MNI REALITY CHECK: US Jobs Recovery 'Losing Steam'

The jobs market likely flatlined in August as an unprecedented recovery loses steam in the absence of additional fiscal relief and an effective treatment for Covid-19, recruiters and industry leaders told MNI.

Financial markets predict the U.S. economy added 1.35 million jobs in August after gaining nearly 1.8 million in July. But those numbers are still far below June's record-setting 4.8 million and would amount to less than half of the 22 million jobs lost in March and April having been recouped.

"It's easy to still be impressed by 1.8 million and forget that that's a very small amount relative to what we need to actually accomplish," said Josh Wright, chief economist at Wrightside Advisors in New York.

"This could be one of the last of the strong jobs reports," he added, forecasting a gain of just over 1 million Friday. "There's a very real risk - a very real risk - that we could be losing jobs as soon as a month or two from now."

FEDERAL AID

Wright said a jobs recovery during Covid-19 largely hinges on more federal aid, but an agreement on the next relief package is largely out of reach as Democrats and Republicans in Congress continue to disagree on key issues.

Still, August's employment picture shouldn't change much from that of July, with little in the way of changing patterns, he said.

Job growth in small businesses was "not growing, but not decreasing" in August, said Frank Fiorille, vice president of risk, compliance, and data analytics at Paychex, a U.S. payroll provider.

Fiorille said construction jobs continued to surge in August while service-sector job growth was relatively weak. Distinct differences were evident among regions, with employment in the south and west growing more slowly than in the north.

"You clearly saw some weakness in some of the [Covid-19] hotspots, like Florida and Texas," he said, referencing Paychex data from roughly 300,000 small businesses across the U.S.

WHITE COLLAR LAYOFFS COMING

Absent more government cash and a vaccine that brings the Covid-19 pandemic to an end, a second, albeit smaller, round of layoffs seems likely, and higher-wage white collar jobs are less secure this time around, said Tom Gimbel, CEO of the LaSalle Network, a staffing firm in Chicago.

"There's going to be some mid-senior level white collar layoffs and that'll be the second wave of the economic hit," he said in an interview, noting more service jobs will also inevitably be lost when colder weather brings outdoor dining to an end.

Major airlines last month announced plans to lay off thousands of corporate workers in October when a grant from the CARES Act expires and software company Salesforce announced it would lay off 1,000 employees late last month.

EMPLOYERS PRACTICE CAUTION

Gimbel said temporary hiring picked up in August, likely reflecting more cautious employers who aren't ready to bring on full-time staff while the nation's economic outlook is still so uncertain.

Many companies are still offering full-time employment opportunities, though temporary jobs may be a more secure bet for businesses that have seen their revenues drop since March, said Yvonne Rockwell, an Express Employment Professionals franchise owner in Santa Clarita, California.

"They're still not sure what the future holds for their business," she said, adding that openings for both temporary and full-time positions were strongest for occupations related to e-commerce, which has seen an unprecedented boom during the Covid-19 crisis.

"Everybody is looking for [delivery] drivers right now," she said.

Rockwell said the expiration of an extra USD600 in weekly unemployment benefits authorized under the CARES Act that expired in July could have driven more people to the labor market in August.

"As the deadline was drawing near and there wasn't anything passed for that supplemental unemployment benefit, our phones started to ring," she said. Job seekers are "definitely paying attention" to moves in Congress.

"Because the benefit has been cut in half, that may entice some people to reenter the job market," she added, referencing President Donald Trump's executive order that granted states the ability to offer an additional USD300 in weekly benefits. "There's definitely a correlation."

But that announcement came after the reference period for Friday's report and won't show up in official jobs numbers.