The labor market continues to heal after the initial shock from the coronavirus. There is still massive damage, and the speed of repair is slowing down. Notably, improvement seems to be slowing down the most in industries that are the most hard-hit, which suggests that the easy wins are going away.
A big drop in the unemployment rate and a large rise in the employment-to-population ratio are a good sign. But a look underneath the hood shows that more enduring forms of joblessness are increasing. Temporary layoff unemployment declined, but permanent job loss unemployment ticked up. The core unemployment rate increased a fair amount in August.
The source of the payroll slowdown is concerning. After being the major source of bounceback in job gains, leisure and hospitality employment has slowed considerably after being devastated early in the crisis. If this sector has run out of steam, high levels of joblessness will last longer than initially thought.
More people with more jobs is something to celebrate, but we need to be concerned about how sustainable these gains will be. The labor market is clearly losing momentum, and the foundations appear fragile. With federal stimulus programs still lapsed and the threat of a second wave of the virus this fall, it’s not clear the labor market can keep improving on its own.