Stand Up and Applaud the U.S. Economy (A post about something other than the election)

by Anirban Basu

Let’s set the presidential election aside and give the people what they really want: an in-the-weeds breakdown of today’s payroll employment report. The U.S. added 638k jobs in October. The unemployment rate dipped to 6.9%, down from 7.9% in September and less than half the unemployment rate registered in April.

Once again, America trounced consensus expectations, which were 530k jobs added and 7.7% unemployment. There remain all sorts of reasons to be skeptical about the ongoing economic recovery, including surging coronavirus infections, political uncertainty and wrangling, tighter credit conditions, and a lack of major stimulus since April. Through it all, America’s economy has continued to heal.

Virtually every economic segment added jobs in October with one major exception: government, which lost 268k jobs for the month on net. While this was partially driven by the loss of 147k temporary 2020 census workers, state and local government education subsectors lost 61.4k and 97.8k jobs in October, respectively. This is likely due to a number of factors, including diminished public budgets and the need for less staff as many school districts move instruction online, albeit temporarily.

Nonetheless, today’s jobs report should be viewed as a win for the U.S. economy.

You can read my insights on the construction industry’s employment situation at Associated Builders and Contractors

Three Key Takeaways

Over the first 6 months of recovery, U.S. payrolls have recovered about 54% of the jobs lost during the pandemic. The last 46% will take significantly longer than 6 months to regain.
The labor force participation rate rose to 61.7% in October, but has seesawed over the course of the pandemic, generally drifting lower. This will be a critical indicator to watch in coming months.
The unemployment rate for women fell from 8% in September to 6.7% in October and is now lower than the unemployment rate for men (7%, down from 7.7% in October). Unfortunately, this does not change the narrative that women have faced more economic hardship during the pandemic—the change in unemployment rates is due to men rejoining the labor force at a faster clip in recent months and women dropping out in greater abundance.

What to Watch
While the demand side of the economy retains strength, including in the form of high household savings rates, the supply side is threatened by another round of state-mandated economic lockdowns. That means that another near-term recession is possible. In fact, one seems likely this winter.