Will Good News In The August Labour Report Lead To More Bad News?
(5 min read)
Last Friday’s August labour market report had elements of both glass-half-full and glass-half-empty news. On balance, the half-empty glass still looks bigger than the half-full one. But it is also quite possible that the half-full narrative continues to drive the near-term outlook for the economy and labour market. That raises the risk that Congress will not be able to agree on a robust stimulus package before the election and the recovery stalls.
The Economy Was Still Reopening in August
On the positive side, businesses clearly continued to reopen and recall workers in August. The headline payroll report was up by 1.4mn, and the broader household survey rose by 3.8mn workers. In recent years, the establishment payroll employment has run about 96% of total employment, with the difference mostly due to farm, gig and freelance workers (Exhibit 1). When the coronavirus lockdowns hit, the payroll percentage moved up to 97%, implying that non-payroll workers took the bigger hit. But the payroll share dropped back to 96% in August, as non-payroll workers returned to work. Our best guess is that many were able to reengage as businesses reopened, while others were probably responding to the loss of the $600 per week supplemental unemployment benefit.
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