The U.S. economy created the fewest jobs in five months in October and more Americans are working part time, the clearest evidence yet that the recovery from the pandemic recession was slowing as fiscal stimulus ends and new COVID-19 cases explode.
The Labour Department’s closely watched employment report on Friday also showed 3.6 million people were out of work for more then six months, underscoring the challenges the next president, whether it is incumbent Republican Donald Trump or Democrat Joe Biden, confronts to keep the economy growing as it heals from the deepest recession since the Great Depression.
Biden edged closer to winning the White House early on Friday as he took a narrow lead over Trump in the battleground state of Pennsylvania. Trump on Thursday alleged fraud without providing evidence, suggesting some votes cast in Tuesday’s election were ‘illegal’ and launching lawsuits in several states over the ballot counting process.
Non-farm payrolls increased by 638,000 jobs last month after rising by 672,000 in September. That was the smallest gain since the jobs recovery started in May and left employment 10.1 million below its peak in February. A 271,000 increase in leisure and hospitality jobs accounted for about two-fifths of the payrolls gain last month.
Interest rates remain near zero
Employment in professional and business services increased by 208,000, with about half of the job gains in temporary help services. Government payrolls fell 268,000, weighed down by the departure of temporary workers hired for the 2020 Census and further job losses at cash-strapped state and local governments.
Economists polled by Reuters had forecast payrolls advancing by 600,000 jobs in October.
A contested election reduces the chances of another coronavirus rescue package from the government this year. Even if more fiscal policy is agreed on, it will likely be smaller than had been anticipated before the election.
That will shift the spotlight to the Federal Reserve. The U.S. central bank kept interest rates near zero on Thursday. Fed Chair Jerome Powell acknowledged the pace of improvement in the economy and labour market had moderated, noting that the recovery would be stronger with more fiscal support.
U.S. stocks took a breather on Friday after surging more than seven per cent this week. The dollar fell against a basket of currencies. U.S. Treasury prices were lower.
Long term unemployment
More than $3 trillion US in government pandemic relief for businesses and workers fuelled a historic 33.1 per cent annualized rate of economic growth in the third quarter. That followed a record 31.4 per cent pace of contraction in the April-June quarter.
Lack of fiscal stimulus and spiraling new coronavirus infections across the country have put the economy on a sharply slower growth path heading into the fourth quarter. Restaurants and gyms have moved outdoors, but cooler weather and the resurgence in COVID-19 infections could leave many in trouble.
Even if states and local governments do not impose new restrictions on businesses, consumers are likely to stay away, fearing exposure to the respiratory illness. The United States set a one-day record for new coronavirus cases on Wednesday with at least 102,591 infections, according to a Reuters tally.
Though small and medium-sized businesses have suffered most from the pandemic, large corporations have not been spared. Exxon Mobil last month announced 1,900 layoffs in the United States. Boeing said it expected to eliminate about 30,000 jobs, 11,000 more than previously planned, by end-2021.
The unemployment rate fell to 6.9 per cent from 7.9 per cent in September. But it continued to be biased down by people misclassifying themselves as being “employed but absent from work.”
Without this recurring mistake, the government said the jobless rate would have been about 7.2 per cent in October.
While the unemployment rate has dropped from a peak of 14.7 per cent in April, that is not a true reflection of the labour market’s health. The number of people out of work for more than six months surged by 1.2 million to 3.6 million in October.
The number of people working part time for economic reasons increased by 383,000 to 6.7 million, reflecting reduced hours because of slack work or business conditions.
At least 21.5 million people were receiving unemployment benefits in mid-October. Many people, mostly women, have dropped out of the labour force to look after children or because they fear contracting the virus.
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Through late summer and early fall, Tim Ball spent as much time as possible underwater in his dive gear, scouring the seabed off the Burin Peninsula for scallops.
It’s an ocean-to-table operation that sees his hand-harvested scallops quickly making their way to dinner plates in the downtown of St. John’s.
“I try to keep it all local,” said Ball about his business philosophy.
With a provincial economy that’s in dire straits and in need of reversing its course, Ball thinks every little bit can help— especially if the focus is keeping as many of those little bits as possible in the province.
For Ball, that means, among other things, using locally made bags and boxes for packing his scallops and using a Burin Peninsula cab company for sending his catch into St. John’s.
“Because this is a primary industry … we are in, and we are getting the actual resources from the bottom, this is creating new money for the economy,” Ball said. “If the money is staying in Newfoundland, then great.”
Terre Restaurant in St. John’s is one of the destinations for Ball’s scallops. Before the season ended last month they could be found listed on the menu as “Seared Diver Scallops.”
“They’re amazing,” said head chef Matthew Swift.
“Anywhere else in the world … the idea of marketing day boat scallops is sort of a pipe dream. If I were to tell friends in other places that Tim gets out of the water, and I get the scallops in as long as it takes to drive in from Burin? It’s insane,” he said.
On top of the quality, it’s Ball’s business recipe that also interests Swift.
“Just in terms of having a diverse and smaller economy, where we can support people on a more individual level,” he said.
This way of thinking is something that also strikes a chord with John Schouten — Memorial University’s Canada Research Chair in Social Enterprise.
Schouten says Ball’s operation means more than just local spending on his supply chain. There’s also a spillover effect which would also see Ball spend money at local businesses in and around Garnish, where he fishes from.
“So every hundred dollars that passes from me, to you, to somebody else here locally, that $100 is working the whole time in our favour here in the province,” said Schouten in an interview last month.
Patch the bucket
It may be a small example, but there’s a bigger lesson in it for the provincial government, said Schouten. He thinks the government should treat the economy like a leaky bucket, where money comes in and goes out.
“If the government could, using that metaphor, start patching the bucket to keep the money in the province longer, working harder for local businesses, local people, people who are making a living wage — that would do wonders for the stability of the economy here,” he said.
Speaking of helping the economy, Ball thinks what he’s doing is scalable. In addition to scallops, Ball also hand harvests sea urchin, but he thinks there’s more that can be harvested as well — including kelp, sea cucumbers and periwinkles.
For that to happen, there would have to be consistent licensing periods from the federal government and more divers with commercial dive training.
Eventually Ball would like to see a special school that trains up to a dozen divers a year for this type of work.
If a community had a handful of divers, Ball said, the economic spin-off is easy to see — you need people shucking scallops and spotting the divers, gear needs repairing, supplies need to be bought.
“I think it’s just a win-win situation for small communities,” he said. “It could be a good economic boon.”
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