November Jobs Report: Surging Virus, Slowing Economy

In November, the economy generated 245,000 jobs; the unemployment rate edged down to 6.7 percent. The economy is slowly pulling out of the deep hole it fell into when the coronavirus struck in the first quarter.

Gross domestic product (GDP) increased strongly in the third quarter as more businesses reopened, lockdowns eased, and some schools reopened. But when the Fall season arrived, and the flu threat returned, the virus surged throughout the country. Social distancing restrictions were reintroduced, limiting in-store service in bars, restaurants, and other businesses, reducing revenue.

Labor market conditions improved, but employment remains well below the level observed at the beginning of the year. Nearly three million workers are on temporary layoff, and nearly four million have permanently lost jobs. Total employment is down 10 million below the February peak.  The November jobs report showed a 12 percent “real” unemployment rate, including discouraged workers and others who have given up the search for jobs.

The economy shows a “K” shaped recovery, not the “V” shaped recovery projected by the outgoing Trump administration.  Workers in higher-paid occupations are driving consumer demand while lower-paid workers have lost many jobs and continue to bear the brunt of the economic collapse. 

African Americans are concentrated in the latter group. Their unemployment rate is 10.3 percent, partly reflecting the decline in their labor force participation rate.

Additional federal stimulus is required to strengthen the recovery and put the economy on the path of sustained growth. Extended unemployment benefits are scheduled to expire at the end of December, and the Treasury Secretary reclaimed $400 billion in 13 Treasury/Federal Reserve credit facilities that were available to help stabilize business liquidity.

A $900 billion stimulus agreement between House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, and the White House is under consideration. But that’s not enough to adequately address the problem. The package should include the $600 billion in unspent funds from the CARES ACT, which includes $250 billion in unspent funds in the Paycheck Protection Program.

The renewed stimulus should be targeted toward industry sectors and population groups that have been hurt most by the coronavirus, including small businesses, the leisure/hospitality industry, the health care industry, and low-income families. State and local governments also need help to safely reopen schools.

Community Development Financial Institutions should play a major role in distributing the funds, and guidelines should be developed to ensure that they reach minority-owned businesses.   Reducing racial economic disparities will strengthen the recovery and boost economic growth.

Without additional stimulus, the economy is likely to slip into stagnation in 2021.

Bernard E. Anderson, Ph.D.
Chief Economics Advisor, National Urban League, and Whitney M. Young, Jr. Professor Emeritus, The Wharton School, Univ. of Pennsylvania