The first time the coronavirus blanketed the U.S. earlier this year, tens of millions of jobs vanished and the economy sank into a historic recession. This time around the record spike in coronavirus cases is destroying just a fraction of the jobs.
Just how many?
We might find out next week from the U.S. employment report for November. Wall Street
expects a 500,000 increase in new jobs — marking the seventh increase in a row — but a handful of indicators suggest total employment could actually decline again for the first time since April.
Take weekly new jobless benefit claims, a measure of layoffs. They’ve risen for two weeks in a row for the first time since July and hit a five-week high in late November.
Business surveys compiled by Homebase and Kronos, meanwhile, suggest hiring almost came to a standstill this month. The new wave of coronavirus cases and resulting government restrictions on business might even have resulted in a net loss of jobs.
Yet other business surveys, most notably a pair conducted by IHS Markit, suggest that hiring actually sped up in November.
Why such mixed messages?
Homebase and Kronos cater to small and medium-sized businesses, including Main Street shops with fewer resources than mega-corporations. Some states in the Northeast, Midwest and West have reimposed limits on the number of customers, business hours and other restrictions that hurt these smaller service-oriented companies the most.
The IHS surveys, on the other hand, are drawn from larger companies with more resources, not to mention manufacturers that have largely escaped government restrictions.
By and large, big companies have figured out how to protect their workers and customers and run their businesses effectively, said St. Louis Federal Reserve President James Bullard. He doesn’t think they’ll suffer as much from the latest coronavirus outbreak.
“Most goods can be produced in the middle of a pandemic,” he said.
Bullard is one of the most optimistic voices at the Fed who believes the recovery is likely to gain steam soon if pending coronavirus vaccines are as effective as promised. Companies will look past the current coronavirus wave toward next year, he said, and the prospect of a return to normal.
See: MarketWatch Coronavirus Recovery Tracker.
The wild card is the consumer. Americans are going out less to eat, shop or travel amid the latest viral outbreak, and if they slash spending, the ill effects will work their way up to larger companies. Few people are going to buy a new car if they think they’re about to lose their jobs.
So far consumer confidence has held up pretty well. A trio of consumer surveys declined in November, but not nearly as much as they did in the spring.
Yet if they do cut back and sunny-side up forecasters like Bullard turn out to be wrong, the economy is sure to experience a few more turbulent months until the sky begins to clear.
The November employment report will offer a window into the broader labor market and how companies are responding overall.
A hint of what’s in the November jobs report could comes a day or two before it’s released. The employment gauges in ISM reports on manufacturing (Tuesday) and service-oriented companies (Thursday) often point in the same direction.
ADP, the giant national payroll processor, will also give its own tally on Wednesday of private-sector job creation in November.
U.S. jobless claims, as always, is a good bellwether for the labor market. If they rise for the third week in a row it’s sure to set off more alarm bells on Wall Street and in Washington.
Not everyone is starting to panic, though. The economy added jobs during the summer even as the coronavirus spiked. And fresh indicators on consumer spending and business investment have remained robust.
“Clearly the pandemic is hurting the economy. That is obvious,” said senior economist Jennifer Lee of BMO Capital Markets. “But the U.S. economy started [the fourth quarter] on a solid footing.”