than $2 trillion plan, highlighting the more than 10 million Americans who remain unemployed, as well as the rising numbers of permanent job losers and long-term jobless.
Biden said in a speech Friday that only wealthy people are feeling the recovery while others are still suffering. “The report reinforced the worst fears and painful truths,” Biden said.
Relying on this jobs report to delay stimulus is a mistake, according to ING chief international economist James Knightley.
“The hit to incomes from the cut in unemployment payments and the absence of a broader fiscal support package means there are major challenges for the economy as it tries to recoup all its lost output,” he said in a note. There could be a monthly payrolls contraction in coming months, “underlining the case for additional fiscal stimulus and the need for good news on a Covid vaccine.”
What Bloomberg’s Economists Say
“The expiration of the $600 top-up to unemployment benefits appears to have encouraged a number of Americans to seek employment. ... Yet the labor-market recovery is slowing well shy of the pre-pandemic peak, and well-targeted fiscal aid is still needed to sustain momentum in spending through year-end, and into 2021.”
-- Yelena Shulyatyeva, Andrew Husby and Eliza Winger
Read more for the full reaction note.
Several studies have thrown cold water on the idea that the $600 payments discouraged people from returning to work. Their expiration probably didn’t play a major role in August’s jobs gain, according to Heidi Shierholz, senior economist at the Economic Policy Institute and a Labor Department chief economist under President Barack Obama.
“A job is so precious,” she said. “The idea that you would turn down a job for temporary benefits, it just doesn’t make sense in the vast majority of people’s lives.”
With the $600 payments expired and congressional negotiations at a stalemate, Trump in early August announced an additional $300 a week in federal jobless benefits for most unemployment insurance recipients. While the majority of states have been approved for the funds, only some states have actually begun paying out the added benefits.
“It is good that we are seeing job growth, we are improving, this labor market is getting stronger,” Shierholz said. “The really bad news is it’s still in absolute crisis.”
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