(Bloomberg) — The last U.S. jobs report before November’s presidential election is projected to show a sharp deceleration in labor-market gains, suggesting the winner will inherit an increasingly shaky economic rebound.
Employers probably added 875,000 workers in September following 1.37 million in August, according to the median projection of analysts ahead of Friday’s Labor Department data. The jobless rate likely fell only slightly, to 8.2%.
Such figures would represent the smallest improvement of the nascent recovery. The pace of future gains could slow further or even reverse: New federal stimulus — which kept businesses and jobless Americans afloat in earlier months of the crisis — is in doubt before the election, major corporations announced job cuts in rapid-fire fashion this week and Covid-19 cases picked up in late September.
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“There’s a huge amount of strain in the labor market. There’s a long way to go,” said James Knightley, chief international economist at ING. “We’re starting to see a leveling-off in key sectors of the economy.”
Friday’s figures will also give an update on the strains below the surface. The number of workers who have permanently lost their jobs has been rising, compared with those on temporary layoff or furlough. In addition, prior months have shown increases in Americans who have seen extended spells of unemployment.
Economic data earlier Thursday showed joblessness remains widespread. Last week, 837,000 Americans sought state unemployment benefits, still about four times the pre-pandemic level, while 11.8 million claimed continuing benefits the prior week, the Labor Department said.
What Bloomberg’s Economists Say
“Initial rounds of fiscal aid had provided enough of a cushion for the economy to continue its recovery in the beginning of the fall amid relative stability in new Covid-19 infections, suggesting a relatively benign outcome in the September employment report. But the situation appears to be taking a turn for the worse going into the fourth quarter.”
— Yelena Shulyatyeva, Andrew Husby and Eliza Winger
Read more for the full preview from Bloomberg Economics.
A separate report from the Commerce Department showed Americans’ incomes fell in August by the most in three months after the government’s supplemental unemployment benefits expired, threatening to temper consumer spending.
The Federal Reserve lowered interest rates to all-time lows to help spur borrowing. At the same time, Chairman Jerome Powell and colleagues have highlighted that additional fiscal stimulus will likely be needed. The Fed’s actions, along with hopes for a Covid-19 vaccine and a new fiscal stimulus package, have helped keep U.S. stocks near a record high.
Without a pickup in the pace of job gains, Donald Trump — who trails challenger Joe Biden in national polls — could become the first president since World War II to count fewer jobs at the end of a four-year term than at the start.
Some parts of the economy are doing well, with home sales at the highest in a decade and retail sales above pre-crisis levels.
Figures from the National Federation of Independent Business on Thursday showed the largest share of small businesses since the end of 2018 plan to add workers in coming months.
But more broadly, hiring is slowing. In addition, layoffs are increasingly spreading to executives and salaried employees, after the initial wave of losses hit hourly and lower-wage workers harder.
Businesses in leisure, hospitality and travel are finding it increasingly difficult to maintain profitability without a vaccine or federal aid. U.S. airlines are starting to lay off more than 30,000 workers unless they get additional relief, while Walt Disney (NYSE:) Co. is letting go of some 28,000 people in its theme-park business.
Yet the pain is also hitting other sectors, including insurance, energy and finance.
While the latest news won’t be reflected in Friday’s numbers — which cover the period through mid-September — it’s a harbinger for the rest of the year. Also, colder weather may force more businesses, particularly restaurants, to shut or cut staff.
“There is a second wave of layoffs that are now happening,” said Stan Shipley, an economist with Evercore ISI.
With job losses increasingly becoming permanent, Americans who have lost work are unemployed for longer. About 3.4 million had lost their jobs permanently as of August and the number of long-term unemployed Americans — defined as out of work for at least 27 weeks — is likely to climb further above August’s 1.6 million, already the highest level since 2017.
Research shows that those jobless for this long tend to experience lower wages, spending, and other poor socioeconomic outcomes.
“The longer people stay on the sidelines, the more likely the scars to the labor market are going to be permanent,” said Gregory Daco, chief U.S. economist with Oxford Economics.
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