In this news, we discuss the Smallest job gains in five months expected as U.S. labor market momentum wanes.
WASHINGTON (Reuters) – U.S. employers likely hired the fewest workers in five months in October, which would be the clearest indication to date that the end of the fiscal stimulus and the explosion of new COVID infections- 19 were undermining the dynamics of economic recovery.
The Department of Labor’s closely watched jobs report on Friday will highlight the challenges the next president, whether incumbent Republican Donald Trump or Democrat Joe Biden, will face in keeping the economy growing as it grows. that it is healing from the deepest recession since the Great Depression.
Biden moved closer to victory Thursday in an extremely close U.S. election, while Trump alleged fraud without providing evidence, suing and calling for recounts in a race yet to be decided since polls closed on Tuesday .
“The October jobs report is likely to show evidence of a weakening labor market,” said Dean Baker, senior economist at the Center for Economic and Policy Research in Washington. “This is an urgent problem facing anyone who is in the White House.”
Non-farm payrolls likely increased by 600,000 jobs in October after increasing by 661,000 in September, according to a Reuters survey of economists. It would be the smallest gain since the employment recovery began in May and leave employment 10.1 million below its February peak.
The jobs report is also expected to show increases in the ranks of people who have lost their jobs permanently, as well as those who have been out of work for more than six months.
A contested election reduces the chances of another government coronavirus bailout this year. Even if more fiscal policy is agreed, it is likely to be less important than what was planned before the election.
This will shift the spotlight on the Federal Reserve.
The US central bank kept interest rates near zero on Thursday. Fed Chairman Jerome Powell acknowledged that the pace of the improving economy and labor market had moderated, noting that the recovery would be stronger with more fiscal support.
More than $ 3 trillion in government pandemic assistance for businesses and workers fueled a historic annualized economic growth rate of 33.1% in the third quarter. This followed a record contraction rate of 31.4% in the April-June quarter.
The lack of fiscal stimulus and the surge in new coronavirus infections across the country have put the economy on a significantly slower growth path as the fourth quarter approaches. Restaurants and gyms have moved outside, but cooler weather and the resurgence of COVID-19 infections could leave many struggling.
Even if states and local governments don’t impose new restrictions on businesses, consumers are likely to stay away fearing exposure to the respiratory disease. The United States on Wednesday set a one-day record for new coronavirus cases with at least 102,591 infections, according to a Reuters tally.
THE RISK OF FALL
“The virus is still preventing many people from going to their local restaurants, bars and cafes, and this continues to weigh on the number of jobs for small businesses,” Torsten Slok, chief economist at Apollo Global Management told New York.
“Given that half of the employment in the United States is in companies with fewer than 500 workers and given the lower likelihood of additional budget support, this is a downside risk for non-farm payrolls over the next few months, including tomorrow.
Large companies are not immune either. Exxon Mobil XOM.N announced 1,900 layoffs in the United States last month. Boeing BA.N said it plans to cut around 30,000 jobs, 11,000 more than planned, by the end of 2021.
A payroll number lower than forecast for October cannot be ruled out. Reports on Wednesday showed that hiring by private employers had far exceeded expectations last month and employment in the service sector had slowed.
Data from Homebase, a payroll planning and tracking company, showed that the number of employees working last month was little changed from September.
Overall job growth in October was likely held back by the departure of more temporary workers hired for the 2020 census and tight budgets in state and local governments.
Retailers normally start hiring for the holiday season in October, a practice that has been shaken by the pandemic. According to economists at JPMorgan, this could disrupt the model the government uses to eliminate seasonal fluctuations in the data and weigh on non-farm payrolls.
The unemployment rate is expected to drop to 7.7% from 7.9% in September. This does not accurately reflect the health of the labor market, as the unemployment rate has been biased downward by people mistakenly classifying themselves as “employed but not working”.
At least 21.5 million people were receiving unemployment benefits by mid-October. Many people, mostly women, have left the workforce to care for children or because they fear contracting the virus.
“Persistent fear of the coronavirus, slowing economic recovery
and reports of childcare issues discourage
workers more reluctant to join the official ranks of these
look for work while pushing others to leave the labor market
for now, ”said Kathy Bostjancic, chief US financial economist at Oxford Economics in New York.
With the dynamics of the labor market declining, average hourly compensation is expected to increase 0.2% in October after advancing 0.1% in September. The average work week remains at 34.7 hours.
Reporting by Lucia Mutikani; Edited by Dan Grebler
Original © Thomson Reuters
Originally posted 2020-11-05 21:16:12.