Job Gains, Possible Productivity Gains Point to Continued Speedy Economic Recovery

October 6, 2020 Updated: October 7, 2020

Commentary

The number of unemployed persons in the United States fell by 1 million last month, a pace that would put the nation back to pre-pandemic numbers in about six months.

In September, there were 12.6 million unemployed persons. That’s an improvement from the 13.6 million reported in August and obviously substantially higher than the 6.8 million without a job in February, the month before the pandemic was declared.

Of course, there are always seasonal factors, such as teachers going back to work in the fall, many construction jobs disappearing during the cold or wet winter months, and retail work vastly expanding during the traditional holiday shopping season. As the pandemic continues, all of these normally seasonal situations may be more muted or may be more exacerbated than normal.

Meanwhile, average hourly earnings were up 4.7 percent from a year earlier.

If these trends continue, along with increases in earnings that reflect productivity gains as a result of telecommuting and other such measures, it’s very possible that the U.S. economy might emerge from the lockdowns and related restrictions even stronger than before the World Health Organization declared the pandemic in mid-March.

However, the government agency that compiles those numbers, the Bureau of Labor Statistics (BLS), warns that “the large employment fluctuations over the past several months—especially in industries with lower-paid workers—complicate the analysis of recent trends in average hourly earnings.”

So economists and market participants are cautioned to see how average hourly earnings might be affected when lower-wage hospitality workers, restaurant servers, and retail store clerks all go back to work. It could be that the average wage growth is a function primarily of fewer people earning less.

However, in a special set of questions, the BLS also learned and reported: “In September, 22.7 percent of employed persons teleworked because of the coronavirus pandemic, down from 24.3 percent in August. These data refer to employed persons who teleworked or worked at home for pay at some point in the last four weeks specifically because of the pandemic.”

What we don’t know, of course, is whether the percentage of people responding “yes” declined because they have now changed to a “new normal” of working from home, or whether they are back in the classroom or office or jobsite and no longer need to work remotely for health reasons. In either case, we can probably safely assume employers and employees are choosing the optimum solution for optimum worker efficiency and optimum protection from the coronavirus.

Finally, we also have the survey of the purchasing managers of more than 300 industrial companies. These professionals buy and schedule deliveries of what their companies need from outside firms and have their finger on the pulse of what their firms are expecting in the near future. According to the results published by their professional association, the Institute for Supply Management (ISM), some 32 percent of all respondents expect their firms to be able to increase prices over the next month versus the previous month. Only 6.8 percent indicate prices will have to be lowered.

Firms only boost prices when they think their customers have the ability and willingness to pay. This might be the single most important factor in building a case that the U.S. economy is on a positive trajectory. Meanwhile, 19 percent of ISM respondents say their firms are going to increase hiring—still less than the almost 22 percent who think their firms are going to reduce the rate of hiring.

Given the tepid rate of hiring over the past few months, it should come as no surprise that the rate of hiring would slow in the coming months.

Of course, many factors will drive the continued economic recovery: first and foremost, whether it’s safe to travel and work, learn, shop, eat, and be entertained outside the home; second, the level of confidence regarding the future economy, and so on. Companies will invest and hire if executives have a positive outlook.

For now, though, the pace of the recovery looks strong.

Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.