Here we are again: the United States could start losing jobs very soon

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“The economy will get worse before it gets better,” Jason Furman, Obama’s former economic adviser, told CNN Business. “The number of people with jobs could easily drop in December and January.”

While economists don’t expect massive layoffs like the spring’s, any disruption to the labor market recovery would be of concern as the United States has still been down nearly 10 million jobs since February.

“The vaccine will help the economy a lot in 2021, but we still have a very long and very difficult way to go – with more challenges before the improvements start,” said Furman, who is now a professor at Harvard University.

Travel, retail affected by virus

Details from the jobs report showed how the worsening pandemic derails the recovery.

The unemployment rate fell to 6.7%, but it was for the wrong reason: more workers left the workforce in November.

After a hiring boom this summer, the retail sector lost 35,000 jobs last month. The leisure and hospitality industry, the hardest hit sector of the economy, created just 31,000 jobs. This marks a staggering slowdown from the 270,000 leisure and hospitality jobs added in October.

“There is a very good risk that the payroll will drop completely in December as the spread of the virus intensifies and restrictions become more widespread,” said Michael Pearce, senior US economist at Capital Economics.

Beyond the job report, other warning signals flash about resuming.

Unemployment claims remain incredibly high. GDP is slowing down and could turn negative soon. And real-time indicators show recoveries in restaurant reservations, air travel and hotel reservations have derailed as Covid-19 cases, hospitalizations and deaths increase.
If no stimulus deal is reached by the end of the year, millions of Americans will lose their benefits and families will fall into poverty. Inaction by Congress risks plunging the economy back into recession.

“The recovery is not quite stalled, but it’s going to be weak heading into the first quarter,” Ethan Harris, head of the global economy at Bank of America, told CNN Business.

‘Stop making mistakes’

Harris agrees there’s a “pretty good chance” that hiring will turn negative soon – and said it might be the shake Congress needs.

“It would be a call for Washington to move on to a tax package,” Harris said. “There is no outside force stepping in to tell Congress to stop frolic and get down to business.”

Normally, politicians would come under fire in the financial markets. But that’s not the case right now, as investors celebrate the coronavirus vaccine breakthroughs that brighten the 2021 outlook.

The Dow has just achieved its best monthly performance since 1987. The S&P 500 is at record levels. The CNN Business Fear & Greed Index of Market Sentiment shows “extreme greed”.
Stimulus talks: everyone wants a deal, but it's unclear if a bipartisan plan will deliver, even with the backing of the Democratic leader
And this despite the fact that the daily toll of the pandemic has just reached a record 2,804 – and some experts fear that it will soon approach 4,000. A record number of 100,226 patients with Covid-19 are hospitalized in United States.

“Markets are oblivious to these numbers,” said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence.

Booth said investors and Wall Street economists were squarely focused on June 2021, when vaccines could lead to a solid reopening of the economy. However, she added: “I don’t think they take into account what may happen by then.”

The stakes couldn’t be higher for millions of Americans

The good news is that stimulus talks have gained significant momentum in recent days. A bipartisan group of moderate lawmakers unveiled a $ 908 billion framework that would provide state and local aid, unemployment insurance, small business loans and funds for vaccine deployment.

Not only have Democratic leaders embraced the bipartisan plan, but a flood of Republican lawmakers posted positive comments on a deal Thursday. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi spoke, raising hopes of a breakthrough.

“I have never had so much hope that we would get a bill,” said Republican Senator Lindsey Graham.

Trump said the stock market would crash if Biden won. The Dow Jones has just had its best month since 1987.

Without Washington’s action, critical unemployment programs and other safety nets will soon expire.

About 12 million workers are at risk of losing their benefits, according to the Century Foundation, a progressive think tank. Indeed, two main programs under the CARES Act – one that covers the self-employed and on-demand workers, and the other that helps those who have been unemployed for longer – are due to end on December 26.
In March, the government suspended payments and canceled interest on federal student loans. But if neither Congress nor the Trump administration act, millions of student loan payments will fall due early next year.
Likewise, the temporary stop of evictions of tenants meeting certain criteria by the Centers for Disease Control will expire at the end of the year.

“An extraordinary number of single mothers will be kicked out if there is no extension. I don’t think that’s something either side wants,” Booth said.

Double dip recession fears

The business community is starting to worry more about the recovery and the stalemate in Washington, according to the all-new Beige Book, a collection of Federal Reserve corporate anecdotes.

“Numerous contacts have raised concerns about the recent wave of the pandemic, mandatory restrictions (recent and future) and impending expiration dates for unemployment benefits and moratoriums on evictions and foreclosures,” Beige said. Book.

Jefferies economists called it “one of the most disturbing beige books we’ve seen in a long time” and evidence that “the risks of double dip are starting to rise.”

“A long, dark winter is ahead for many businesses before the sun rises with a vaccine in the second quarter,” Jefferies wrote in a note to customers Wednesday.

Large companies such as ExxonMobil, Wells Fargo, Charles Schwab and Disney have announced plans to cut thousands of jobs. same 3M (MMM), a company enjoying strong demand for its much sought-after N95 mask, is cutting nearly 3,000 jobs.

The CNN Business Recovery dashboard of real-time indicators shows how parts of the economy are moving:

  • Restaurant reservations on OpenTable are down 68% from last year, down from 14% at the start of September
  • The number of travelers at the airport is two-thirds lower than a year ago
  • Hotel occupancy rates fell by a third, compared to a 19% drop in early September
  • Small business working hours have fallen 20% from pre-crisis levels

Of course, parts of the US economy are doing quite well.

The real estate market is still booming, driven by record mortgage rates and a rush to buy suburban housing. E-commerce is growing rapidly and countless buyers are turning to Amazon (AMZN), Etsy (ETSY) and the websites of Walmart (WMT) and Target (TGT).
Don't slam tax brakes too soon, OECD warns

Yet the pandemic is accelerating the demise of physical stores – and these are the ones employing the most workers. It means the hiring boom for seasonal retail workers may not materialize. Indeed, Friday’s jobs report showed a loss of retail jobs and an increase in warehousing jobs.

“Brick and mortar are really going to take a hit this holiday season,” said Harris, the Bank of America economist. “We’re likely to see a holiday season that looks okay from a sales perspective, but not from a seller’s perspective.”

The risk is that Washington’s political divide could drag the US economy into a painful double-dip recession before vaccines are widely distributed to the public.

“If we’re going to have a nice second wave of recovery,” Harris said, “you need both the vaccine and a tax package.”

This last part belongs to Washington.

CNN’s Anneken Tappe and Lauren Fox contributed to this report.

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