US economy adds 638,000 jobs in October as recovery slows

As the world awaits a winner to emerge from the United States presidential election, a snapshot of the country’s labour market on Friday showed just what a daunting economic recovery task awaits either President Donald Trump or his Democratic rival Joe Biden.

As the world awaits a winner to emerge from the United States presidential election, a snapshot of the country’s labour market on Friday showed just what a daunting economic recovery task awaits either President Donald Trump or his Democratic rival Joe Biden.

The US economy added 638,000 jobs in October, the US Bureau of Labor Statistics reported on Friday – 34,000 fewer than September’s revised number – while the unemployment rate ticked down to 6.9 percent.

Notable gains were made in leisure and hospitality, professional businesses services retail trade and construction.

While the headline numbers are solid, the US economy still has a way to go to recover its pre-pandemic strength and the headwinds it faces are growing stronger.

The country is now in its ninth month of recession. And though the economy bounced back strongly in the third quarter, having entered recession in the first and suffered a record plunge in the second – it is still a long way from its pre-pandemic strength.

A little over 12 million of the 22 million jobs lost in March and April as lockdowns swept the nation have been recovered.

Low wage service workers, minorities, women and youths have born the brunt of the COVID-19 economic carnage and reestablishing their foothold in the labour force is becoming more challenging as an increasing share of temporary layoffs become permanent job losses.

The fraction of unemployed Americans whose previous jobs have been eliminated for good increased from 10 percent in April to about 40 percent in September, researchers Stephanie Aaronson and Wendy Edelberg at left-leaning think tank Brookings found.

This is very troubling because the longer people are out of work, the more likely it is that their skills will erode and the tougher it becomes to re-enter the workforce.

Moreover, the landscape is becoming more difficult for jobless Americans pounding the pavements in search of work.

While some sectors of the economy – like the housing market – have been on fire thanks to the Federal Reserve keeping interest rates at rock bottom, other sectors, such as restaurants, hotels, airline travel and other customer-facing services are struggling and staring down the barrel of a tough winter.

Moreover, the economy’s march back to full economic health is downshifting after federal lifelines to the unemployed and small businesses expired in late July. More federal protections are set to lapse at the end of December including the CDC’s moratorium on evictions.

On Thursday, Fed Chairman Jerome Powell said the outlook for the economy remains “extraordinarily uncertain” and cited key risks including surging COVID-19 infections in the US and abroad and households blowing through their savings as Washington remains gridlocked over another round of virus relief aid.

Powell signalled – as he has repeatedly – that the Fed cannot shoulder the recovery burden alone, saying that “fiscal policy” – Fed speak for Congressional virus aid packages – is “one of the main reasons why the recovery has been as good as it’s been so far.”

Senate Majority Leader, Republican Mitch McConnell said he would like to see another round of stimulus passed before the year is out. But as the odds narrow for Democrats to gain control of the Senate, expectations are growing that Congress will likely pass a slimed-down stimulus package.