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Losing Momentum
Well over half a year into the coronavirus crisis, the economy is still a shadow of its 2019-self.

Friday's monthly job report, the last before the upcoming presidential election, painted a picture of a slowing recovery:

  • The economy added 661,000 jobs last month. Sounds great in a vacuum. But that’s nearly 1 million fewer than the 1.6 million jobs added in July and August on average and well below the 800k expected by economists.
  • The unemployment rate fell from 8.4% to 7.9% in September. Another good headline. But peel back one layer and much of the improvement came from a drop in the labor force participation rate (more people have given up on trying to find a job).
  • All Told: The economy has recovered 11.4 million of the 22.2 million job losses suffered between February and April. While many Americans have gotten back to work, 3.8 million job losses have become "permanent," according to the September survey.

Michael Pearce of Capital Economics says, “It is clear that the economic rebound is entering a new, weaker phase.”

Consumer Concerns
The economic devastation of the spring was just that: devastating.

But an unprecedented avalanche of emergency stimulus meant U.S. personal income actually rose during the early stages of the pandemic. Now, with enhanced unemployment benefits rolling-off, economic reality is setting in:

  • U.S. personal income declined 2.7% in August. The Bureau of Economic Analysis places the value of lost income at over half a trillion dollars.
  • The savings rate in turn dropped 3.6% vs. July and many economists warn the end of economic relief could bog down consumption in the long-term.

The Takeaway: For now, a stalemate in Washington has sullied hopes for further fiscal stimulus. Speaker Nancy Pelosi said Thursday she is “optimistic” a last-ditch compromise could be reached, but Democrats and Republicans are still “way off” on unemployment benefits and aid to state and local governments.


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