What to watch on jobs day: October job growth expected to mildly improve as COVID-19 caseloads recede
Over the last couple of months, the resurgence of the Delta variant has made it abundantly clear that the ebbs and flows of the pandemic continue to exert powerful effects on the labor market. After increasing, on average, over 1 million jobs in June and July, job growth slowed to less than 300,000, on average, for August and September. While COVID-19 caseloads have slowed between September and October, they continue to be higher than experienced in June and July, suggesting that we will see a mild improvement—not a huge windfall—when the latest employment data are released on Friday.
For the reference week of the October jobs data, average daily COVID-19 caseloads stood at 78,987. This is a significant (43.5%) improvement over the average daily COVID-19 caseloads during the September reference week: 139,920. All else equal, this should translate into economic growth, as workers begin to feel it is safer to resume in-person job search and employment and consumers become more willing to purchase in-person services. The decline in October COVID-19 caseloads, however, does not mean we are back to the levels earlier in the summer. October’s levels were over twice as high as the average daily caseloads during the reference week in July (33,711 cases).
Similarly, OpenTable shows mild improvement in restaurant customers between September’s and October’s reference weeks. While seated diners in September were down 12.6% compared with the same week in 2019, the number of diners was down 8.4% in October. Although the 8.4% drop in seating relative to the pre-pandemic period is less than what we saw in September, it is still not as promising as the smaller 5.7% drop in July’s reference week compared to July 2019. This likely means the October labor market did not see the kind of growth we experienced in June or July, but some improvement from the disappointing September level is likely.
Along with the top-line job growth numbers, I will be paying close attention to whether job gains are experienced across various demographic groups, particularly those who continue to be left behind in the recovery. Nominal wage growth will also likely garner attention as inflation remains high. Since job losses in the pandemic were concentrated among lower-wage workers in service sector jobs, I would expect growth in average wages to slow as they are rehired. The fact that this hasn’t happened may be an indication that many of the most vulnerable haven’t found secure footing in the recovery yet.
The spread of the Delta variant this summer clearly slowed the pace of what had been a very rapid jobs recovery. This highlights yet again that public health measures that contain the virus are the most important economic policy measures that can be undertaken. The public health roadblock to the jobs recovery in recent months and the fading of fiscal relief passed earlier this year also show that passing the Build Back Better Act could boost job growth considerably over the next year or more.
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