The pandemic-induced downturn initially had hints of being the sharpest but shortest U.S. recession on record. Now there are increasing signs of economic scarring that resemble past slumps.
Beneath a headline number showing a better-than-expected gain in July jobs, the government’s employment report contained indications of underlying weakness.
Payrolls remain 13 million below pre-pandemic levels and the number of people out of work for 15 weeks or longer more than doubled from the prior month, to 8 million. The labor-force participation rate fell for the first time in three months and the number of people discouraged by job prospects hit a five-year high.
Such figures, along with recent high-frequency indicators pointing to a pause in the recovery, suggest the pandemic slump will be more drawn-out.
With lawmakers failing to extend supplemental unemployment benefits that have supported incomes and spending, President Donald Trump signed orders over the weekend to provide limited relief that faces questions over its implementation and legality.
Reports due later this week on July retail sales, industrial production and consumer sentiment are expected to confirm a moderating pace of economic activity.
“There’s definitely a lot of work to be done in getting the economy back to where it used to be,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.
Trump’s latest moves create “some downside risk to the outlook as it removes pressure on Congress to agree to something more comprehensive,” he said.
Goldman Sachs Group Inc. economists took a different view, saying in a note that because the new jobless benefits could run out in a month, it could raise pressure on lawmakers to do more.
In any case, some of the long-term economic and labor-market effects of the virus have already been set in motion, such as a lengthening duration of unemployment. Others will take longer to develop: wage gains coming under pressure, the impact on female labor-market participation as schools extend virtual classes and the effect of shaky job prospects for recent graduates.