The economy added 1.4 million jobs in August, and the unemployment rate fell 1.8 percentage points to 8.4%, the Labor Department reported on Friday as hiring slows from prior months.
The report beat economists’ expectations, which had predicted about 1.3 million new jobs and an unemployment rate of 9.8%, although the job gains were boosted by temporary hiring for the census.
Great Jobs Numbers! 1.37 Million Jobs Added In August. Unemployment Rate Falls To 8.4% (Wow, much better than expected!). Broke the 10% level faster and deeper than thought possible.
— Donald J. Trump (@realDonaldTrump) September 4, 2020
Friday’s report included reasons for optimism and also warning signs that the economy remains at risk of a prolonged recession.
Most encouragingly, the unemployment rate fell even as the labor force expanded by nearly 1 million, suggesting that many workers are returning to their old jobs. Unemployment is already below the rate that Federal Reserve officials expected it to be at the end of the year.
Hiring, however, has also slowed each of the past few months, raising the worrying prospect that the recovery will lose steam before the workers who lost their jobs in the pandemic are able to return to work. Employers have rehired only about half the 22 million workers laid off because of the pandemic.
Mark Hamrick, a senior economic analyst at Bankrate.com, said there is still a long way to go in getting those jobs back.
“No matter how you slice it, that’s a tall order,” he said.
A major risk facing the country is that the spring’s temporary layoffs become permanent job losses due to the pandemic dragging down consumer demand. In August, the number of people who had permanently lost their jobs increased by more than 500,000 to 3.4 million.
MGM Resorts, for instance, announced last week that 18,000 furloughed employees would be permanently cut from the payroll. American Airlines has threatened to furlough more than 17,000 workers unless it receives more federal assistance.
Meanwhile, the number of jobless workers who found employment decreased by more than 260,000 last month. However, the number of people entering the labor market increased in August, but the number is still below what the participation rate was before the pandemic.
Economists don’t expect a rapid rebound. Economic output won’t even regain prepandemic levels until mid-2022 or later, according to a plurality, 49%, of economists surveyed by the National Association of Business Economists. Rehiring workers laid off in the pandemic will take years, according to the NABE survey. A majority of the economists said that combating COVID-19 is the most important policy issue for the next presidential administration.
The retail sector saw a surge in hiring, adding 249,000 jobs in August, with almost half the growth occurring in general merchandise stores.
Employment in the leisure and hospitality sector increased by 174,000 in August, with about three-fourths of the gains occurring in bars and restaurants. Despite job gains totaling 3.6 million over the last four months, employment at bars and restaurants is down by 2.5 million from February.
The professional and business services sector saw an increase of nearly 200,000 jobs, but more than half of new jobs occurred in the temporary help services. Employment in this sector is 1.5 million below its February level.
Robert Frick, corporate economist at Navy Federal Credit Union, called the labor report “a big win for American workers” but also cautioned that regaining the jobs that are still lost will be a hard slog.
“Unfortunately, the easier jobs gains are over, and now, we’ll be battling permanent layoffs once thought to be temporary, bankruptcies, secondary layoffs, and maybe major layoffs in the airline industry. Expect that starting this month, we’ll struggle to drop the unemployment rate as much, and possibly see break-even jobs months and even backsliding,” he said.
