US Job Recovery Stumbles — 428,000 Added vs. 1 Million Projected

By Bruce Harpham Thursday, September 3, 2020

Less than 500,000 new private-sector jobs were created in August, according to payroll company ADP. That falls short of Wall Street predictions that forecast 1 million new jobs. A single job report only tells part of the story, however.

Summer Job Recovery Loses Steam

While August's job growth might have disappointed Wall St economists, there is reason to see this as a good news story. In July, ADP found that approximately 212,000 new positions were created. In contrast, the US Department of Labor's broader measure of employment found that US employment increased by 1.8 million in July. Looking further back, ADP reported that there were 2.3 million new jobs created in June 2020. These observations suggest that the initial surge of post-lockdown job growth is slowing.

Which Companies Are Creating Jobs?

Like other economic recoveries, some companies are doing much better than others. Overall, ADP's measurement found that the services sector — which includes restaurants — is adding most of the new positions. The goods-producing sector manufacturing jobs only added approximately 40,000 jobs in August, according to CNBC.

The top sectors creating jobs include leisure and hospitality, with approximately 129,000 new jobs created. Following close beyond, health care and education account for many new jobs. Small businesses are mainly holding back from hiring. Companies with more than 500 employees accounted for the majority of new jobs created. Unfortunately, some industries cannot easily switch to working from home arrangements. The construction industry added 28,000 roles. Manufacturing, historically known for well-paying positions, added less than 10,000 jobs.

The Jobs Recovery Is Far From Complete

The employment losses from COVID-19 and efforts to contain the pandemic are far from complete. As of August 15, the US Labor Departments reported that approximately 29 million Americans are receiving unemployment benefits of some kind. In contrast, only 1.6 million were receiving benefits in the same period of 2019. This tells us that tens of millions of Americans who had a job in early 2020 who still lack a job today despite several months of strong job growth.

How Much Are People Earning Today?

Looking at the raw number of new jobs created prompts a question: what is happening to income? Data from the US Bureau of Labor Statistics reveals some surprising results. In July 2020, average weekly earnings in the US were $1,013 compared to $962 in July 2019. This report doesn't seem to reconcile with the broader story of job losses. One explanation is that many professional-level jobs have continued using remote work while lower-paying jobs in restaurants and other fields have disappeared, so the resulting average has increased.

States Are Still Reporting Unemployment Rates Far Above the National Average

While the US unemployment reached 10.2% in July 2020, the national-level measure obscures the reality that many states are suffering. In the west, California and Hawaii both have unemployment rates over 13%. In contrast, Washington is only at 10.3%. Some of the worst-hit states remain in the Northeast: New York reported a 15.9% unemployment rate in July, while Pennsylvania and New Jersey report over 13%.

A handful of states have managed to achieve impressively low unemployment rates. Utah and Nebraska both reported state unemployment rates below 5%. The lower figures in these states may be due to the lower COVID-19 cases in those regions. As of September 3, Utah and Nebraska have reported less than 500 COVID-19 deaths. If these states can continue to maintain low case numbers, their job situation will likely remain bright.

What a K-Shaped Recovery Means for the Future

Some economic commentators have started to speak of a K-shaped recovery. One segment of the economy, such as large companies with access to cash reserves, credit, and an ability to operate remotely, will do well. Likewise, firms such as Google and Facebook have already stated that their employees may continue to work remotely throughout 2020. These companies and individuals are likely to experience a relatively good year in terms of earnings. That's the upward part of the K-shaped recovery.

The downward part of the K-shaped recovery refers to the reality that millions will continue to suffer joblessness. For example, Bloomberg has reported that small business bankruptcy is likely to increase 36% in 2020 compared to last year. The growing number of bankrupt companies means many people who have lost their jobs may have to look elsewhere for opportunities.

For the upcoming election, voters will demand to see a credible plan from both sides to revive the economy while responsibly handling the pandemic.

About the Author


Headshot of Bruce Harpham

Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.

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