Jobs Report August 2020: Unemployment Falls to 8.4%

Credit…Samuel Corum for The New York Times

It could be years before the central bank raises interest rates above a “low” level, Jerome H. Powell, the chair of the Federal Reserve, said on Friday, a sign of the Fed’s steadfast view that the economy, while slowly recovering, will need extraordinary support for an extended amount of time given the pandemic.

His comments, in an interview with NPR, were a contrast to those from the White House, which hailed Friday’s jobs report showing the unemployment rate dipping to 8.4 percent as a sign of a continued, rapid recovery from the depths of the pandemic recession.

“The economy is now recovering,” Mr. Powell said. “But it’s going to be a long time, we think. We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time. It will be measured in years.”

The Fed slashed interest rates to near zero in March and has increasingly suggested that it is in no rush to raise them, even if the unemployment rate drops and the labor market is running hot.

Last month, Mr. Powell announced a major shift in how the central bank guides the economy, signaling it would make job growth pre-eminent and would not raise interest rates to guard against expected inflation just because the unemployment rate is low.

“What we’ve learned is that unemployment can be even lower than we thought and not result in troubling levels of inflation,” Mr. Powell told NPR. Later, he added: “We’re not going to prematurely withdraw the support that we think the economy needs.”

While Mr. Powell expressed concern over the long-run sustainability of federal debt, which will nearly exceed the size of the economy this fiscal year, he said now is not the moment to worry about cutting spending and limiting borrowing. “The time to start working on fiscal sustainability is not right now when we have so many people in need,” he said.

  • Stocks were down sharply in early trading on Friday, but recovered most of their losses by the afternoon. The S&P 500 ended the day down 0.8 percent after being down as much as 3 percent. The tech-heavy Nasdaq composite closed down 1.3 percent.

  • The S&P started the week by marching upward and reaching another high on Wednesday, but ended it by sliding down 2.3 percent from where it had started. Given that the S&P 500 has rallied 50 percent since its low in March, market analysts said some big drops were almost inevitable. “You knew you had one of these coming at some point, perhaps more than one,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “The moves upward, especially in the last few days, were something.”

    Still, the steepness of the recent declines could stoke more fear and further selling.

  • The continued selling occurred after a government report on Friday showed that the U.S. economy added 1.4 million jobs in August. Stocks have moved steadily higher since March even as the pandemic-hit economy struggles to recover. The Federal Reserve and Congress have helped stimulate the economy, giving investors confidence, but some analysts say the economy has to show more strength to keep the rally going.

  • Tech companies hold significant sway over the S&P 500 index by virtue of their size. Investors have been optimistic about the tech firms, whose market dominance and online business models appear poised to benefit from the prospect of a work-from-home world.

  • And big tech companies helped to pull the index down: Amazon ended down 2.2 percent, and Facebook and Alphabet both fell about 3 percent.

  • A day earlier the S&P 500 suffered its worst drop since June: 3.5 percent. The Dow Jones industrial average closed down more than 800 points.

  • Stocks had been on a significant tear. Before Thursday, the S&P 500 had been up in nine of the last 10 sessions.

  • European markets also fell on Friday, and Asian markets closed lower after Wall Street’s plunge.

Jobs remain far below pre-pandemic levels

Cumulative change in all jobs since August 2016

By Ella Koeze·Data is seasonally adjusted.·Source: Bureau of Labor Statistics

Employers continued to bring back furloughed workers last month, but at a far slower pace than in the spring, and millions of Americans remain out of work.

The U.S. economy added 1.4 million jobs in August, the Labor Department said Friday, down from 1.7 million in July and down sharply from the 4.8 million added in June. Payrolls are still more than 11 million jobs below their pre-pandemic level.

The unemployment rate fell to 8.4 percent, down significantly from 14.7 percent in April and 10.2 percent in July. The drop brings the rate below the peak of the last recession a decade…

Read More: Jobs Report August 2020: Unemployment Falls to 8.4%

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