Modest gains in employment

Probably the last thing the markets needed was another bewitching October surprise to cap off an already eventful year. The disclosure that the coronavirus struck President Trump initially unsettled global markets, but they recovered thanks to solid employment data and improving consumer sentiment.

The monthly employment report always garners close attention, but now it is viewed as a barometer on the strength of the post-shutdown recovery. In September, the economy added 661,000 new jobs. In any other month this would be viewed as huge, but it was below expectations and greeted as a disappointment.

The unemployment rate fell from 8.4% to 7.9%, but labor force participation also fell, from 61.7% to 61.4%. The workweek increased modestly, and average hourly earnings rose slightly over the last year. Underscoring this modest employment improvement was the weekly jobless claim report. It showed that new claims for unemployment payments decreased over the last week, but 11.8 million people remain out of work and filing claims. 

Consumer sentiment improved in late September, as measured by the University of Michigan survey. People appear to have turned more optimistic about the national economy. But much of this increase was driven by higher-income households; lower-income households face continued income and job losses. Without new federal stimulus and enhanced unemployment benefits, the income gap likely will widen. Survey respondents continue to cite the virus and how—and when—the election is decided as the primary sources of uncertainty.