The surge in coronavirus cases across the country is not expected to generate huge job losses like it did last spring.
Economists fear, though, that it will limit hiring, preventing a rapid recovery and increasing the risk of a drawn-out recession.
“I don’t expect to see outright decline in employment over the next few months; I do expect to see much smaller gains in employment,” said Stephanie Aaronson, director of the economic studies program at the Brookings Institution.
Already, there are clear signs the jobs recovery has slowed.
The labor market has recovered roughly half of the 22 million jobs lost last spring. But the lion’s share of those gains occurred between May and August, when more than 10 million jobs were created, according to the Labor Department. Since then, the pace has slowed. September and October saw increases of 661,000 and 638,000, respectively.
Meanwhile, the number of new virus cases has been trending up since early September, according to the COVID Tracking Project. The increase has forced local governments to put restrictions on businesses, which hurts hiring.
“We’re not going to have 4.8 million jobs created in a month anymore, like we did in May,” said Curtis Dubay, a senior economist with the U.S. Chamber of Commerce, adding that the running average for monthly job growth will likely be around 650,000.
“I think we’ll be at that [level] for the foreseeable future,” he said.
It would take over 16 months for the economy to recover the roughly 11 million jobs that are still missing, based upon Dubay’s projection. It would take even longer for employment growth to return to trend.
The timeline would get much longer if job growth slowed from that pace, which would be a disaster for the country.
Doug Holtz-Eakin, president of the center-right economic think tank American Action Forum and a former director of the nonpartisan Congressional Budget Office, cautioned that failing to enact another relief package would hurt job growth.
“We know that we’re having a resurgence of the virus,” he said. “That is going to interfere with productivity, and we’re going to see less growth in employment … A stimulus could help push [the economy] the other way.”
Providing another round of loans to small businesses tops economists’ lists.
The first relief package that was enacted in March included the Payroll Protection Program, which enabled owners to keep their employees on the payroll even if their business was shut down.
Loans were made available to businesses last spring as the economy was in the throes of the pandemic and tens of millions of jobs were lost. Despite the program’s rocky start, it helped stabilize the economy by saving 51 million jobs, according to the Small Business Administration. However, that program stopped accepting loan applications on Aug. 8.
Senate Majority Leader Mitch McConnell, a Republican from Kentucky who won reelection Tuesday, suggested Wednesday his intention is to advance a $500 billion coronavirus relief bill rather than compromise with Democrats on a bigger bill.
House Speaker Nancy Pelosi, a California Democrat, supports the enactment of a $3.4 trillion relief plan that includes renewing the PPP.
McConnell has yet to provide details on what he would put forward, but the plan he introduced last month resuscitated the PPP. It is expected his new proposal would do the same, according to economists.
