September Jobs Report: Recovery Likely to Stall Without Federal Stimulus

By Dr. Bernard E. Anderson, Professor Emeritus, Wharton School, University of Pennsylvania and National Urban League Senior Economic Advisor

In September, private sector employment grew by 877,000, state and local employment declined 231,000 and the unemployment rate fell to 7.9%.  The leisure hospitality industry gained 318 thousand jobs, two-thirds of the total job growth. Most industries showed some job growth.

The job growth reflected widespread business reopening across the country as consumers emerged from lockdowns imposed to contain the spread of Covid-19. Retail trade employment grew 142,000 and health care and social services employment grew 108,000.

Consumer spending, which drives economic growth, showed the effect of the $4.1 trillion federal stimulus program that was enacted in March to maintain household income as the economy collapsed.  A major component of the stimulus program was the $600 federal supplement to state unemployment benefits. But the federal supplement expired at the end of July.  That reduced unemployment benefits from 150% of pre-pandemic average household income to 50% of that figure.

The recall of furloughed workers accounted for most of the employment growth.  Still, the slow growth of aggregate demand across the economy made employers cautious about the sustainability of the recovery, and generated a continued high level of layoffs. New claims for unemployment compensation registered 877,000 in the third week of September.

Black employment grew by only 9,000 during the month, but Black unemployment declined by 201,000.  The Black unemployment rate was 12.1%.   White employment grew 142,000 and unemployment declined by 401,000. The white unemployment rate was 7%.  As a result of those adjustments, the Black/white unemployment ratio remained unchanged at 1.72. 

The crimp in household income generated by the expiration of the federal supplemental unemployment compensation payments, increasing budgetary pressures on state unemployment programs, strong financial pressures on small business revenue, the treat of increased infections during the flu season, and uncertainties about when a vaccine will be found all argue strongly for and extended federal stimulus plan. Otherwise, the recovery is likely to stall.  The U. S. Senate, the House, and the White House should adopt a plan for comprehensive plan for at least $1.5 trillion to bolster the economy.