Market Watch: Low Unemployment Rate, High Skepticism: Jobs Report analysis
The U.S. Department of Labor released its monthly job report on Sept. 4, which surpassed predictions and shocked investors, recovering nearly 1.4 million jobs. The unemployment rate had a sharp decrease of 1.8% points to 8.4% points, serving as one of the largest declines in American history. Analysts are skeptical of the rapid growth and how accurate the indicators represent economic prosperity.
“The recovery has been rapid, but this is still the easy part of it — with the harder part ahead...Recalling people from a layoff is easier than creating new jobs,” Jason Furman, a former chief economic adviser in the Obama White House, said via Twitter.
Job Report Summary provided by Yahoo Finance:
Change in non-farm payrolls: +1.371 million
Unemployment rate: 8.4%
Average hourly earnings, month over month: 0.4%
Average hourly earnings, year over year: 4.7%
Labor force participation rate: 61.7%
Despite the forward-looking appearance of the employment analysis, many factors worry economists. AP Analyst Paul Wiseman gathered critical takeaways. “The easy part is over,” Wiseman warned. The rapid improvement in unemployment numbers was primarily due to business reopenings that allowed employers to recall their workers. Millions of jobs accounted for that dropped the unemployment rate included temporary layoffs. These numbers automatically rebound when businesses can reopen rather than new job opportunities.
Wiseman highlighted the misconception that everyone was equally favored in the August job market. Hispanic unemployment counts dropped; however, race disparities were not solved in the past month. “Hispanics are disproportionately likely to work in the kinds of services jobs — at restaurants or construction sites, for example — that have been returning as businesses reopen. The unemployment rate for Hispanics tumbled to 10.5% from 12.9% in July,” Wiseman said.
In August, the federal government reported 344,000 jobs were added, but over 251,000 of those jobs resulted from temporary 2020 Census workers. The steep incline of hiring at the national level drove up job numbers at all government levels, breaking historical records.
After the jobs report was released, investor behavior signaled an optimistic market, viewing the 1.4% drop in unemployment as fuel to keep buying. Positive indicators pushed The Dow to record highs, retracing the 1,000+ point loss since the spring. However, the stock market is unpredictable and does not accurately represent how the economy is doing.
Economists warn that the core economic problem appears to be shrinking; instead, it worsens to alarming levels. The employment summary additionally included the dreadful permanent layoff numbers that are running in an upward trend.
Furman tweeted the figures for a visual representation:
April: 2.6m
May: 2.9m
June: 3.7m
July: 3.7m
Aug: 4.1m
The coronavirus has swept the economy and financial markets off a track that analysts can effectively predict. In the past three job reports, the country has seen fluctuating indicators that serve as both signs of improvement and threats of worsening conditions.
“An unemployment rate of 8.4% is much lower than most anyone would have thought it a few months ago. It is still a bad recession but not a historically unprecedented event or one we need to go back to the Great Depression for comparison,” Jason Furman tweeted.