The Labor Day weekend here in the U.S. is, socially speaking, the end of summer, and the beginning of the fall. And Friday’s employment report provided an apt metaphor. The data showed sunny and warm results from August but also showed leaves falling in the background and cooler temperatures.

The headline number of 1,371,000 jobs created was very strong and right about at expectations. The unemployment rate smashed through expectations of around 9.8% and instead made an epic 1.8% descent (the second largest ever after June’s 2.2%) to 8.4%.

Job gains were widespread, the labor force participation rate rose 0.3% to 61.7%, the employment to population ratio leaped 1.4% to 56.5%, and the broader “underemployment” rate fell to 14.2% from 22.8% in April. The number of people on furlough fell by 7.1 million. Those on temporary layoffs declined sharply by 3.1 million. It was a lovely month indeed.

But then the leaves started to fall.

First, even though the number of people who said they were on temporary layoff fell sharply, that still left 6.2 million workers on the sidelines waiting to go back to work. Second, the unemployment rate is from the less reliable part of the report known as the household survey and looks a little questionable. On top of the usual uncertainty, the Bureau of Labor Statistics said that the unemployment rate is actually understated by about 0.7% due to classification errors. The next problem was that of the 1.371 million jobs created, 238,000 were temporary jobs for Census workers, and without them, the headline job growth number would only have been 1,133,000.

Most importantly, however, job gains across all sectors are definitively slowing. This is the single most important feature of the report because it shows what will probably be a continuing trend.

Most likely, what is happening is that the first round of job gains were the easy ones to get when non-essential businesses that had temporarily been shut down, were allowed to re-open. Those jobs in effect had simply been dormant for a few weeks, and when the “all-clear” was given, those jobs came to life and were filled up again. As I have said ad nauseam, these gains were the low-hanging fruit.  But how many more of those situations are there? It would seem that most states have relaxed most of their restrictions so that most of the jobs which were going to be opened back up quickly, already have. In the meantime the report indicated that the number of permanent job losses rose to 3.4 million - these are the former job-holders will no longer have a job to go back to. The chart below illustrates the situation: a lot of small businesses are back up to speed, but it will be a while before many more will.
Small businesses before the pandemic only had a 27-day cash buffer to survive, so it’s no wonder that there have been permanent job losses and your favorite little café has gone under.  Thank heaven for the Paycheck Protection Program which offered a lifeline for at least a little while.
source: J.P. Morgan Chase
And for those employees whose former employer has shut down, the remaining job market has of course gotten much, much tougher.  Who is going to hire in this environment?  As shown in the chart below, job openings as represented by the blue line, are still down 16% since before the shutdowns.

To make things even worse, the report said that 6.5 million people in July and 5.2 million people in August were actually “prevented from looking for work due to the pandemic.”

However that didn’t keep people from applying for jobless benefits, and in fact claims for the pandemic benefits rose as shown by the widening arrows in both charts. Weekly initial claims have flattened out but at still astronomical levels.  The total number of those still receiving benefits as shown in the chart on the right is increasing because of pandemic claims while regular claims are declining, but again both remain at previously unimaginable levels.

Summer has come and gone, and we’ve made good progress since a terrible spring, but like the leaves off the trees, the rate of job gains is falling.
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