– September 2, 2020

The U.S. economy is estimated to have added 428,000 new private-sector jobs in August, according to the ADP Research Institute (see top chart). While a gain of that magnitude would be considered strong in an ongoing expansion, it is weak in the context of a recovery from record-breaking losses. The U.S. economy lost more than 21 million jobs in March and April as government-imposed lockdowns forced most consumers to stay at home and many businesses to close. The current consensus forecast is for the addition of 1.265 million private-sector jobs for the month (see top chart).

Almost 9.5 million people were added back to payrolls over the three months from May through July but that is less than half of the total workers shed. Worse, the pace of recovery appears to be slowing. The declines in the unemployment rate likewise appears to be slowing. After hitting 14.7 percent in April (and closer to 20 percent if improper classifications in the survey process were corrected), the unemployment rate stands at 10.2 percent in July with an expected decline to 9.8 percent in August (see bottom chart).

The ADP report for August estimates small businesses (under 50 employees) added 52,000 jobs for the month while medium-size businesses (50–499 employees) added 79,000 new employees and large firms (500 employees and above) added 298,000 new employees. Among the sector breakdowns, goods-producing industries added 40,000 including a 28,000 increase in construction jobs, a 9,000 increase in manufacturing jobs, and 2,000 jobs in natural resource and mining industries. Service-providing industries, which typically account for the majority of employment, added 389,000 jobs. Leading the gains were leisure and hospitality (+129,000), health care and education (+100,000), and professional and business services (+66,000).

The employment report from the Bureau of Labor Statistics is due out on Friday, September 4, and should provide a more comprehensive look at the labor market. Both the ADP and BLS reports are subject to revisions in the future.

Overall, the labor market recovery remains highly uncertain. With Covid-19 concerns still widespread, policy responses erratic, elevated numbers of initial claims for unemployment benefits, and significant distortions to economic activity, the path of recovery for the economy and the labor market remains unclear.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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