US PRESIDENT-ELECT Joe Biden inherits one of the most fraught economies in generations, requiring his administration to sustain its fragile momentum and help millions of Americans get back to work.
As coronavirus disease 2019 (COVID-19) cases begin to spike again, stricter health policies to contain the virus’s spread would risk stifling the recovery and make it even more difficult for companies to boost hiring. At the same time, the pandemic has introduced its own economic hurdles that could become systemic if left unaddressed.
Things are gradually improving: 638,000 jobs were added in October, sending the unemployment rate down to 6.9%. Record household spending propelled a huge rebound in third-quarter growth and manufacturing is gaining pace. A higher-than-normal saving rate also provides firepower for the consumer in coming months — and for the president-elect’s economy.
But the labor market still has a long way to go. There are 10 million fewer employed people than in February, prior to the virus-related lockdowns.
Building on these nascent gains is dependent on vaccine development and deployment in scale, especially as COVID-19 cases reach records and risk another wave of business shutdowns. Maintaining the recent economic momentum also depends in part on another round of fiscal stimulus from Congress, which lawmakers failed to agree on in the months before the election.
Absent additional government aid for unemployed Americans and small businesses, the pace of consumer spending will probably slow. A weekly $600 extra jobless benefit ended months ago and many more consumer protections are expiring at the end of the year, threatening the household finances of millions of unemployed.
“It’s going to take a long time to get back to where we were, but we’re moving in the right direction,” said Joshua Shapiro, the chief US economist at Maria Fiorini Ramirez, Inc. “The path of the virus is going to be extremely important, in terms of what that means for people’s behavior and economic activity. So there’s still a lot of question marks.”
The most recent data on the number of people filing for jobless claims bears testament to this; more Americans than expected filed for state unemployment benefits in the week ended Oct. 31, underscoring churn in a labor market that continues to recover only gradually.
The October jobs report also highlights the tailwinds for Biden.
More people are back to work now than analysts expected just six months ago. Gains were broad-based — with increases in retail, food services, and transportation and warehousing as businesses continued to reopen their doors.
There were also encouraging signs for women, whose unemployment rate fell below men’s, and drops in joblessness for Black Americans and Latinos.
“The pace of the recovery seems to be holding up,” said Nick Bunker, an economist at Indeed, Inc. At the same time, “we’re still in a significant hole” and “the pace of this recovery really is constrained by the virus,” he said.
The employment data also highlighted the importance of additional benefits. One-third of unemployed Americans have been out of work since at least April, during the initial round of layoffs tied to COVID-19-related business closures.
Research has shown that this category of long-term unemployed, those without a job for at least 27 weeks, have a harder time re-entering the labor market in the future.
The jobs they once had in travel and hospitality may not be there any longer even when the economy recovers, requiring retraining and government help.
“The longer you’re out of work the more difficult it is to get back in,” said Jennifer Lee, senior economist at BMO Capital Markets. “During the Great Recession people started to feel their skills were getting outdated. That’s where the government spending has to come in.” — Bloomberg